Trump’s two-fer on tariffs has unleashed a torrent of commentary. While the majority of those points are absolutely on target – for example, the inanity of the formula used to decide the specific tariff rate for a given place; the inclusion of uninhabited islands on the list; the likely consequences in terms of price increases, currency changes, and recession; the bitterness and resentment that the announcement has provoked around the world; the fecklessness of the Republicans in Congress in the face of this turmoil; and then the near-U-turn, only hours after pronouncements to the contrary – there are several points that deserve a closer look. In this post, I’ll focus on why the tariffs were imposed, then lightened. Follow-ups will cover how serious a blow this is, or is not, to the U.S.-led international system; and what kinds of lessons can be learned from other cases where U.S. presidents reversed themselves on particularly cherished foreign policies.
To begin with, the famous formula. Numerous commentators have, justly, pointed out that dividing the trade deficit by two times imports has zero overlap with anything remotely resembling a tariff schedule. However, it should not be imagined that this exercise in numerology is unique. Quite the contrary: foreign policy, whether regarding economic, military, or other issues, is quintessentially an area in which decisions are made on the basis of numbers plucked more or less out of thin air. A good case in point is the “Nixon shock” of August 1971, in which the U.S. suspended the convertibility of the dollar into gold, imposed a 90-day freeze on wages and prices, and set an import surcharge of 10 percent, supposedly to counter exchange rate movements. Half a year before the decisions, Nixon’s Treasury Secretary, John Connally, was already contemplating some kind of aggressive action on the grounds that “foreigners are out to screw us, our job is to screw them first.” Apparently, he seized on a Treasury estimate that the dollar was currently overvalued by 10 to 15 percent and recommended an import surcharge to cover future exchange rate movements of 10, not 15 percent, a figure appealing to Nixon on the grounds that it was “not too damned aggressive, just aggressive enough.” Indeed, when, some weeks later, Kissinger confronted Nixon with evidence showing that 10 percent was too low to be effective but high enough to contribute significantly to trans-Atlantic tensions, Nixon’s response was telling: “The difficulty is the surcharge, Henry, it’s so popular domestically we can’t just end it.”
Or consider arms races. Putting aside the question of whether tit-for-tat strategies really are optimal as a way of inducing cooperative behavior, the logic of retaliation says nothing about the magnitude of the retaliatory move. For example, when at the end of the 19th century, Germany began its naval buildup, the British responded to it by redeploying their forces and constructing a new class of ship, the Dreadnought. The Germans reacted, after numerous internal debates, by deciding to build four new ships per year for four years, then three per year after that; the British in turn decided to build four ships in one year, then four more the following year if needed (this latter was a financial compromise in the face of the slogan “we want eight and we won’t wait”). To imagine that either the original ship-building numbers put forward by naval officials, or the eventual compromises agreed to by politicians, were chosen according to some kind of well-established formula, is self-evidently ridiculous.
In other areas of policy making, one sees a similar process at work. When the EU and the US decided to set ceilings on refugees, or when delegates to environmental meetings opted for particular figures on warming, or carbon reduction, the same kind of reasoning predominates. Nor is this simply a matter of innumeracy on the part of politicians and foreign policy officials (certainly some of Nixon’s advisers had the economic chops to perform fairly accurate calculations, and the same can be said for some of the policy makers involved in climate change negotiations). Rather, the point is that, at least in foreign policy, the idea is to do something considered appropriate, with the specific something being of distinctly secondary importance. Thus, although the numbers Trump proudly displayed were ludicrous, he is hardly unique in that regard. That we see Trump’s tariff decisions as particularly illogical says more about our lack of familiarity with the sordid arcana of past tariff decisions than to the crystalline rationality of other, more commonly opted-for foreign policies.
