At Barron’s: Trump’s Tariffs Are No Alternative to Free Trade

(I write a monthlyish opinion piece for Barron’s. This one was published there in April. My previous pieces are here.) 

In recent decades, the main challenges to free trade have from organized labor and the political left.¹ People of a certain age with left-of-center politics will remember the rallies against the World Trade Organization in Seattle, Washington, D.C., and Montreal.²

That President Donald Trump is now delivering anti-globalization puts leftist trade critics in an awkward spot. Some, such as Shawn Fain, the fiery president of the United Auto Workers Union, are embracing Trump’s message, even if they don’t care for the messenger. If tariffs will bring back good industrial jobs, then shouldn’t labor and its allies be in favor, regardless of who is proposing them? 

Rebuilding U.S. manufacturing may be a legitimate goal—and, in principle, restrictions on imports might be part of the toolkit for accomplishing it, as people like Fain say. There are real problems with globalization. The Covid-19 pandemic revealed how brittle international supply chains can be; with the certainty of climate disruptions and the near-certainty of future conflicts between states, there’s a strong case that production would be more resilient if it was less dependent on key components from a few distant sources. 

We shouldn’t overstate the case for manufacturing. Fast food workers in California are paid more than autoworkers in Alabama, and places like Pittsburgh have successfully transitioned from a local economy based on manufacturing to one based on health care and education. Still,  Pittsburgh is the exception. In much of the country, stable, well-paying manufacturing jobs have been replaced with less secure, lower-paying ones—or with no jobs at all.

But it’s exceedingly unlikely that Trump’s protectionist policies will correct this. Important parts of the necessary toolkit to reshoring are not just missing, but being actively dismantled by his administration. And history suggests his “Liberation Day” tariffs look nothing like what you’d want if rebuilding industry was the goal.

The U.S. has, through much of its history, been a high-tariff country—the president isn’t wrong about that—and not just during the McKinley era. As historian Paul Bairoch³  puts it, the U.S. is the “mother country” of protectionism; the earliest arguments for protecting infant industries were put forward in 1791 by Alexander Hamilton, the first Treasury Secretary, in his Report on Manufactures. It’s worth looking back to that to think about what real industrial policy would look like.

“Protective duties” on imports are the first item on Hamilton’s agenda. (Though he also warns against “the vain project of selling everything and buying nothing.”) But look at what else he calls for: subsidies (“bounties”) for manufacturing; “encouragement of new inventions and discoveries”; and strict “regulations for the inspection of manufactured commodities” to maintain quality standards. He wants to steer credit to industry.⁴ He wants public investment in roads and canals. He calls not only for opening “every possible avenue for immigration from abroad,” but even for the government to pay the costs of “bringing from abroad workmen of a superior kind.”

Eighteenth-century language aside, this program is very similar to the playbook that successful late industrializers have followed, from 19th century Germany to 20th century Japan, Korea and Taiwan, to China today. 

It’s also almost the exact opposite of the policies being followed by the Trump administration. The public investment that Hamilton called for, already in decline, is now in the crosshairs of DOGE. Regulations are being rolled back. And skilled foreign workers are hardly going to flock to a country where they risk deportation for their social media posts.

Ironically, one of the most compelling recent examples of a reindustrialization project gone right comes from Trump’s predecessor. The Inflation Reduction Act helped spark a historic surge in manufacturing investment, particularly in green energy. The Biden administration did make use of tariffs, to the dismay of some liberals. But the centerpiece of the IRA was subsidies, along with loan guarantees and measures to stabilize demand—perhaps the most important consideration for businesses considering investments in long-lived capital goods. Trump is promising to end the Biden-era Chips Act, which allocated tens of billions of dollars to support domestic semiconductor manufacturing.

The throughline from Hamilton to Biden is that industrial policy calls for a big, active state, prepared to deploy the full range of professional expertise—exactly what the current administration is against. There are, to be sure, principled arguments for a smaller government; but they don’t hold if your goal is to fundamentally reshape the economy. 

Tariffs in isolation will do little to boost investment, especially when there’s no telling how long they will last. Major industrial projects take years to come online and may operate for decades. Tariffs that can be imposed by executive order can be removed by the order of the next executive, or the same one if he changes his mind. What rational business would consider a massive reorganization of supply chains to bring protection back to the U.S. in response to tariffs that might, depending which headline you read, be removed next week as part of a bilateral deal? What they need above all is certainty, which is the opposite of what Trump is providing. 

Manufacturing, even more than other parts of the economy, is also dependent on imports. Where trade restrictions have been successfully used in industrial policy, they’ve strategically focused on protecting a few sectors, without limiting access to the inputs those sectors need. Again, Trump’s across-the-board tariffs approach does just the opposite.

In a different world, one could imagine a program of delinking from international trade that also offered the stability, support, and complementary public investment needed to rebuild U.S. manufacturing. In that world, we might have to struggle with hard tradeoffs between the benefits of onshoring production and the benefits of deeper global integration. 

But that is not the world we live in. I sympathize with people who want to rescue the baby of industrial policy from the bathwater of the “Liberation Day” tariffs. But there are no babies in this particular bath.

1. Including from me here and here.
2. I was shocked to discover that the anti-WTO protest in Washington, which I went to in my first year as a grad student, happened 25 years ago.
3. Barioch’s account of 19th century trade policy was drawn on heavily in Ha-Joon Chang’s influential Kicking Away the Ladder
4. One strikingly modern part of this, not directly relevant to this piece, is that he favored a permanent national debt because it would be almost equivalent to money for business holders. The idea that public debt is a source rather than a use of liquidity for the private sector is a striking anticipation of functional finance.