Everyone has a lot to say about President Trump’s “Liberation Day” tariffs, announced on April 2 last week, and thus not to be confused with an April Fool’s Day joke. Whenever consumer prices are up, and retirement accounts are down, Americans start paying attention to politics. Even a few Republicans in Congress now seem worried enough to break openly with the administration, after having stayed silent while it took a sledgehammer—or at least an on-stage chainsaw—to our system of constitutional government.
If Republican politicians are worried in public, and now willing to say so, we can expect that their financial backers are worried in private. Which means that we should expect “Trump’s tariffs” to become a media talking point for years to come, even if he backs down and reverses course eventually, which no one is putting past him.
But what are we talking about when we talk about Trump’s tariffs? And what are we not talking about?
Most people are talking about “the markets,” meaning, the stock market, and whatever tumbles it takes as the administration upends the globalized division of labor that Wall Street helped create and now depends upon. But the mere fact that “the markets are down” is only an indication that the United States is running a near-term policy that Wall Street does not like. This does not make it a bad policy by itself. The stock market would also tumble if a hypothetical left-wing administration—say, Bernie’s or AOC’s—were to shift the tax burden from labor to capital by treating capital gains as ordinary income to offset the elimination of payroll taxes. Stock prices would fall even more if a conflict in the South China Sea forced America to decouple radically and rapidly from its deep commercial enmeshment with China. Indeed, as Covid showed, our global trade networks are fragile—and everything from pandemics to cold wars to hot wars can disrupt them, thus roiling “the markets.”
Trump himself has encouraged a narrow market focus by constantly looking to the stock market as a barometer of policy success. He was keen to take credit for the stock market gains of his first term, which were buoyed by his 2017 tax cuts for the wealthy. And he has judged other presidents’ policies by how the markets reacted. His second term has seen a new and highly visible merger of wealth and power: The billionaires of Big Tech smiling on his inaugural dais, the leaders of foreign countries lining up to dine at his private Mar-a-Lago Club, and the spectacle of the world’s richest man given free rein as an unelected and amateur cost-cutter. Trump’s second-term cabinet is filled with businessmen and billionaires. And the president himself seems to epitomize the new “international oligarch” style. His gold-leafed Manhattan penthouse, the top three floors of Trump Tower, was “decorated to emulate the Palace of Versailles,” as House & Garden explained, which seems to say the quiet part out loud.
In short, an oligarchic government naturally invites a market-driven mode of social assessment. So why not judge Liberation Day by how the stock market reacts to it?
The reason is that Trump and his defenders are not wrong to criticize neoliberal economic globalization and to question the role of the United States and its major trading partners in maintaining a highly unbalanced system. A case could be made for suffering short-term economic pain for the sake of systemic reform, at home or abroad. Since last week, Trump and his cabinet have been scrambling to make such a case. But no plausible argument has yet been made for these tariffs, even in the long run, leaving aside even their amateurish and haphazard rollout (which may or may not have been the product of some AI program). No one seems able to tell us clearly what this liberation is all about, and the several explanations on offer are not obviously compatible.
Tariffs can do three things, broadly speaking. They can provide government revenue. They are “taxes,” after all, which the government collects. They can shield some sectors from foreign competition, whether for reasons of industrial renewal, domestic economic policy, or plain old favoritism. And they can serve foreign-policy goals by rewarding or sanctioning other countries, as part of a “geoeconomic” policy.
The administration’s defense of “Liberation Day” seems to shift among these objectives without settling plausibly on any of them. Sometimes, the objective seems to be putting the tax burden on imports—and thus, in some measure, US consumers—rather than on US workers and investors. At other times, the aim seems broadly consonant with the Biden administration’s effort to rebuild the US manufacturing base, but without the crucial support for industrial policy that went along with Biden’s more targeted tariffs. At still other times, the objective seems to be “geoeconomic”—though in a way that undermines, rather than reaffirms, the hard-won US alliances since the end of World War II. Europe and Japan are now reeling from the Liberation Day tariffs in ways that give China new openings as well as increasing diplomatic credibility.
Short-term economic pain requires a broader vision that ties together US domestic and international economic policy with foreign policy goals and realities. The Biden administration had such a vision: a selective decoupling from China, labor-first domestic policy, and a focus on energy, climate, and the green transition. It was articulated across a series of landmark speeches by National Security Advisor Jake Sullivan, Treasury Secretary Janet Yellen, National Economic Council Director Brian Deese, US Trade Representative Katherine Tai, and others. The economy the Biden administration handed off was strong in its fundamentals, as even The Wall Street Journal noted in late October of last year. This was excepting perhaps its record of inflation, which stemmed largely from the pandemic and was comparable to, or lower than, that occurring in other OECD countries over the same period. And, as the current administration’s critics are now eager to point out, the inflation during Biden’s term may end up looking modest in comparison to what Liberation Day will deliver.
“It is not obvious that the current administration has any programmatic vision.”
It is not obvious that the current administration has any programmatic vision to compare. (Here, and elsewhere, one feels keenly the absence of Trump’s first-term US Trade Representative Robert Lighthizer.) The president’s own statements focus a great deal on shifting the tax burden—but what this will mean, of course, is an inflationary “tax” on consumers that creates more fiscal space, likely to be used for renewing Trump’s first-term tax cuts on the capital gains and inherited incomes of the wealthiest Americans. But making the goods that ordinary people buy more expensive through government taxation is obviously “regressive” unless it is tied to a long-term programmatic vision based on other values—say, restoring labor’s place in the economy or renewing America’s critical manufacturing capacities. Again, the Biden administration articulated a vision of this kind to justify its selective tariffs and its expanded industrial policy. But it is almost impossible to believe that tariff policy alone, especially of this blanket and haphazard kind, can accomplish a rebalancing of the domestic economy without other forms of government support and regulation of the kind that seems anathema to the techno-libertarian faction of the current administration.
