Donald Trump once boasted that “Trade wars are good, and easy to win.” Americans must hope so, because more trade conflict awaits if he returns to the White House after November’s election. Trump’s latest scheme involves a sweeping 10 per cent global tariff on all imports, and he’s toying with the idea of slapping a 60 per cent duty on Chinese goods. These moves wouldn’t just spark swift retaliation; they could tip the already fragile World Trade Organisation into outright anarchy.
This would mark the sharpest escalation yet in America’s ongoing love affair with protectionism, a wave that both he and President Biden have enthusiastically ridden. Trump’s first term saw tariffs on 70 per cent of Chinese imports, new duties on steel, aluminium, washing machines and solar panels, and a dramatic walkout from the Trans-Pacific Partnership (TPP). Economists condemned these “America First” actions as self-defeating. Barriers to trade don’t just increase prices for consumers; they stifle competition and undermine productivity and innovation. Trump and Biden shunned the experts.
Biden could have reversed Trump’s tariffs — economists certainly begged him to — but he largely chose not to. Instead, he doubled down in select areas, raising tariffs on Chinese “green” goods such as solar panels and electric vehicles and imposing export controls on AI chips and manufacturing equipment to keep American-developed tech out of Chinese hands. Biden’s enthusiasm for industrial subsidies has been similarly unrestrained, throwing support behindUS manufacturers in the semiconductor and green tech sectors. The result? A tangled mess of government intervention that has left America’s trade policy looking increasingly insular and confused.
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What, exactly, is the endgame here? Trump initially justified tariffs as a way to force a renegotiation of “unfair” trade deals, while Biden talks up his measures as a defence against foreign threats. But it’s now obvious that both see protectionism as a magic bullet: one that can create high-paying manufacturing jobs, fortify national security, and secure US dominance in cutting-edge technologies. Trump even claims tariffs will fix America’s trade deficit. Yet these goals — some laudable, some misguided — are often in direct tension with one another, and undermined by the protectionism itself.
Trump’s initial steel and aluminium tariffs, for example, justified by “national security” concerns, drove up costs for US manufacturers that use these metals, so undermining manufacturing jobs. Economists estimate that they may have saved about 1,000 steel and 1,300 aluminium jobs but eliminated 75,000 jobs in downstream industries such as construction, cars and heavy machinery. Worse, the move triggered a flood of petitions from these firms seeking exemptions or their own protections through tariffs, compounding the economic damage.
If reducing reliance on China was the key aim, Trump and Biden both missed the obvious alternative: trading more openly with democratic allies to source goods elsewhere. Instead, Trump’s tariffs alienated key partners such as the EU and Japan, while his new proposal for a blanket 10 per cent tariff on all imports risks deepening rifts everywhere.
Biden has too much respect for propriety for such actions. Yet for all his talk of “friendshoring” — the idea of building supply chains with US allies — he failed to rejoin the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a strategic pact that could limit China’s influence in the Pacific region. In fact, his administration gave up pursuing free trade agreements even with allies like the UK, instead pushing buy American and industrial policies that reek of beggar-thy-neighbour protectionism.
Part of this protectionist push is being sold as a way to future-proof US leadership in AI, semiconductors and other cutting-edge industries. But even here, US policy often works at cross-purposes. Biden’s administration has hauled major US tech firms into court with dubious antitrust lawsuits — hardly a recipe for global tech leadership. And while Biden’s export controls on high-tech chips are meant to hurt China, they also hurt American firms by cutting them off from a huge market. Denying China direct access, in fact, pushes Beijing to pour more subsidies into its own production and deepen trade ties with other nations to circumvent US restrictions. Whether that ends up a positive for America is debatable.
In any case, Biden’s protectionism clearly isn’t just about special case national security concerns or fostering infant industries. Last week, his government targeted the “de minimis” exemption, which allows Americans to import small amounts of goods, such as clothing, duty-free. Hiking the price of T-shirts won’t help American companies beat China in AI development. It will simply raise clothing prices for ordinary households, modestly helping domestic textile manufacturers, a low-paid sector long past its heyday.
If Biden ignores these trade-offs, Trump outright dismisses them, implying that tariffs themselves are painless. He says foreign exporters foot the bill, conveniently ignoring the mountain of evidence showing US consumers and businesses pay the lion’s share. He touts huge revenue windfalls, glossing over the billions in bailouts American farmers needed after retaliatory tariffs under his presidency and the logic that to raise significant revenue, tariffs must fail at cutting imports. And when he says tariffs will shrink the trade deficit, economists roll their eyes. Trade deficits are mostly determined by savings and investment flows, not tariffs. Higher tariffs boost the dollar, making exports pricier and leaving the trade deficit just as wide — as we saw during Trump’s last presidential term.
In the end, both Biden and Trump have sold Americans on the false hope that their protectionism can fix disparate economic and social issues. They deny the higher prices and long-term costs to economic efficiency that get hidden by America’s underlying economic dynamism. As one US commentator put it: since 2016, tariffs have cost manufacturing jobs in the name of saving them, alienated allies in the name of decoupling from China, and raised everyday goods’ prices in the name of helping hard-up workers. If Trump wins the next election, we can expect more of the same paradoxes — but worse.
Ryan Bourne is an economist at the Cato Institute and editor of the new book The War On Prices