By Lori Wallach - Project Syndicate | March 26, 2025
US President Donald Trump’s focus on “reciprocal tariffs,” rather than balanced trade, does not suggest that his administration intends to use tariffs strategically to cut the country’s chronic trade deficit. But Democrats must stop dismissing outright a policy tool that they themselves embraced under Biden.
WASHINGTON, DC – As the clock ticks down to President Donald Trump’s planned imposition of “reciprocal tariffs” on US trade partners on April 2, Trump’s opponents have been attacking tariffs as a price-raising menace, rather than indicting Trump’s two-month master class on how to misuse a potentially effective policy tool.
Many Democrats seem to have forgotten that President Joe Biden increased the size and scope of the first Trump administration’s tariffs on imports from China. And while Biden raised tariffs in 2024, inflation still started to decline – just as it remained flat after Trump tariffed Chinese imports worth $350 billion starting in 2018.
Biden’s combination of tariffs and industrial policies to boost demand for domestic goods and incentivize investment delivered the manufacturing boom that Trump keeps promising. By 2023, the United States had the highest rate of investment in factories in 30 years. Perversely, instead of trumpeting this achievement, the Democrats’ 2024 presidential candidate, Kamala Harris, attacked “Trump’s tariffs” in a campaign that lost a majority of working-class voters.
Now, instead of attacking Trump’s misguided notion that tariffs alone can revive American manufacturing, and highlighting his plan to kill the industrial policies that will deliver new manufacturing jobs (for which Trump will claim credit), Democrats have doubled down.
Branding tariffs as Trumpian is a mistake. If you support a carbon border tax to combat climate change, or enforcement of labor standards in trade pacts, you support tariffs. And tariffs are popular. Shortly before the US presidential election, 56% of Americans favored increasing tariffs, with support among non-college-educated voters in Michigan, Wisconsin, and Ohio at 58%.
The economic damage Trump has caused since taking office in January is not due to tariffs per se, but the economic uncertainty caused by constant tariff changes and targeting of non-trade-related goals, like migration and fentanyl trafficking, and countries like Canada (with which the US has a non-oil trade surplus). Riding Trump’s tariff rollercoaster, prospective US manufacturing investors are more likely to reach for a barf bag than their checkbooks.
Even so, a March CBS poll found Americans still wanted higher tariffs against China. Are they wrong?
Core elements of the postwar Bretton Woods system are either incompatible with today’s realities or have been entirely eliminated, like fixed exchange rates. The US dollar, as the world’s main reserve currency, does not depreciate to correct trade imbalances. A chronically overvalued dollar means that imported goods denominated in other currencies crush even the most efficient US producers. Meanwhile, decades of liberalization of capital flows, together with powerfully enforced foreign-investor rights, have led to offshoring of even high-end manufacturing to low-wage countries.
The result has been a persistent US global trade deficit since 1975, including a record-high $918.4 billion in 2024. As economic theory would predict, deindustrialization and greater economic inequality followed. The North American Free Trade Agreement and the emergence of the World Trade Organization in the mid-1990s, together with China’s accession to the WTO in 2001, turned the gradual decline of US manufacturing capacity since the early 1980s into a rout. The US has since lost more than 90,000 factories and five million net manufacturing jobs and now mainly produces dollar-denominated assets purchased by foreigners with the billions of dollars they earn by selling Americans their goods. This has been extremely profitable for the US economy’s financialized sectors and wealthy investors – and a disaster for many.
The numbers speak for themselves. Sixty-three percent of Americans could not cover a $500 emergency expense. Those with college degrees live a whopping eight years longer than those without, while so-called deaths of despair among working-age Americans – from suicide, alcohol-related diseases, and drugs – decreased overall US life expectancy for the first time starting in 2015. Former factory towns nationwide, not only in the Rust Belt, have been shattered.
It doesn’t have to be this way. The COVID-19 crisis demonstrated the perils of having production of many essential goods concentrated in too few countries, which US military analysts also consider a national security risk. The US can create good jobs and restore a sense of security for the 62% of American workers without college degrees by boosting domestic production of products essential to Americans’ health, safety, and security. This, and diversifying the sources of US imports, can strengthen US national resilience and security.
Tariffs will be part of the fix because the problem is on the import side. America cannot export its way to balance. While the US has by far the largest chronic trade deficit, 66 countries are in the same position, while 19 countries, including China, Germany, Japan, Korea, and Taiwan, rack up chronic global trade surpluses by relying on mercantilist policies to boost their manufacturing capacity and exports. Decades of anti-dumping, subsidies, and WTO enforcement cases have not stopped this. If deficit countries united to raise tariffs on surplus countries, it would not only help rebalance trade but also benefit their workers, who would become the consumers of the goods no longer flooding export markets.
If that bloc of countries also agreed to act in accordance with the International Labor Organization’s core standards and the rules of key multilateral environmental treaties, even more people could benefit from trade. As offshoring has moved into higher-wage work, the main premise of free trade gains – that even if some people lose their jobs, everyone benefits from access to cheaper imported goods – has collapsed. As Nobel laureate economist Paul Samuelson showed in 2004, US workers now lose more in wages than they gain from cheap imports.
Tariffs are not the panacea Trump claims, but they also do not always raise consumer prices. Tariffs are charged on the wholesale price of imported goods. Whether these costs are passed on to consumers is a choice made by companies that import tariffed goods. A National Bureau of Economic Research study showed few retail-price increases after the 2018 China tariffs, because companies absorbed the cost from their profit margins instead.
On the other hand, some firms use tariffs as cover to increase their margins. For example, while Trump’s first-term tariffs supposedly raised prices for washers and dryers, there were no tariffs on dryers, and retailers raised washer prices in Canada, where no tariffs applied. Strong enforcement of competition policy can combat price increases during the necessary transition to more balanced trade.
To reap the benefits of trade, it is critical that the US cut its large chronic trade deficit. Trump’s focus on “reciprocal tariffs,” rather than balanced trade, does not suggest an intention to use tariffs strategically to achieve this. But Democrats must stop dismissing outright a policy tool that they themselves embraced under Biden. The question they should focus on is whether Trump’s tariffs will help or hurt Americans.
Lori Wallach is Director of the Rethink Trade program at the American Economic Liberties Project.
Copyright Project Syndicate
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