This time, Team Trump wants tariffs

Economic nationalism has been a rhetorical mainstay of former President Donald Trump’s message since he first entered the race in 2016. His vision for trade and industrial policy overturned decades of GOP orthodoxy and won over millions of Americans left behind by globalization and deindustrialization. However, during his presidency, Trump struggled to implement nationalistic economic policies that clashed with the entrenched economic views of his advisers, donors and staff.

As Trump makes trade protection a central element of his 2024 platform, an uncomfortable question still lingers: Will his administration deliver? “Personnel is policy” is a familiar mantra to anyone familiar with the personnel conversations of the incoming Trump administration. This extends to the people around Trump — his most trusted donors, informal advisers, etc. – who shape his priorities even if they are not named. Unlike before, Trump may well have a growing circle of influential advisers and donors who share his vision for fair trade and reindustrialization.

To assess the prospects for trade policy in a putative second Trump administration, we must first consider what happened during the Trump presidency. Of course, the administration successfully imposed massive tariffs on the People’s Republic of China, triggering a trade war and effecting a historic shift in the US-China relationship. Led by the highly capable US Trade Representative Robert Lighthizer and his well-aligned staff, Trump’s trade policy has been one of the administration’s most enduring achievements. Along with Trump’s tariffs on steel, aluminum and solar panels, tariffs on China have been maintained, if modified, by the Biden administration.

Many of Trump’s other goals for trade and industrial policy, however, were unfulfilled by the end of his term. A fifth column of free-market fundamentalists and Never Trumpers in the Congressional GOP has compromised the legislative potential of 2017-2019. During that critical period, Congress failed to take up Trump’s infrastructure proposals, ignored his call for anti-offshoring legislation and instead approved a package of tax cuts. with some merit but little to direct new growth to fixed capital investment in production.

Congressional intransigence aside, other executive-led initiatives have not been as successful as the Chinese tariffs. Reasonable tariffs on EU goods, which protect their own markets from US exports, have faced international controversy and possible elimination. Fares to Canada and Mexico were also very low. The replacement of NAFTA with the only slightly improved USMCA has not been reversed decades of damage caused by one of the worst trades in the history of trades. Infighting among senior administration officials over trade policy could have compromised the administration’s position in critical trade negotiations.

Perhaps because of these setbacks, Trump has doubled down on his commitment to tough trade policy in the 2024 election campaign. He now promises to enact tariffs of 60 percent on Chinese goods and 10 percent on all imported goods—in effect, bringing back America to the protectionist posture that has been our historical norm. Despite a great cacophony from doomsday economists, Trump seems determined to deliver on his first administration’s promise to revolutionize US trade policy. He even suggested replacing the income tax entirely with tariffs, a politically fanciful idea that nevertheless signals his commitment to tariffs. Moreover, he has chosen a pro-industry vice presidential candidate and is still listening to his trade advisers, Peter Navarro and Lighthizer.

Furthermore, the legal and procedural hurdles for President Trump to enact the desired tariffs are minimal. Recent analysis by CSIS found that the president has broad enough legal authority to unilaterally impose massive import taxes without any legislation required. Of course, this possibility may not become a reality if the administration is mired in infighting and internal resistance.

Most damaging to Trump’s trade vision would be economic policymakers and advisers who quietly cling to Republican free-market orthodoxy and withhold or undermine President Trump’s wishes for trade and industrial policy. Among his closest advisers, Trump has no shortage of committed free-traders, namely Larry Kudlow, Kevin Hassett, the former chairman of the Council of Economic Advisers, and billionaire hedge fund manager John Paulson, whom Trump has publicly suggested as a potential secretary of the Treasury. . The biggest risk is that these advisers will amplify the media’s already alarmist rhetoric about protective tariffs to persuade Trump to weaken or abandon the promised package.

