I & I Editorial Board“April 2nd, 2025, will go down as one of the most important days in modern American history.” — White House Press Secretary Karoline Leavitt.
We have no doubt that Leavitt’s prediction will come true. Whether it’s remembered for being a success or as Smoot-Hawley 2.0 remains to be seen.
“It is going to work,” Leavitt said. “And the president has a brilliant team of advisers who have been studying these issues for decades.”
That’s a bit of an odd boast, given that the economists who have been studying tariffs and trade policy for decades had long ago decided that tariffs are a sledgehammer approach that rarely work as intended, that they are a wildly expensive way to create jobs, don’t spur economic growth, protect uncompetitive U.S. firms, and are an ineffective diplomatic tool.
National Review recently published an article tracing papers from the Heritage Foundation going back to the early 1980s arguing for the benefits of free trade. The article is meant as a criticism of Heritage President Kevin Roberts’ recent defense of Trump’s tariff strategy.
But a separate article in National Review also admits that other countries routinely impose far higher tariffs on U.S. goods than our country levies on their exports into American markets. “In some places, our companies are paying a significantly higher rate to sell our goods there than they pay to sell their goods here. That does seem at least a little unfair, doesn’t it?” writes never-Trumper Jim Geraghty.
Geraghty also admits that some countries were lowering their trade barriers in anticipation of Trump’s reciprocal tariffs: “The European Union is identifying concessions it’s willing to make to Donald Trump’s administration to secure the partial removal of the U.S. tariffs that have already started hitting the bloc’s exports and that are set to increase after April 2.”
But what is Trump’s ultimate goal? On the one hand, he says he wants only to level the playing field between industrial nations. That’s what all those free trade agreements that conservatives long championed were supposed to do, but have not succeeded, according to Trump.
“Trading partners have repeatedly blocked multilateral and plurilateral solutions, including in the context of new rounds of tariff negotiations and efforts to discipline non-tariff barriers,” Trump writes in his executive order. “At the same time, with the U.S. economy disproportionately open to imports, U.S. trading partners have had few incentives to provide reciprocal treatment to U.S. exports in the context of bilateral trade negotiations.”
If Trump’s approach works better than all those trade deals at bringing down other nations’ tariffs, who can complain? Certainly not free traders.
On the other hand, Trump keeps saying things such as raising “trillions and trillions of dollars” from tariffs “to reduce our taxes and pay down our national debt,” and that up until 1913, the federal government largely depended on tariffs as a source of revenue.
Trump also argues that “jobs and factories will come roaring back into our country” as companies try to avoid tariffs by reshoring production work. “We will supercharge our domestic industrial base.” His plan also includes a 10% across-the-board tariff on imports.
All of which suggests that Trump wants to build a large and permanent tariff wall around the country. We are hard-pressed to believe that will work, but Trump has proved us wrong before.
For the sake of the country, we hope Trump’s liberation day is remembered in future history books … and for all the right reasons. And if that’s the case, it will be seen as another remarkable odds-defying achievement for the 45th and 47th president.
— Written by the I&I Editorial Board
William F. Shughart II
Judging by the equalizing effect the tariffs are intended to have, net-net, Trump is anti-tariff.
Smart cookie, that Trump – what doesn’t kill us makes us stronger.
What nearly kills the Middle Class makes the donor/investor class stronger.
You gotta break some eggs. We , the USA, have had many of our eggs broken since WWII. We allowed trade with other countries very detrimental to us, to help them regrow from the destruction of the war. They’re grown now, its time they stopped sponging off us. LEVEL the field of trade!!
This month marks the 80th anniversary of VE day.
The Soviets defeated the Nazis at huge cost, not the US. The real Victory Day is in Russia in May. The US will have “We Incinerated a Million Civilians in Japan Day for No Military Reason,” coming up sometime, you can celebrate that.
The whole US advantage is based on it taking heavy advantage of the world since WW2, the US is not the victim, it is the unrelenting self absorbed bully.
The US (US banks, corporations, and Deep State actors) has taken advantage of every nation on the planet in every way possible, including murdering millions of people for no good reason, since WW2. We have ruthlessly dominated national resources of foreign nations and co-opted every national financial system while enabling corrupt dictators all over the planet, since WW2. Our national success is heavily based on the US boot on the world neck. If you do not get this, I feel sorry for whoever has to suffer your opinion at the dinner table.
The hard irony here is that it is the same American and British capitalist bankers who’ve run roughshod over the world since WW2 then enforced the globalization that has helped to level the playing field such that foreign nations can finally, after 75 years of US abuse, tell the US to go to hell. These characters know no national loyalty, they are pure greed. Russia and BRICS is the best example of new found freedom of other nations to get the US boot off their necks.
The US will get it’s comeuppance, because other nations will work hard to improve their own lot. Where and to what extent Trump’s bull-in-a-China-shop tariffs effect outcomes is of little importance. Trump will be making noise in private life by the time all this shakes out.
Could you list those nations the US has taken advantage of and how? You do know that Europe would right now be a totalitarian hell hole without the US in WWII, right? I think you should take a basic Western history course.
And trump his giving the elite another opportunity to acquire assets on the cheap.
Free trade is GREAT-except in these circumstances: 1) When foreign countries don’t engage in free trade also and 2) when national security is at stake.
The”free trade” banner is now being used by foreign countries to use free trade against the US. It is a tool that foreign countries use to raise their economies and pummel ours.
If it is not recognized (as Trump has with his reciprocal tariffs) then the “free trade” orthodoxy of the US will be used by foreign countries (friends and foes) as a noose to choke off our own economic development.
The above point must be made clear: Friendly countries do not want to hurt the US- but will if it means there will be more economic largess coming into their country. Their goal is not to hurt the US, but rather to help their own country.
National security issues should be clearer and are more direct-especially after the COVID supply-chain issues we encountered. During that period the China CCP government had bought up many health supplies, then re-sold them at outrageous margins.
Thus, our main foe not only identified itself as a foe but showed us what could happen if it started to monopolize other products and industries. For instance, if it monopolized steel it could use this monopoly to tear down our own steel industry so that we wouldn’t be able to produce the steel that we needed to defend ourselves against this nefarious foreign power.
President Trump recognizes that foreign competition-if it is wielded unfairly by our allies or used by our potential foes-can be used against us.
The trade deficit (how much more we import than export) is not only a sign that our dollars can buy foreign products more cheaply than we can produce them, but also is a sign that if we don’t use tariffs intelligently-rather than ideologically, as US free traders seem to-our foes will suffocate the industries we rely on to defend ourselves, and our friends will unfairly win the economic race.
We are lucky to have a President- who also was a successful businessman-that recognizes this. Our previous politician Presidents (Republican and Democratic) had not a clue.
We had been living off our political capital for decades-and, I believe, if President Trump hadn’t been elected we would still be whistling past the graveyard-until we became a member of that graveyard.
President Trump’s use of reciprocal tariffs to increase our ability to compete fairly with other nations and also to assure our national security by inviting other nations to produce here (and thus avoid our tariff) is ingenious.
He is leveraging our economic and consumer power to both increase our competitive power against allies and re-build our industrial base to assure our future security.
No other President in recent memory did this: He is using an asset we already have (our worldwide and indefatigable consumer power) to put us in a better position to compete with the nations of the world and also to interfere (and-hopefully-stymie) our foes, who hope to demolish our industrial base (which we need, besides a powerful military) to defend ourselves.
Trump can achieve his goals of bringing millions of jobs back here, only if he simultaneously brings the big monopoly unions under the purview of Sherman Antitrust Law, requiring them to compete fairly and openly with the non union providers of the same services; to cease being monopolies.
Right now, they are uncontrollable monopolies with far more power to disrupt the economy, to cause national security dangers and to disrupt the education of the next generation, than the merger of any two corporations.
Otherwise, the high cost of non competitive union labor and the intractability of the union bosses of UAW, Steelworkers, Longshoremen, Teachers, etc., will remain much too high, not competitive, not marketable and the jobs will never return to our shores.
Ball is in your court Mr. President to finally bring fair and competitive bidding for all jobs and contracts, especially every job supported by taxes, to strengthen and to protect our country by ending the power of those massive disruptive monopolies!
Political coalitions are short term. I am happy that President Trump is making the Republican party popular with the working class and I hope he secures great economic gains for them. But as with all political movements, the working class Republican party will eventually support policies that will be detrimental to the US. I’m afraid that the Republican party will become owned by big labor and will eventually pursue short sighted pro-labor policies that makes the US anti-competitive and harms our prosperity. I guess we will have to deal with it when it happens.
