Anyone trying to make sense of President Trump’s tariffs is missing the point. The conga line of trade negotiators will keep dancing because Mr. Trump will continue to use tariffs to exert dominance, signal threats and make deals. There won’t be a new end state. Tariff numbers will keep fluctuating, prices for goods and investments will be unreliable, and agreements won’t last. But the damage to America’s economy and strategic interests will persist.
The president has cited various goals for his disorderly deal-making. He wants to cut bilateral trade deficits, open foreign markets, protect favored U.S. industries and restore manufacturing. He also wants to raise revenue and in some instances simply punish others for a perceived offense. His administration leaps from one rationalization to another to justify the boss’s most recent whim. But Mr. Trump won’t be pinned down. He believes uncertainty adds to his power and wants the freedom to bully others depending on what has his attention.
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As a former reality TV star, the president enjoys signing papers and waving them before cameras. He likes announcing concessions and deals. He revels in the appearance of winning and moving on to the next episode. The rest of his government scrambles to discover the terms of the deals, sorting through the exceptions and side bargains—before the merry-go-round spins again. Enforcement will depend on Mr. Trump’s attention span and his latest fancy.
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By contrast, Mr. Trump relies on coercive power. He views economics as a zero-sum contest for a fixed pie of resources and wealth to be divided up through his deals. Ironically, the interdependence of America’s allies enables Mr. Trump to menace them more than possible foes. He is pummeling friends Washington will need for military, intelligence and technological cooperation. In contrast, he has been cautious with China, which made a plan to hit back effectively, especially through controlling exports of vital minerals.
Mr. Trump’s trade policies and uncertainty will impose costs over time. Prices will increase. Washington will misallocate resources to less-competitive sectors. Productivity will slide. Other countries will be less willing to rely on American policies and companies. The costs might be offset for a time by other aspects of the U.S. economy, such as investments in artificial intelligence, data centers and energy. But America will be dissipating economic power, resilience and competitiveness. Brexit offers a rough analogy. The U.K.’s withdrawal from the European Union didn’t plunge the British economy into a nose dive, but over the years costs related to the shift have ground down the economy.
This isn’t leadership—it’s a con. Trump’s tariffs inflate costs for everyone, making consumers and businesses pay more while killing small firms’ ability to import. His random, ever-changing tariff rates—picking winners and losers with no logic—wreck supply chains and choke the market. It’s government interference on overdrive, not a strategy. The fix? Scrap tariffs, cut regulations, and let markets work. Trump’s boasts about Big Tech are a desperate distraction from the truth: he’s claiming credit for wins he didn’t earn while his policies demolish Main Street. Economic freedom means letting businesses thrive, not letting Trump take a bow for other people’s work.
Markets are not indifferent to where and how goods and services are produced. They are highly — ruthlessly — partial to producing them where and how it is most profitable to do so.
The profit-loss system consolidates decentralized information from around the world into price signals. Those signals tell people where and how it makes the most sense to produce something. They often tell people things that are counterintuitive, such as that it is actually more efficient to have a piston cross national borders six times during its production. The signals also tell people things they would have no possible way of knowing otherwise, because prices are formed through the process of exchange. Prices “are continually being discovered and formed by entrepreneurs testing ideas about future consumer wants and resource constraints,” as Marian Tupy and Peter Boettke recently wrote. It’s a marvelous bottom-up system of packaging and transmitting information.
Affirming the justice of that system is not a neutral statement. It is an affirmation of property rights and the wisdom of individuals and businesses to make decisions for themselves. The prosperity it creates is good for lifting people from poverty and increasing their access to goods that make their lives better. I’m not indifferent to more goods at affordable prices, and neither are American workers who want to make the most of their paychecks.
Protectionists would replace that system for determining where and how to produce with one that says the government knows better. That is inescapable for protectionists. Michael is correct that statesmen cannot be indifferent. They are likely to ignore the solid information that comes from prices and be partial to their particular view on what is good for the country, which is of course influenced by what helps them get votes and campaign donations. That top-down method of decision-making is less likely to deliver prosperity.
And, perhaps fortunately, tariffs are no longer an abstract question. The U.S. currently has an avowedly protectionist administration, led by a protectionist president and staffed and advised by the country’s leading protectionists. And U.S. tariff policy doesn’t remotely resemble the statesmanlike ideal that Michael invokes. The president is running roughshod over the Constitution to impose tariffs on adversaries and allies alike, announcing and modifying them by social media post, making mutually contradictory claims about their purpose, all while bragging about the foreign investment that the supposedly evil trade deficit makes possible. I look forward to being told that true protectionism has never been tried.
Beyond the troubling legal questions, the deal with Nvidia and AMD reeks of more crony capitalism. Just as it has used and threatened tariffs to seemingly obtain concessions from foreign countries on trade, this new deal suggests that the Trump administration will leverage the executive branch’s authority to regulate and restrict imports, exports, and foreign investment to bring private companies to the negotiating table to serve the president’s political prerogatives.
Just two months ago, the administration secured an agreement whereby Japan’s Nippon Steel granted the federal government a “golden share” in the company in exchange for President Trump’s approval of Nippon’s acquisition of US Steel. (The acquisition had previously been blocked by President Biden on exceedingly weak “national security” grounds.) That deal gives Donald Trump, in his capacity as president, a veto over many of the business decisions that the merged steel firm might make—from changing the company’s name or relocating its headquarters to reducing planned investments and changing the strategy for sourcing inputs.
In May, President Trump threatened to put a 25 percent tariff on iPhones made outside the US in an attempt to get Apple to make its smartphones in America. To avoid this tariff hike, Tim Cook has announced a $600 billion investment in the US over the next four years. Former US trade negotiator Stephen Olson has pointed out that, “What we are seeing is in effect the monetization of US trade policy in which US companies must pay the US government for permission to export. If that’s the case, we’ve entered into a new and dangerous world.”
In July, Trump imposed 39 percent tariffs on Switzerland—more than double the 15 percent rate to which its European Union neighbors are subjected—marking a sharp departure from the American-Swiss trading relationship. The tariffs went into effect last week on August 7. The average tariff rate that the U.S. subjected Swiss imports to was 2.21 percent in 2022 (the most recent year for which data are available), according to the World Bank. Switzerland’s average tariff rate on American goods was even lower: a mere 0.52 percent. In January 2024, Switzerland abolished all industrial tariffs, resulting in 99.3 percent of American goods entering the country tariff-free, according to Switzerland’s State Secretariat for Economic Affairs.
Despite Switzerland’s nearly completely laissez faire trading relationship with the U.S., Trump complained of a $41 billion deficit with Switzerland during an August 5 interview on CNBC’s Squawk Box. (According to the Office of the U.S. Trade Representative, the American-Swiss goods deficit in 2024 was not quite that high: $38.3 billion.) However, this figure excludes trade of services between the two countries, which accounted for a trade surplus of $29.7 billion in favor of America. The total trade deficit, then, was approximately $8.6 billion, or 21 percent of Trump’s inflated claim.
In fact, there’s strong evidence that the BLS has only gotten more accurate over time, not less. Ernie Tedeschi of The Yale Budget Lab and former chief economist for the White House Council of Economic Advisors released this analysis the trends of revisions:
