After several decades during which tariffs were discarded by the bipartisan establishment, trade protectionism is back at the center of American politics. Donald Trump ran and won on tariffs in 2016, put them at the heart of his triumphant 2024 campaign, and is already using them as a bargaining tool for negotiations with countries such as Canada, Mexico, and China. But it isn’t just Trump. After taking office in 2021, President Biden took up and expanded his rival’s trade measures against China.
“Biden took up and expanded his rival’s trade measures against China.”
Throughout, economists have gone back and forth over the effects of tariffs on growth, trade, and employment, and will continue to do so as Trump’s second-term agenda takes shape. But debates over trade policy cannot simply be reduced to dueling statistical analyses. Rather, trade also needs to be considered as a political question. In 2017, the Dartmouth economist Douglas A. Irwin published his mammoth history of American trade policy, Clashing Over Commerce. Irwin’s book provides a fascinating lens for thinking through the political contours of US trade policy, which he shows has often been driven by politics rather than economic theories.
In Irwin’s account, the United States has had three paradigms for trade. From the founding until the Civil War, tariffs were first and foremost a source of revenue for the federal government, even as they also served the purpose of fostering the growth of US manufacturing by protecting it from foreign competition. Between the Civil War and the Great Depression, the protectionist motive became the primary driver of trade policy; this is what Irwin calls the restriction paradigm. After the Depression, US trade policy was instead guided by the principle of reciprocity: That is, policymakers have prioritized international agreements that give the United States reciprocal access to foreign markets. Although in practice, revenue, restriction, and reciprocity have tended to overlap, these three paradigms indicate differences in emphasis.
While some pundits still invoke the Smoot-Hawley Tariff Act of 1930 as a cause of the Great Depression, Irwin follows many contemporary economists in playing down its role in bringing about the downturn, focusing instead on monetary explanations. On the other hand, he also casts doubt on the idea that the high tariffs of the post-Civil War era played a central role in turning the United States into an industrial colossus. While noting that such tariffs were compatible with the explosive growth of the US economy, he attributes that growth to other causes: the scale of the country, freedom of commerce within the Union, relatively well-functioning capital markets, access to technology from abroad, and high rates of immigration. He also argues that exports exploded in the late 19th century in part because of the discovery of vast new stores of iron ore in Minnesota’s Mesabi Range, which lowered the price of iron dramatically, cutting the costs of manufacturing steel and iron products.
All along, Irwin emphasizes the primacy of politics. For instance, the United States went through a series of trade shocks between 1808 and 1814, including a self-imposed shipping embargo and the British blockade of trade during the War of 1812. These trade shocks helped accelerate domestic industrialization. According to Irwin’s calculations, there were about 15 textile mills in the United States prior to the trade embargo that began in late 1807. By 1809, the number of textile mills had shot up to 87. Once established, these mills and other interests began to organize for more protective tariffs. Economic disruption prompted by political action gave rise to economic actors who then exerted influence on economic policy.
Likewise, the architects of the post-World War II international economic order justified their promotion of trade not with appeals to economists who predicted higher GDP growth, but with geopolitical arguments. For instance, Cordell Hull, FDR’s secretary of state for 11 years, promoted global trade agreements on political grounds. Since World War I, Hull had been convinced that increased global trade would foster international stability. In private, he admitted that “95 percent [of his trade program] is more or less political or psychological.”
The history recounted by Irwin also reveals that trade paradigms tend to undermine themselves. For instance, the very successes of the “restriction” paradigm eventually undercut the political consensus that upheld it. The high tariff rates created a bonanza for federal coffers, and, unlike in the United States today, budget surpluses increasingly became a political problem. Congress tried to combat these surpluses by winding down taxation measures imposed during the Civil War and by creating new benefit programs, such as pensions for veterans of the Union Army. American industrial success in the export market forged an interest bloc of large manufacturers that increasingly prioritized expanding access to markets abroad. This, in turn, set the stage for the push toward reciprocity and trade multilateralism in the 20th century.
“Trade paradigms tend to undermine themselves.”