The US is the world’s largest consumer market, twice the size of the entire European Union and three times the size of China’s. Meanwhile our exports constitute only around 12% of GDP. Export-driven countries like South Korea & Germany will thus suffer the most. China will suffer too, but not as much as we think. This gives the US tremendous leverage, which leads me to think Trump is using tariffs to reshore manufacturing and bring stubborn countries to the bargaining table on other issues. There IS no other market big enough to absorb all that production.
There are a million ways this can backfire. Consumer spending has been keeping this economy afloat, so if you throttle the American consumer with higher prices a recession is likely, with stagflation thrown in due to higher interest rates. And no matter how comprehensive the tariff blanket is, foreign companies will look for ways around them. Who would you rather bet on, the slow, plodding US federal bureaucracy or the nimble businesspeople in other countries. looking for holes in Trump’s strategy?
A year from now, we’ll look back on “Liberation Day” as either the moment that re-shaped the global order, or the worst economic own-goal in American history.
“This gives the US tremendous leverage”
A lot smaller than you think. USA is responsible for 13% of world import. Its a lot , but still way too low for other sides to crawl and pay to have access to american market.
Also Trump reduced this leverage by his unpredictability,. Just like no one makes deals with terrorists same is with Trump. Its pointless as Trump wants to push deal on very unfavourable for other side terms and can break his word again like he did against Canada. You see it already – China slapped tariffs and ban on resources without any contact with Trump. EU will follow steps soon enough – again – there will be no attempt to sit on bargaining table. Only trade wars. Everyone will lose, but its USA where those wars will hit harder as on top of tariffs there is ongoing boycott on everything which is made in USA.
Keep in mind that US can reduce trade deficit only by reduction in consumption. You cant force people wordwide to for example buy more Teslas, Fords and Jeeps… just strange coincidence that all 3 brands are on bottom in reliability. Those new factories that Trump want will not make any difference as why would anyone buy identical quality goods and pay more?
If, and I emphasize if, tariffs are truly a form of revenue, then the potential to reduce taxes exists. To the extent taxes are lowerred, the effects of higher prices on goods are neutralized and consumption remains unaffected. I realize this is pie-in-the-sky speculation, but time will tell.
…as Forest Gump said….”stupid is a stupid does…and that’s all I have to say about that.”
Congratulations on being among the first to call out the fact that almost all other countries charge sometimes huge fees for US made products to get past customs. Still waiting for someone to do a comprehensive study on the non-fee barriers to imports. Almost all articles on the Trump tariffs make no mention at all of how extensive, and effective, all kinds of trade barriers are to US imports. Anyone ever write about the 19% VAT levied on virtually all US imports to the EU? No, I didn’t see anything on this either.
I worked in China on a manufacturing project (magnesium alloy production) in 2006 and was amazed at the number of rules that serve as non-fee barriers to getting imports into China. This includes products that are not even available in China at all at any price, such as aluminum which is alloyed with magnesium to make it into the remarkable metal that magnesium is. Each shipment in required a separate “license.” Plus, they keep the currency super cheap (I stayed in a 5-star Sofitel for $77/night), which makes everything cheap.
But after a study of currency, these import/export processes, and other factors, it became clear to me that if a wall around the US was built, with no in or out flow of products, the US would become very prosperous – due to the level of freedom here, intellectual and physical property protection, reasonable cost resolution of commercial commerce disputes, and the amazing innovation that goes on constantly, a result of the freedom that is unmatched here. If China could not sell a huge percentage of its production in the US, their economy would never generate prosperity on its own.
This is why everyone wants to sell their products here, while protecting and closely controlling their own stagnant economies, weighted down by restrictions and a lack of real economic and financial freedom. True free trade, which is what Trump is working for, would, in the end, benefit everyone. But I’m continuing to breathe, waiting for this to happen.
The fact that almost all of the mainstream, and most non-mainstream media lacks any kind of understanding of these factors doesn’t help. It’s certainly not 1929 anymore, but you’d never know that in most articles and talk shows.
Thanks so much for your excellent essays on these and other topics. I’ve been a fan of yours since the IBD days.
Other countries sell here because we want what they sell. As soon as product is ported to the US its quality changes for the worse.
What so few have said is what happens if our trading partners lower their tariffs to match our current tariffs? Not much would change from a consumer perspective in the US and maybe we would begin to export much more, which would create many US jobs. It would benefit other countries’ consumers but would have a negative impact on their jobs market.
Free trade is only free for countries that exercise it in action and not in words only. Many of our allies and friends have only benefited from free trade when it comes to exporting their goods and services to the U.S.A.