President Trump has made one intention very clear, that being that he will be working to restore the United States’ industrial base. He’s been taking steps to do that, and many of those steps have involved tariffs intended to balance trade. This effort has culminated (so far) with the April 2nd “Liberation Day” reciprocal tariffs. Democrats and even some Republicans are opposing the tariffs, but one administration member, Secretary of State Marco Rubio, went on record on Friday in support of the president’s plans.
Rubio, speaking at NATO headquarters in Brussels, made the remark after taking issue with a reporter’s claim that world economies are “crashing” in the wake of Trump’s “Liberation Day” tariffs.
“We have to be a country to think we’re the largest consumer market in the world, and yet the only thing we export is services, and we need to stop that,” Rubio said. “We need to get back to a time where we are a country that can make things, and to do that, we have to reset the global order of trade.”
“So the president rightly has concluded that the current status of global trade is bad for America and good for a bunch of other people. And he’s going to reset it, and he’s absolutely right to do it,” Rubio added.
Secretary Rubio repeated that the United States must once more become an industrial power, a country that makes things:
“I mean, this is, just can’t continue. We can’t continue to be a country that doesn’t make things. We have to be able to make things to provide jobs for Americans… it’s that simple,” he said. “China, as an example. I mean, it’s outrageous. I mean, they don’t consume anything. All they do is export and flood and distort markets in addition to all the tariffs and barriers they put in place.”
Granted, tariffs make many uncomfortable, and that discomfort is not limited to the left; free-trade advocates on the right are concerned as well. But, as President Trump points out, free trade has to work both ways, and many nations have heavy tariffs on American goods.
The free-market advocate website Issues & Insights is a little more cautious on the matter, but they are not ruling out the idea that the tariffs may have the desired effect.
…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.”
On Friday, the Trump administration’s tariffs would seem to have scored their first hit; Vietnam’s leader, To Lam, in a phone call with President Trump, agreed to meet for talks on how to avoid the reciprocal tariffs. It is this kind of thing that Issues & Insights acknowledges might work.
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.
You don’t get much more free trader than I&I’s editorial board.
Detractors from the Trump policy note – accurately – that the markets are dropping. The Dow, for example, has dropped roughly 10 percent since President Trump re-assumed office.
Secretary Rubio had an answer for that, as well:
Rubio added, “If you’re a company and you make a bunch of your products in China and all of a sudden shareholders or people that play the stock market realize that it’s going to cost a lot more to produce in China, your stock is going to go down, but ultimately the markets, as long as they know what the rules are going to be moving forward, and as long as you can sustain where you’re going to be, the markets will adjust.”
Markets are reactive, of course, and if the tariffs do have the desired effect – well, then Secretary Rubio will have been proved correct. Markets also hate uncertainty, and that’s a big part of what’s behind the ongoing correction.
More Winning: Trump Economy Adds 228K Jobs in March, Crushing Predictions of Critics, Economists
The thing is, we’re in terra incognita here. The United States has not tried a major tariff reset since Smoot-Hawley in 1930. And, despite what you will hear in some quarters, the Smoot-Hawley tariffs didn’t cause the Depression; the market crash that led to that financial disaster happened in 1929. No less an economist than Milton Friedman opined that the effect Smoot-Hawley had on the Depression was minimal. What’s more, the global economy is vastly different now than it was in 1930. Britain, in 1930, had the world’s largest and most powerful navy on the planet and a powerful industrial base, while the United States was still moving from being a predominantly agricultural economy to an industrialized one – and only ten years later, we would be the “arsenal of democracy.” Japan was the primary power in Asia, militarily and economically, while China was an agricultural country mired in what we would now call the third world.
Much has changed since then.
So, will President Trump’s tariffs work? Anyone who says they know, one way or another, is engaging in some leg-pulling. But one thing President Trump gets right, regardless of his methods: The United States must once more become a nation that makes things. We are too dependent on too many other countries for too many things, and many of those countries (China) are not friendly.
I’m inclined to think that the tariffs are more an “Art of the Deal” tactic than anything intended for the long term. But tariffs, be they a negotiating ploy or, as I&I puts it, a permanent wall around the country, are what President Trump campaigned on, they are what people voted for, and his win was convincing. Now we get to see what happens – and one thing is for sure and for certain: The country could not have stayed on the course that the Biden/Harris administration had it on.
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