Commentary: Trump Shows Value of Tariffs as Foreign Policy Tool

by Christopher Roach

 

The great American foreign policy debate began with the two parties’ divide over Vietnam. Until the Vietnam War, Republicans and Democrats more or less held to a consensus on the value of containment. After the war, Republicans favored unilateralism, a strong military, and clear-sighted pursuit of national interests that included the use of force against foreign threats. George W. Bush exemplified this thinking, and his early, bold action in Afghanistan after Sept. 11, 2001, found success in spite of knee-jerk criticism from the Left.

On the other side, the Democrats favored multilateralism, negotiations and diplomacy, and a preference for domestic wealth redistribution over military investment. A persistent Democratic criticism of the Iraq campaign was not that it tried to introduce democracy into a broken part of the world, but rather that Bush failed to obtain the blessing of France. Democrats, particularly John Kerry in the 2004 presidential campaign and Barack Obama in 2008, treated diplomacy like magic, where consensus was an end in itself. Mere talking would align other nations more closely to our preferred path.

The main foreign policy debate of the 2004 and 2008 elections was the Iraq war. In 2004, Bush remained firm in his conviction that we had to fight America’s jihadist enemies using our military and continue doing so until events had reached some reasonable level of peace. At that time, Americans were still scarred by the 9/11 attacks and optimistic about his solution.

By the 2008 election, however, much of the country—including many Republicans—had soured on interventionism and war. Obama ran and won as a peace candidate, whose sensibilities could not have contrasted any more sharply with those of John McCain. Iraq made the nation and the Republican Party more cautious about foreign policy adventurism.

Obama’s stance on foreign policy and Iraq was very much in the mainstream of the Democratic coalition, emphasizing the importance of other nations’ viewpoints and often invoking his international upbringing. As with members of both parties, though, Obama was a “neoliberal” committed to the broad tenets of globalism. Thus, he favored the free movement of capital, goods, and people to wherever the economy dictated. Protectionism or the use of tariffs for other foreign policy purposes was anathema for him, as well as most other Democrats, just as it was for the pro-business, free-trade-oriented Republicans.

Until Trump, no one in either party seriously contemplated the use of tariffs as a tool, not of protectionism, but of foreign policy.

The binary choice was typically framed as one of war or diplomacy. Certain measures short of war—such as “no-fly zones” and sanctions—would also be recognized as useful, but all of these required the application of military power or international consensus to be successful. As such, they would only be used against the most hostile powers and for the most severe offenses. They were an imperfect tool, as the costs they inflicted were often disproportionate to the issue at stake, leading to mass starvation in nations like Iraq and North Korea.

An Intermediate Option

Trump’s use of tariffs as a foreign policy tool is unique. While a familiar feature of America’s 19th-century political debates, those proponents of tariffs sought primarily to build America as an emerging industrial power. Tariffs were not then conceived of as a weapon to wield against foreign competitors. The debate was domestic, pitting the industrial North against the agricultural South, and later the agricultural Midwest.

In the 20th century, tariffs fell into disuse after the Great Depression. Economists blamed them for worsening the Great Depression—a complicated question—and, in spite of earlier views, Americans of all stripes strongly supported free trade when the nation emerged from World War II with the natural advantage of a large, intact industrial capacity compared to all of our foreign competitors.

During the Cold War trade was seen as a liberalizing force, where American pop culture, fast food, and consumer goods were used to demonstrate the economic and cultural vitality of the West in contrast to the drab Soviet system. One of the great cold warrior Ronald Reagan’s first acts was restoring grain exports to the Soviet Union. After the Cold War, hardly anyone questioned free-trade orthodoxy.

The role of trade in the devolution of the Soviet Union had much to do with trade liberalization with communist China. Even after the regime’s 1989 massacre of students at Tiananmen Square, full-throated condemnation was hard to come by. President George H.W. Bush vetoed congressional action seeking to impose tough tariffs. Throughout the Clinton and George W. Bush presidencies, China traded with the West, the West’s investment in China increased, and China began to displace higher-priced manufacturers in the United States, Europe, and even developing countries like Mexico.

Trump came on the scene, and in spite of his alleged lack of expertise, made a clear-headed appraisal of reality. Namely, our military interventions in most of the world cost a lot and provided little benefit, and, at the same time, we were allowing China to play us for suckers through their unified economic and defense policy. China stole technology, restricted access to its markets, and was building an increasingly capable military, while western powers stuck to the outdated free trade formulae of the past.

Trump’s background as an actual participant in business had a more nuanced sense of how to pressure adversaries. The old paradigm—force versus diplomacy—was not realistic. Diplomacy must be backed by threats of force or some other sanction. But force is either too expensive, unrealistic, or overly provocative in certain situations. Less provocative and complex tools are called for that still send a message and impose a cost.

Trump’s tariffs on Chinese and Mexican goods make great use of America’s economic leverage. American strength is its industrial base and economy. Foreign nations want to sell here, and they also want to buy what we are selling. Our economic strength comes from our legal regime, resources, and people.

And our military power flows from our economic strength. While our military comparative advantage is significant, it is not infinite. American military power has achieved lackluster results in the more chaotic parts of the world, particularly the Middle East.

More importantly, this tool is not useful in relation to China, as there is no realistic way we would risk war with China or other large, nuclear-armed powers.

