The ongoing debate surrounding the U.S. economy has reignited discussions about the effectiveness of protectionist policies, particularly those reminiscent of Donald Trump's tariff strategies. Veronique de Rugy, in her recent editorial for Antelope Valley Press, argues that the resurgence of protective tariffs as a means to restore America's economic greatness is fundamentally misguided. She critiques Oren Cass's assertion that tariffs fueled America's growth, emphasizing that this interpretation overlooks key historical insights. According to Douglas Irwin, high tariffs did not cause prosperity; instead, the economic growth of the 19th century was largely linked to foreign capital investment and an open economy. De Rugy highlights that economists like Brad DeLong have pointed out the economic harm tariffs inflicted on exporters and consumers alike, while Phillip Magness notes that tariffs often led to corruption and inefficiencies within the market.
Adding to this discourse, Wanjiru Njoya from Eurasia Review highlights a notable shift in political consensus, revealing that both Democrats and Republicans now support tariffs to protect American industries. This bipartisan support marks a significant reversal from decades of free trade advocacy, particularly in the context of tariffs on imports from China, which have gained popularity among U.S. manufacturers. For instance, kitchen cabinet makers have pointed out that Chinese firms hold a staggering 40% market share in their industry, prompting calls for protective measures.
In a recent analysis by Professor Amy Skonieczny from the Australian Institute of International Affairs, the entrenched nature of populism in U.S.-China relations is further explored. Skonieczny notes that economic tensions between the two nations have become a bipartisan issue, with both Trump and Biden maintaining hard-line policies toward China. Trump's framing of China as a threat to American workers has left a lasting legacy, which Biden continues to uphold, emphasizing protectionism as a means to safeguard American jobs. This emotional narrative of betrayal and injustice resonates deeply with voters, reinforcing the political will for economic containment of China.
However, Njoya also references economist Murray Rothbard, who argues that protectionism ultimately harms consumers and does not create fair trade. Rothbard's perspective emphasizes that free trade is essential for consumer prosperity and that national borders play a crucial role in maintaining cultural integrity. He distinguishes between political and economic boundaries, suggesting that free trade does not necessitate open borders and that safeguarding borders does not impede voluntary trade.
Furthermore, de Rugy underscores the significant role that immigration played in economic growth during the 19th century, noting that it occurred in a tariff-free environment. She warns that today's interconnected global economy means that imposing higher tariffs would raise production costs, ultimately harming the competitiveness of American industries. This perspective aligns with the critiques offered by Vincent J. Geloso, who argues that the consumer welfare losses associated with protectionist policies far outweigh any potential gains in domestic production. Geloso's analysis emphasizes that tariffs raise input prices, harming competitive industries and leading to a net loss in consumer welfare.
Both Geloso and de Rugy challenge the notion that protectionist measures are a viable solution for economic growth. They argue that historical precedents demonstrate that tariffs do not serve as effective drivers of economic prosperity. In a related perspective, Sultan Ahmed bin Sulayem, CEO of DP World, recently stated that protectionism harms global trade, which is vital for growth, jobs, and sustainability. Despite the rise of protectionist policies, he noted that international trade remains resilient, with growth observed in regions such as Latin America, the Far East, the Middle East, and Africa, even amidst challenges in Europe and America.
In a broader context, Irwin Stelzer from The Times discusses how Donald Trump aims to reshape American capitalism by implementing deregulation, lowering taxes, and imposing steep tariffs. He plans to end open borders, democratic socialism, and diversity policies, reversing Joe Biden's leftward shift in capitalism. Trump's approach favors companies without unionized workforces and emphasizes skilled legal immigration alongside patriotic policies. Current GDP per capita in the U.S. stands at $82,000, compared to $13,000 in China and $60,000 in the EU. Trump supports tariffs not only to protect American jobs but also to enhance national security, targeting big tech and Big Pharma. This approach diverges from traditional free-market principles, suggesting a new variant of capitalism.
Recently, Fabrizio Hochschild, a former UN under-secretary-general, warned that Trump's proposed tariffs—25% on imports from Mexico and Canada, and 10% on China—could significantly harm global trade and burden U.S. consumers. Hochschild emphasized that tariffs raise prices and reduce competition, which could adversely affect GDP growth. He cited the automotive industry as a prime example, where increased tariffs would lead to higher production costs and car prices. Hochschild expressed concern over a fragmented global economy and the need for multilateral trade dispute resolution through the WTO. He urged cooperation to address pressing global challenges like climate change and inequality.
Adding to the critique of protectionism, Donald J. Boudreaux in his analysis on The Daily Economy argues that retaliatory tariffs and subsidies are particularly harmful, serving as handouts to politically powerful groups while distorting resource allocation and reducing national wealth. He points out that the rationale for retaliation is flawed, often leading to trade wars that benefit interest groups at the expense of broader economic health. Boudreaux emphasizes that free trade remains the best policy, regardless of foreign subsidies, and warns against the ambiguity in defining subsidies that complicates the justification for protectionism.
In a recent interview, economist Jeffrey Sachs from Columbia University warned that protectionist measures like tariffs will burden U.S. consumers and harm U.S.-China trade, potentially weakening the global economy. Sachs argues that tariffs are motivated by a desire to weaken China's economic progress and that exaggerated threats from China are unfounded. He believes that if trade barriers spread globally, it would lead to significant losses in output and the benefits of international trade. Sachs's insights add a critical layer to the ongoing discussion about the implications of protectionism.
Most recently, Dominik A. Leusder from Jacobin magazine critiques Trump's tariff policy, stating that while he promotes tariffs to protect American workers, they will likely increase costs for consumers and do little to reverse industrial decline. On January 23, 2025, Trump signed executive orders planning tariffs on computer chips, pharmaceuticals, and steel. Leusder highlights that the U.S. faces twin deficits due to excess consumption over production and argues that tariffs transfer income from households to producers, raising prices disproportionately for lower-income households. He warns that the U.S. lacks institutions for equitable distribution of trade benefits, suggesting that tariffs may serve as a spoils system for political allies, exacerbating economic dysfunction.
In this context, Trump's admiration for President William McKinley, known as the 'Tariff Man,' becomes particularly relevant. McKinley’s presidency was marked by high tariffs, notably the McKinley Tariff of 1890, which raised duties on manufactured goods. Trump identifies with McKinley’s approach, believing that tariffs can lead to prosperity. However, historians caution that Trump's view is oversimplified, as the U.S. economy grew at an average of 4% annually both before and after McKinley’s presidency, and high tariffs were a common feature of U.S. policy from 1861 to 1933. McKinley’s policies also contributed to the Spanish-American War in 1898 and included an endorsement of 'reciprocity' for tariff reductions.
As the U.S. navigates its economic future, these insights serve as a critical reminder of the potential pitfalls of protectionist policies and the importance of prioritizing consumer welfare and innovation over short-term industrial gains. The persistence of protectionism, particularly in relation to China, is expected to continue shaping U.S. trade policy well beyond the 2024 election, reflecting a broader shift towards economic nationalism.