The second point concerns the disconnect between the tariffs and the goals that Trump set for them. Commentators have had a field day pointing out that if, as the White House claims, foreign producers, not domestic importers will absorb the costs of tariffs, then there cannot be a shift to domestic production; and moreover that if there is such a shift, then it is not possible for tariffs to bring in large amounts of money to the Treasury. But this failure to connect means to ends, or even to worry about the consistency of ends, is, as I have pointed out before, absolutely bog standard in every branch of foreign policy making. Trump of course has for decades been fixated on tariffs, but in that regard he is simply being cruder than many of his predecessors: Kennedy, for example, with his adoration of the Special Forces (including their wearing green berets); Biden with his use of sanctions as practically a default option; and many presidents (for example, Eisenhower, Nixon, Ford, Carter, Reagan) with their routine employment of the CIA’s covert intervention capabilities. Nor, in discounting harmful consequences of tariffs, was Trump denying reality much more than other leaders have done, whether for foreign or domestic policy. When things go badly, the veracity of reports can be denied (Trump: “fake news”) or downplayed (Bush on Katrina: “you’re doing a heck of a job, Brownie”), or the timeline stretched out (Clinton on Kosovo bombing: “the weather is better in May than in April, in June than in May, in July than in June”), or the failure reinterpreted (“first president in decades who’s not leaving a war in Afghanistan to his successor”), or any number of other ways of dealing with cognitive dissonance. This is one reason why states persist so long in unsuccessful policies. The only difference, so far, between Trump’s tariff policy and various of his predecessors’ policies is that, with 401K plans being hit almost hourly, the patent failure of Trump’s policy to accomplish any of his stated goals was apparent to a wide audience far more quickly than earlier foreign policy disasters.
The third point has to do with Republicans’ AWOL status. Much of the commentary in the days following the initial announcement bemoaned the near-silence, at least institutionally, of the Republicans in Congress in the face of Trump’s tariff policies, the implication being that if they had acted in accordance with their presumed beliefs, Trump would never have dared impose the tariffs. (Although, if one is to believe newspaper reports, Trump did talk with congressional Republicans prior to his U-turn, this still was behind the scenes, and they did not so much publicly act as devoutly hope.) But once more, this timidity hardly distinguishes them from their earlier counterparts. For example, when the Democrats controlled the Senate, their personal antipathy to Netanyahu did not stop them from massively supporting the Biden administration over Gaza. And this fealty to the White House is the rule, not the exception. In every administration going back at least to the days of FDR, Congress’s default stance is one of backing the president. One starts with those who are members of the president’s party, then adds at the very least a sprinkling, if not a torrent, of senators and representatives from the other party. Whether or not this backing is genuine, calculated, or craven, it is something that can be taken to the bank.
A fourth point has to do with Trump’s psychology. We are told that Trump is impulsive, seizing on the first idea that pops into his mind; or that he fetishizes tariffs, or that he has hired mediocrities and/or sycophants who cater, incompetently, to his whims; and I myself have speculated that he is driven by revenge against all those he imagines to have wronged him, with foreigners and their exports high on the list. But in the end, such arguments are pointless. The question should not be what drove Trump to pick up the tariff club, but what other clubs were readily available. And the short answer is, there was almost nothing else at hand. Say that Trump did indeed want to harm foreigners, or demonstrate his power, or return to the days of William McKinley. Could he have gotten Congress to pass some sort of bill? Obviously not, given the fractiousness of the Republicans and the filibuster in the Senate. Could he have further hurt Ukraine, or cozied up even more tightly to Putin? Yes, but that would do little about states such as Mexico or Lesotho. Could he call for a summit meeting? Too slow, with no guarantees that a deal could be struck at all. In other words, seen from the White House, tariffs were one of the few policy instruments available. The fact that their likely consequences would, to understate the point, be undesirable was secondary: tariffs could be put into force, by Trump himself, quickly; and they could just as quickly be lightened (not that Trump had necessarily planned for that).
None of this is to excuse Trump. To single-handedly cause a global economic meltdown and devastate the market for U.S. Treasuries, all in the space of a few weeks, is no mean feat. (Though, in fairness, Nixon’s nuclear alerts, Johnson’s escalation in Vietnam, and Bush’s Iraq War are strong competition.) Nor am I implying that because Trump’s predecessors also seized on the first policy instrument at hand, therefore Trump is smarter or more capable than he is. Rather, my point is that when someone with Trump’s patent incompetence is placed in charge of powerful policy levers, disasters can and should be expected. And even if Congress had been charier in handing over those levers to the president, their creation in the first place – the military, the diplomatic, the “covert,” and, as we now see, the economic, policy tools – is the root cause of the immediate problem. Those tools were created over decades, and they certainly cannot be either brought under democratic control, or else defanged or dismantled, in the short term. For the moment, the issue is how to pry the tools out of Trump’s hands, and that is the subject of part 2 of this series.