Tariffs, by contrast, do have an effect and can be realistically threatened prior to use. Like war and other applications of national power, they are not free. The economy has faced some headwinds from tariffs against China, and this week’s application of tariffs against Mexico has delivered an additional blow. That said, these are not necessarily permanent measures; they are foreign policy tools designed to encourage compliance. Without a stick, the only tool in the nation’s arsenal is the carrot of wishful thinking, which has delivered little previously in the way of compliance from either China or Mexico.

Mexico has failed to control the transit of Central Americans and other illegal immigrants into the United States. Like China, Mexico is highly dependent on access to American markets. While certain goods and industries may be disproportionately affected, tariffs are far preferable to endless jawboning by diplomats who have no ability to back up their words with pressure. A New York Post report shows some encouraging signs: “Mexico’s president suggested he was open to tightening immigration controls following a threat from President Trump to impose tariffs if the US’s southern neighbor doesn’t put an end to illegal immigration to the States.”

China, by contrast, has been more recalcitrant in both its economic and foreign policy, but one benefit of their decades-long limitation of access to their markets is that their exporters are more numerous and more dependent on American markets than the reverse. China tariffs will encourage domestic substitution or the growth of more friendly powers’ industries, lessen dependence on China, and show our nation collectively that slightly higher-priced consumer goods are a bargain compared to a continuation of the old policy. Tariffs also will show other nations that there may be real consequences for behavior that damages our nation and our economy.

Tariffs do accord with the Republican preference for unilateralism. Tariffs do not require the imprimatur of the United Nations the way formal sanctions do, and when a nation has “monopsony” power relative to exporter nations, they create real consequences that we have the power to impose upon hostile foreign powers.

Secondary Benefits

In addition to being a realistic, intermediate, and relatively low-cost foreign policy tool, tariffs provide other benefits.

They permit the shaping of trade relationships to further other policy goals. A wealthy and stable Mexico or Japan is good for America. In the case of the former, it reduces illegal immigration, drug-related crime, and the possibility of a massive refugee flow from the south. In the case of the latter, a friendly nation that has provided consistent diplomatic and other support is enhanced relative to a hostile China that threatens both nations.

In addition, to the extent domestic manufacturing is substituted for imported Chinese goods, tariffs provide domestic benefits. They expand American jobs, American wealth, and reduce dependence on uncertain and hostile foreign power. These are good results from the perspective of national power, even if such enhancement is not taken into account by traditional thinking on economics and foreign policy.

As I argued in January, “Trump’s tariff policy is ultimately restorative. It restores the balance between international finance and domestic manufacturing. It restores our country’s ability to be independent by preserving necessary industries like steel refining on which our national defense depends. It restores jobs to the country’s interior and wages to American workers, even if it may have some marginal impact on our mega-wealthy coastal centers.”

In this sense, tariffs are unlike sanctions, war, no-fly zones, or other applications of national power. Whereas these legacy tools impose high costs in the form of military spending, global prestige, and the loss of our servicemen’s lives, tariffs may actually increase national power and wealth while reducing that of our adversaries. But even if this wasn’t the case—and there are undoubtedly some costs and losers when we apply tariffs—the costs of tariffs to the nation are more bearable compared to the costs of war and more effective than the Obama-era paradigm of diplomatic negotiations unmoored from any realistic sanctions in the case of the failure to reach a deal.

Trump has occasioned massive resistance from the establishment, broadly understood. At the same time, he has exposed the establishment’s sclerotic and short-sighted thinking, its self-satisfaction in the face of mediocre results, and its failure to address long-term problems, such as the rise of a hostile China. Never does the intelligence and freshness of his thinking and approach contrast more sharply with that of the establishment than in his bold use of tariffs as a tool in foreign policy.

he great American foreign policy debate began with the two parties’ divide over Vietnam. Until the Vietnam War, Republicans and Democrats more or less held to a consensus on the value of containment. After the war, Republicans favored unilateralism, a strong military, and clear-sighted pursuit of national interests that included the use of force against foreign threats. George W. Bush exemplified this thinking, and his early, bold action in Afghanistan after September 11, 2001, found success in spite of knee-jerk criticism from the Left.

On the other side, the Democrats favored multilateralism, negotiations and diplomacy, and a preference for domestic wealth redistribution over military investment. A persistent Democratic criticism of the Iraq campaign was not that it tried to introduce democracy into a broken part of the world, but rather that Bush failed to obtain the blessing of France. Democrats, particularly John Kerry in the 2004 presidential campaign and Barack Obama in 2008, treated diplomacy like magic, where consensus was an end in itself. Mere talking would align other nations more closely to our preferred path.

The main foreign policy debate of the 2004 and 2008 elections was the Iraq war. In 2004, Bush remained firm in his conviction that we had to fight America’s jihadist enemies using our military and continue doing so until events had reached some reasonable level of peace. At that time, Americans were still scarred by the 9/11 attacks and optimistic about his solution.

By the 2008 election, however, much of the country—including many Republicans—had soured on interventionism and war. Obama ran and won as a peace candidate, whose sensibilities could not have contrasted any more sharply with those of John McCain. Iraq made the nation and the Republican Party more cautious about foreign policy adventurism.

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Christopher Roach is an attorney in private practice based in Florida. He is a double graduate of the University of Chicago and has previously been published by The Federalist, Takimag, The Journal of Property Rights in Transition, the Washington Legal Foundation, the Marine Corps Gazette, and the Orlando Sentinel. The views presented are solely his own.

 

 

 

 

 

 


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