In light of that, we should consider whether the paradigm of “reciprocity” has now undermined itself. In part because of the transformative successes of globalization, the world is very different than it was in the 1930s or even the 1990s. According to International Monetary Fund data, the United States made up a fifth of the global economy (when adjusted for purchasing power parity) in 2000, while China made up 7 percent. Today, the People’s Republic’s share is at 19 percent, while America’s has dropped to 15 percent. A raw calculation of GDP would give the United States more of an edge, and some analysts dispute Chinese statistics. Nevertheless, the trend is clear: The United States used to have an overwhelming advantage over China, but now the two countries are much closer to parity. In 2000, the United States also had a clear edge for manufacturing high-end capital goods over China. Today, the Middle Kingdom outproduces America in that export sector, as a recent report from Sen. Marco Rubio’s office demonstrates.
Since the 1980s, whole sections of the American industrial infrastructure have been vaporized. The consequences of this disappearance can’t be reduced to quantitative economic models. For instance, Irwin estimates that under 20 percent of spending on apparel went to imports in the early 1980s. Today, imports compose around 98 percent of the American apparel market, according to one estimate. Domestic manufacturing came under pressure from foreign producers in many sectors during the early to middle “reciprocity” period. Now, some of those sectors have been nearly extinguished. That is a qualitative revolution.
The apparel industry has often been low-paying, and making pants and shirts can be arduous work. This has caused some pundits to dismiss the loss of apparel manufacturing. Yet the United States also remains dependent upon imports for many other products, from toasters to iPhones. It is even reliant upon imports for essential defense materiel. For instance, TNT remains an important component of artillery munitions, but the last TNT factory in the United States closed in 1986, according to a Reuters report. Many US allies have also shut down TNT production, such that NATO countries rely upon a single factory in Poland for TNT. Other than that factory, most TNT production takes place in India and China.
After World War II, American policymakers like Hull saw the globalization of supply chains as a way of strengthening alliances; now, fragile globalized supply chains undermine American security. If America relies for a crucial artillery component on a single factory thousands of miles away, then military supply chains have grown brittle, giving a strategic advantage to powers with more robust defense-industrial infrastructures.
Irwin’s history suggests that it takes a major national trauma, like the Civil War or the Great Depression, to shift a trade paradigm. In both these cases, the trauma coincided with a political revolution in which a single party achieved dominance: the Republicans in the 1860s, the Democrats in the 1930s. We haven’t suffered a crisis of the magnitude of the earlier ones yet, nor have we entered a period of one-party dominance akin to the durable electoral majorities enjoyed by the post-Civil War Republicans or New Deal Democrats.
Perhaps another, more distant comparison is more apt: the War of 1812, which also transformed American trade politics. The shortages during that war’s disruptions decisively shifted many American political elites in favor of some form of protection for industry. Thomas Jefferson, for example, notably recanted his earlier opposition to programs to support domestic manufacturing. While Republicans didn’t consolidate the protectionist paradigm until the 1860s, the foundations for that paradigm were laid long before.
The coronavirus pandemic seems to have provided an analogous shock. The shortages of essential medical supplies, microchips, and other goods revealed the dangers of sprawling supply chains. Beijing’s handling of the crisis—including lingering questions about the origins of the novel virus—has raised concerns in the Beltway about the wisdom of tying the United States so closely to China. In the wake of the pandemic, the Middle Kingdom has rolled out a new program of expanding exports to help counteract slowing economic growth. The sheer size of the Chinese economy now means that this export-expansion effort could have dramatic effects on the American and global manufacturing ecosystems. This state-financed export effort could further undermine economists’ claims on behalf of “free trade.”
So what would a fourth paradigm look like? In keeping with Irwin’s three r’s—revenue, restriction, and reciprocity—perhaps we should call it resilience. This new approach would focus on making the US manufacturing sector more resilient in two ways: expanding domestic production and diversifying international supply chains. Early inklings of the new paradigm can be seen in the tariffs imposed by both Trump and Biden. If China is pouring subsidies into its export sector, policymakers in Washington will likely use higher tariffs as a way of trying to block a second “China shock.” Biden has taken aggressive action this year to raise tariffs on electric vehicles, hoping to keep Chinese-made EVs from crushing America’s EV industry.
As with many other areas, post-World War II trade policy elevated the presidency (and, later, international bureaucrats) at the expense of Congress. Before 1945, tariff bills were high-stakes congressional logrolling, and mastering tariff policy helped a member gain legislative leverage. But the project of reciprocity increasingly snatched power away from Congress. Unlike some changes, this was done knowingly. Sen. Arthur Capper of Kansas, a Republican who backed granting Roosevelt more trade authority in 1934, wasn’t alone in doubting that Congress had the technical expertise to administer trade policy.
