Those who have so far been critical or skeptical of President Donald Trump’s tariff strategy are failing to sufficiently consider the plain fact that the U.S., by virtue of its trade deficit with almost every one of its global trading partners, holds the strongest cards in the epic economic game now being played.
In short, this tariff confrontation ultimately costs our trading partners more than it costs the U.S.
Unreported or superficially reported by the establishment media until now, the administration has claimed that more than 70 nations have already contacted it for the purpose of making a deal that would drastically reduce or entirely end the tariffs they have imposed on what they import from the U.S. This was the true goal all along by the newly re-inaugurated president who has long advocated creating an even playing field for U.S. trade and American global commitments to international security.
The U.S. stock market and other world markets have not only over-reacted (as they almost always do) to the initial Trump announcements of virtually universal tariffs on imports to the U.S., they continue to fluctuate wildly and emotionally on each new tariff development.
The establishment media, always hostile to Mr. Trump, have interpreted each of the president’s adjustments and delays in applying the tariffs as defeats or reverses of his policy. This willful misinterpretation ignores the president’s basic strategy of employing tariffs to force our trading partners to come to the bargaining table.
A number of well-known economists, corporate leaders and other “experts” have issued a barrage of dire warnings and predictions of economic disaster, long-term market crashes, and looming recession or even depression resulting from President Trump’s tariff strategy. This is reminiscent of similar “expert” prognostications that Mr. Trump, defeated for his re-election in 2020, could not possibly win the 2024 election — even after President Biden’s ignominious withdrawal from the campaign.
In conventional contemporary economic thought, tariffs are considered inherently flawed and inappropriate. The example of the long-ago Hawley-Smoot tariffs, often blamed for the market crashes and subsequent economic depressions of the 1930s, are cited as irrefutable proof of how bad tariffs are.
Contemporary conventional wisdom, however, is often biased by its advocacy for the current state of global trade — one in which the largest economic power, the U.S., imposes no tariffs on its imports while virtually every other nation imposes tariffs, value added taxes, or other penalties on their imports from the U.S. These conditions virtually ensure that the U.S. has a growing trading deficit with almost every one of its trading partners.
Over time, the accumulated U.S. trade deficit has become so large it is no longer sustainable — especially because it makes U.S. manufactured goods uncompetitive with foreign competitors, resulting in the demise of many U.S. manufacturing sectors which, in turn, causes increasing American unemployment.
Not only are manufacturing wages much lower in most competing nations, but their imposition of tariffs also makes any American made product far too costly for global purchase. Until President Trump undertook his tariff strategy, the U.S. was unable to do much to compete economically on a level global trade playing field.
Of course, there are other factors of economic disruption in the U.S., including the increasing use of artificial intelligence (AI) in manufacturing and service jobs, over-regulation, excessive union contract demands, and inflationary pressures. But forces in the domestic economy can eventually deal with these.
In the post-war era after 1945, U.S. global dominance enabled it to be generous around the world with disaster aid, the Marshall Plan in Europe and Asia, and military aid to our allies.
That era has now been replaced with another world order, one with new economic and military superpowers. Both Democratic and Republican
recent predecessors to Mr. Trump did little or nothing to adjust to this new reality, and perhaps understandably so — economic adjustments are disruptive and cause short-term hardships which are not likely to win votes from those who are affected.
President Trump, in his second term, can afford some short-term voter unhappiness in order to bring about much-needed long-term change. Although he has acted with unprecedented energy and speed, understandable with his party’s narrow control of the legislative branch and the looming mid-term elections next year, the full impact of his tariff strategy has no predictable timeline.
The large number of nations now willing to modify or eliminate their tariffs and other penalties on their imports from the U.S. have only begun their negotiations. Even if most or all of them are successful for the U.S., it would take some time for many U.S. industries to recreate or enlarge their infrastructures and begin again manufacturing or otherwise producing their products for the domestic and global markets.
By delaying some tariffs, exempting some products, and making other adjustments, President Trump is not retreating or abandoning his strategy. He is, however, fine-tuning it to maximize its impact on our competitors and minimizing its impact whenever possible on American consumers.
This flexibility enhances the strategy’s chances for success, but there are probably some bumpy and uncertain economic days still ahead.
That is the real story.
Barry Casselman is a writer for AMAC Newsline.
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