In these respects, anyone hoping for a strategic reworking of neoliberal ideas and practices in search of “a new political center devoted to the common good” (as in the editorial self-description of this magazine) will find little to celebrate in this particular form of “liberation.”
Perhaps the closest that the administration has come to offering a programmatic vision is the vague suggestion that massive budget deficits and persistent trade deficits mean the country is being cheated. The focus of this suggestion is mainly on trade deficits in goods (bilateral and multilateral), and on declining US manufacturing capacity. Sometimes this feeling moves into critical scrutiny of the role of the dollar in the global trade order, a problem that Christopher Caldwell and Jennifer Burns have recently written about in assessments of Trump’s trade policies. Robert Lighthizer, among others, has highlighted the way that the dollar’s value as a de facto global reserve currency generates a consistent deficit in trade-in-goods.
The role of the dollar, especially after Richard Nixon ended its convertibility to gold in 1971, has indeed been central to the emergence of the neoliberal world order. Too often, trade economists and commentators have missed the fact that, over the last two generations, the finance tail has wagged the trade dog, rather than the other way around. As I explained in a piece written about trade policy during Trump’s first term, “understanding the global role of the dollar allows us to understand how the US can maintain its persistent trade deficit. In effect, the US now ‘specializes’ in providing the money that a globalizing economy requires in the form of dollar-denominated debt.”
Could “Liberation Day,” then, be an effort to remedy the ways that the globalized dollar affects American industry through new taxes aimed at renewing the real economy domestically? Some have suggested as much. But a carefully designed policy to do that would not look like what was announced last week.
“Perhaps the point is to upend conventional pieties and long-settled alliances.”
I suspect, rather, that an overlapping set of theories and intuitions, none of them alone sufficient to justify the policies announced on April 2, and some of them in manifest tension with one another, are all now at work simultaneously in different parts of the Liberation Day tariffs. There is perhaps an overarching theory about changing the dollar’s unsustainable global role, alongside a desire to punish trading partners that have benefitted from this unbalanced, dollar-mediated global order (in effect, re-running the “Plaza Accords” of the mid-1980s), as well as a continuation of the decoupling from China pursued by Trump in his first administration and then by Biden during his subsequent term.
With this lack of clarity in mind, it might be worth flipping the question around and asking: What are we not talking about when we talk about Trump’s tariffs? We are not talking about what a plausible successor to neoliberalism should be, either at home or abroad. We are not talking about how trade and power connect at the international level to deliver a coherent geoeconomic strategy for the United States in the 21st century. We are not talking about how to change the role of the dollar and of globalized finance in undergirding—but also undermining—the system of liberal economic integration that followed the collapse of the Bretton Woods in the early 1970s. We are not talking about a new Bretton Woods. We are not talking about what to do about the “China shock,” or about domestic manufacturing, let alone domestic inequality or the green transition (which other countries will be continuing to make without us). Nor are we talking about how to renew constitutional government to make it more democratically accountable in its processes—including the “fast track” processes that, over the last two generations, have enabled the neoliberal trade policies to which MAGA has emerged as a grassroots response.
But these are the topics we should be talking about—both across parties and beyond Washington. If “Liberation Day” means anything, it should mean liberation to talk about these deeper issues of domestic and global governance that have been neglected now for nearly two generations, since the last great inflection point in US geoeconomic strategy in the mid-1970s, when the postwar regime of “embedded liberalism” morphed into the current and now collapsing regime of “neoliberalism.” To its enduring credit, the Biden administration made a start in this direction, much to the consternation of those in the Democratic Party who had assumed that the world of the 1990s could last forever (a strategy that I have described as the “world-historical gamble” of our time). Alas, the green shoots of an emerging bipartisan consensus about America’s role in the world economy after neoliberalism now look likely to wither in the wake of last week’s so-called liberation.
The worry, of course, is that as the markets fall, we will talk about everything but the real issues. We will speculate about Trump and his psychology; we will wonder about his rich friends and how their fortunes are faring; we will ask how “the markets” are doing today, as if in sympathy for a sick friend. Our experts will ask what “China” thinks, what “Europe” thinks, and then retweet the latest protest tweets from former Treasury secretaries and aspiring ones. The rest of us, surfing social media for the next hit of adrenaline or righteousness or ressentiment, will dissolve back into that pessimism of the intellect and of the will that has marked neoliberalism in both its right and left articulations for two generations. Of course, there may be a lot of economic pain suffered not only by the wealthy, but by ordinary Americans too, though how that will be metabolized in the current political environment—and thus what will come of it electorally—is hard to say.
As for what this liberation is really from, a remaining possibility seems to be staring us in the face: a liberation from constraints, both de facto and de jure, on an energetic executive. Perhaps what to most observers appears a bug of Liberation Day—its haphazardness, arbitrariness, lack of public justification—is, in fact, a feature. Perhaps the point is to upend conventional pieties and long-settled alliances, to be a disrupter on the “move fast and break things” model that Silicon Valley has perfected, and which is now being generalized—ironically by what was once considered a conservative party. If so, then we may one day soon be left muttering, along with Tacitus, “Rara temporum felicitas, ubi sentire, quae velis; & quae sentias, dicere licet,” but only in Latin.