In the last Trump administration, a leader of this resistance was none other than Treasury Secretary-turned-donor Steven Mnuchin, who THE New York Times identified as one of the administration’s “strongest voices for the free trade position.” Publicly, Mnuchin toed the pro-tariff line, but offered domestic resistance to Trump’s economic nationalism. It was Mnuchin’s spat with Navarro he seems to have lost weight America’s negotiating position with China in key 2018 trade talks.

Crucially, some of Trump’s key donors and likely appointees now appear to genuinely support his economic agenda. This camp of free-trade skeptics extends beyond Trump’s established succession of trade hawks, led by Lighthizer and Navarro, who are likely to return to the administration. Lighthizer was even offered for Treasury Secretary. Trump’s circle of advisers has grown to include some new voices who could be strong supporters of the president’s trade and industrial policies.

One of the most encouraging figures in Trump’s new circle of friends is Scott Bessent, ironically the former investment manager of George Soros. Although not a factor in Trump’s previous campaigns or the first administration, Bessent has become “Trump’s new obsession“, according to a recent Wall Street Journal profile — one of his most respected economic advisers and even a nominee for Treasury secretary. His new prominence is a big boon for the prospects for real trade reform in the next administration.

Most importantly, Bessent is a reasonable and articulate interlocutor for an economic agenda that faces considerable public scrutiny and controversy. Speaking at the National Conservatism Conference in July, Bessent explained the inherent value of tariffs:

Industrial policy solutions that rely on changing prices relative to the market create better outcomes and will tend to be more effective than what we’ve seen from the Biden administration, which requires government to pick winners and losers. This is why tariffs can be a powerful economic tool because they operate at the market level.

Such genuine support for tariffs is rare in Washington and has been for at least a generation. Having “one of the brightest people on Wall Street,” as Trump calls Bessent, championing his trade agenda undoubtedly strengthens Trump’s resolve. As Trump praises Bessent and the once-private investor talks to the media, he can be expected to play a role in the next administration.

Another surprising trade hawk is Howard Lutnick, co-chairman of the 2024 presidential transition team and billionaire CEO of financial services firm Cantor Fitzgerald. Speaking at the Madison Square Garden rally on October 27, Lutnick denounced NAFTA, denounced offshoring and defined America First as “Employed American citizens first.” Lutnick recently endorsed Trump’s tariffs (in tandem with corporate tax cuts), saying, “The tariffs will protect our farmers. Production will employ our people and energy will reduce our costs.”

Elite opinion, more broadly, has quietly shifted in favor of a new attitude towards trade and industrial policies. This can be seen on Wall Street with Bessent and Lutnick, as well as in Washington, where respected Sen. Bill Hagerty (R-TN), a likely senior Trump appointee, has endorsed trade restrictions on friendly countries to promote reciprocity. Meanwhile, the increasingly conservative tech sector has become fascinated with rebuilding the defense industrial base (and securing lucrative government contracts). Even Elon Musk, who is not a big fan of tariffs, supported Trump’s plan, noting that it may cause “temporary difficulties (…) When the storm passes and everyone realizes that we are on a more healthy, there will be a rapid recovery to a healthier and more sustainable environment. economy.”

The prospects for real trade reform in a second Trump administration look surprisingly bright. Some of the top economic officials of the incoming Trump administration could almost certainly be free trade skeptics who want to support American industry and reverse the damage of globalization. Overall, Trump’s trade and industrial policy proposals appear to be more popular with GOP donors and policymakers than they have ever been. The president’s nationalist economic agenda may make much more progress in his second administration than in his first.

Even as support for Trump’s trade policy grows, adoption and implementation in his potential second term will prove difficult. Fares to friendly countries in Europe and Asia have been and will be a tough sell; most of the GOP only tolerates industrial policy and trade restrictions in the context of “US-China great power competition.” Domestic ideological resistance is a major problem, but Trump may have the political momentum and human capital to overcome it. In his speeches and policy proposals, Trump has made it clear that, if elected, he wants to quickly and decisively end the era of free trade in American economic history. With friends like his, he might just make it.