What You Don't Understand About Trump's Trade Victories

You’re thinking about this all wrong. 

Those of us who have been most critical of Donald Trump’s tariff policy are probably so rooted in our economics textbooks that we can’t give credit where credit is due.  Call it “tariff derangement syndrome” as the astute Jason Furman does.  Just because decades of economic theory and practice confirm that tariffs reward inefficiency, tax the poor and punish innovation doesn’t mean they’re all bad. 

So, stop ranting for the next 750 words and consider what the president has accomplished in just six months in office, when most administrations are still getting their sea legs.

He has raised America’s average tariffs on imports from about 2% to about 15% (so far) to reduce bilateral trade deficits.  You may think he’s needlessly angering valuable friends and allies to close a measure of international commerce that most experts consider misleading if not meaningless.  But think of it as compensation for how badly these “friends” have treated us in the past. 

He has secured promises to buy hundreds of billions in U.S. exports and hundreds of billions more in direct investment.  If you worry about how much more Europe and Japan need investment for their own flagging economies, think of this as tribute for all we spend on defending them.

He secured tariff-free access for U.S. goods, even while raising tariffs for our trading partners.  Sure, the purists out there will say he has just raised taxes on Americans, while cutting them on foreigners.  But they are just being purists.

He has landed a dozen major trade deals in a matter of months and imposed new terms on everyone else with the ease of a few threatening social media posts.  You may point out that real trade agreements take an average of two and a half years to secure binding legal commitments that businesses need to plan their investments, but companies have complete predictability if they just build everything in the United States.

 Just because decades of economic theory and practice confirm that tariffs reward inefficiency, tax the poor and punish innovation doesn’t mean they’re all bad.

He has secured trillions of dollars in commitments to build new manufacturing facilities.  You can point out that anyone announcing a new factory has been thinking about it long before last November’s election, if that makes you feel good, but everyone’s on notice that they risk getting called out on “Truth Social” for any plant they choose to build abroad.

He's creating thousands of good manufacturing jobs.  Yes, we know that automated production lines mean factories create fewer jobs, but factories on American soil also ensure we’ll always have secure supplies of semiconductors, cars and garden furniture chairs.

He's on track to more than double tariff revenues with more than $150 billion already in the pot this year.  You may ask how long this will last if the whole point is to get production to move to the U.S.  You may point out that limiting tax cuts is a much more effective and efficient way of closing a projected $1.9 trillion deficit, but you’d be hiding in your textbooks again.

He has done all of this at no cost to Americans.  Okay, I know you’re going to go through the whole thing about how American consumers pay tariffs when goods enter the country, and the burden falls disproportionately on low-income households.  But if you really insist that a tariff is a “tax,” then think of it as a “magical disappearing tax”!  Producers always absorb at least some of the tariffs from their fat profit margins, and even more evaporates in the exchange rate, and the final price tag never really shows how much more that tariff added.

He's doing all this without triggering lasting inflation because tariffs are just a one-off adjustment.  You’re going to point out that inflation did, in fact, rise in the most recent reading and that there’s still a lot of uncertainty ahead as the president threatens tariffs against Canada’s fentanyl enforcement and Brazil’s legal system.  But you have to admit that even if 1-year inflation expectations peaked at 6.6% in May, which is more than triple the Fed’s target, they are now back to just 4.4%, which is only more than double.

He has reset global trade rules in a way that will deliver faster growth.  You may point to data that already shows the economy slowing, and you may insist that last week’s jobs number was not fiddled by a Biden-era appointee.  But that’s why the president has been torturing Jerome Powell to cut rates.

He has opened up export markets with Japan promising to buy more American cars and Europe signing up for more American beef.  You may ask just how many cars Japanese drivers will buy if the steering wheel is not on the right side or how much meat European families will consume if it’s injected with hormones they consider unhealthy.  But now you’re just being pedantic.

Finally, he has restored respect for America’s strength so we can be “Great Again!”  You may insist we are punishing the very friends and allies we’re going to need to meet the challenges from China.  You’re going to say that actual trade deals are less important than the relationships we should be building.  You’re going to suggest that unfair agreements will only cause resentment and trouble.  But you’re just not looking at this the right way, and they stopped listening to you long ago.