This transfer of authority altered the domestic politics of trade. Previously, lawmakers would use tariff bills to support local interests, so—for example—congressional delegations from the Northeast often pushed for higher tariffs on shoes because the region was a hub of footwear manufacturing. The president, however, has to assemble a national political coalition and is likely to place more weight on foreign relations than many members of Congress do. This difference in psychology grew increasingly important in the end of the 20th century, when Congress often tried to pass legislation to check some of the trends of globalization only to have the president veto or mobilize opposition to these bills. The Bushes, Bill Clinton, and Barack Obama were often much more bullish on far-reaching trade packages than Congress.
A project of resilience may be more attuned to local stakeholders than the reciprocity paradigm ended up being. But the president might also have national interests in shifting toward resilience. Some of the biggest costs of fragile supply chains are felt at the presidential level—particularly with regard to national security, international diplomacy, and the ability to project power abroad. Hence, the shift away from neoliberal globalization during the Trump and Biden years. Far from the president being at the vanguard of the globalization effort and fighting congressional resistance to trade agreements, the White House has instead often been the prime mover toward the new paradigm.
But Congress has also taken action. In September, GOP Sens. Marco Rubio, Kevin Cramer, and Mike Rounds rolled out the Further Strengthening America’s Supply Chains and National Security Act, which would improve data collection about the sourcing for various pharmaceutical products. Bills to expand oversight of the foreign purchase of American farmland and tighten the criteria for EV tax credits also passed the House recently.
Post-pandemic disruption has also shifted domestic politics on trade. Throughout much of the postwar period, internationalists were on the whole in favor of expanding American trade commitments, at least with non-Communist countries. In the neoliberal era, many internationalists even abandoned that “non-Communist” qualifier on the presumption that trade would push Communist regimes in a more liberal direction. However, proponents of international engagement are now divided. Some want to maintain the project of global integration, while others are concerned that the consequences of this integration constrain Washington’s ability to project power abroad and act as a backstop for the international trading system. By the early 20th century, exporters pushed American policymakers away from a regime of protection to trade agreements; a fracture in the interests of the manufacturing sector (between exporters and domestic protectionists) was crucial for pushing the anti-tariff agenda. A similar strategic split may be occurring today, with resilience-aligned internationalists allying with populists, who have long been more skeptical of international trade in general.
It is hard to predict the exact contours of the policy regime to come. Right now, there is broad bipartisan consensus around decoupling from China, building up US defense and high-tech manufacturing (such as computer chips), and diversifying medical supply chains. The president-elect has pushed for a more sweeping 10 percent universal tariff, an idea that may struggle in Congress but that he might try to implement via executive action. During the campaign, he also floated the idea of allowing companies that manufacture their goods in the United States to pay a lower corporate tax rate. Tax subsidies for manufacturing could be part of a resilience agenda.
While “resilience” will certainly include efforts to make the United States less dependent on trade with China, total economic separation from China will likely be a policy choice of last resort. Not only would doing so dramatically escalate geopolitical tensions, it would also be tremendously economically disruptive. Millions of jobs in the United States—from soybean farmers to local retailers—are tied to trade with China, and many key American allies and trading partners are thoroughly intertwined with the Chinese market. A paradigm of resilience would instead focus on rebalancing.
“Policy levers for rebuilding manufacturing might include things beyond trade.”
With its subsidies for domestically produced components of electric vehicles, the Inflation Reduction Act indicates how a resilience agenda might include trade while not being reducible to it. Important policy levers for rebuilding manufacturing might include things beyond trade itself, such as tax reform or worker training. Energy policy is an essential component of rebuilding manufacturing. Just as American exports were once boosted by the discovery of iron deposits, cutting the costs of energy could boost manufacturing production across the board.
In a 1934 message to Congress asking for more authority to negotiate trade deals, FDR claimed that “it is important that the country possess within its borders a necessary diversity and balance to maintain a rounded national life, that it must sustain activities vital to national defense and that such interests cannot be sacrificed for passing advantage.” The pandemic and shortages exposed by the Ukraine war have caused policymakers to fear that this “necessary diversity and balance” has been upset; a resilience paradigm would aim to restore it. This goal offers a basis for assessing the success of Trump’s trade agenda in the coming years.