President Trump’s tariffs radically alter U.S. foreign and economic policies and hardly offer America a path to a Golden Age.
Fading Liberal Order
After World War II, the United States fostered security alliances—NATO and regional partnerships with allies in the Pacific—and free trade through the WTO, NAFTA and similar regional arrangements.
Our allies, sheltered by America’s overwhelming military power, spent less on defense and could afford more generous social programs and cheaper, state-subsidized health care.
In the 2000s, we erred by admitting China and Russia into the WTO.
China became the dominant manufacturing powerhouse by subsidizing industries where its exports enjoy a comparative advantage and those where it should rely on imports but doesn’t. Russia sold oil and other resources to rebuild its military and now threatens the security of Europe.
Global commerce flourished, but Americans paid a heavy underwriter’s burden by spending more on defense, prescription drugs and medical care generally and bearing the inequality imposed by ever large trade deficits.
The Injustice of America
America is wealthier thanks to globally dominant financial institutions centered in New York and leadership in high-tech design and services. Their top professionals enjoy remarkable incomes but the nation’s working and middle classes are unhappy prospering.
The dollar’s reserve currency status permits us to consume more than we produce but too much is manufactured abroad.
Americans live better than peers in other industrialized countries, but ordinary Americans have seen the pillars of middle-class life—affordable home ownership, college and groceries—escape them. Life expectancies are declining and the mounting national debt is a ticking bomb.
During the Biden years, progressive elites imposed open immigration, climate change fundamentalism, greater emphasis on race and gender goals and cultural norms right down to acceptable pronouns.
For middle America, a descent into economic struggle and guilt became the dividends of globalization—even among under-represented groups cultural elites sought to raise up.
Economic and Social Populism
Populism is the post-Marxian revolution of the western working classes.
The complaints of President Trump’s majority mirror those of disaffected workers in Germany’s northern Ruhr region, Hauts-de-France and other rust belts in Europe.
The American populist impulse is to withdraw from foreign entanglements, better secure borders and somehow resurrect American manufacturing and good paying jobs through protectionism.
Trumpism
The complaints of formerly Democratic voters—working-class whites, Hispanics and Blacks—that delivered a mandate to President Trump are actualized in his transactional international policies.
Before even reassuming office, Trump threatened to withhold support to force Israel to accept a cease fire in Gaza. He’s pressuring Ukraine to settle with Russia and demanding access to its rare earth minerals as the price for American aid.
He threatens tariffs on Colombia and others to deport citizens and Mexico and Canada to better enforce our borders and combat drug smuggling. He won’t disavow the military option to wrestle Greenland from Denmark and retake the Panama Canal.
Americans Will Be Poorer
Protectionism is expensive. It denies us access to cheaper labor and natural resources, compels more manufacturing in areas of comparative disadvantage and reduces productivity, but Democrats share this costly Trumpian obsession.
President Joe Biden’s industrial policies were financed with deficit spending, printing money and the inflation that followed—that lowered many ordinary folks’ real incomes.
Workers who land manufacturing jobs may live better, but those less lucky and relegated to the service sector pay more for cars and are mostly worse off.
Europe and Asia will likely retaliate against American protectionism with tariffs, and global commerce will grow more slowly and require fewer international dollars to lubricate it.
Americans have been paying for ever bigger defense budgets and lower taxes with ever larger federal budget deficits—6.6% of GDP in 2024. We finance those by selling bonds abroad and that results in those larger trade deficits.
Slower growth globally, requiring fewer internationally circulating dollar assets, will slow demand for U.S. bonds and make big federal deficits tougher to finance. Higher interest rates or more inflation or some combination will follow.
U.S. multinationals and financial behemoths will earn less profits abroad and have fewer resources for R&D to stimulate domestic growth.
Tough Choices
When the Democrats return, they will be inclined to reimpose woke social policies, climate change fundamentalism and protectionism rebranded as industrial policy. Mr. Biden didn’t roll back Trump’s tariffs but added subsidies for semiconductor, electric vehicles and other green manufacturing.
Protectionism is the hallmark consistency between the populist right and hard progressive left, and both will drive our splintering allies in Europe and Asia to cut what deals they can with autocrats.
Ultimately, protectionism isolates more than insulates America.
Either Americans reject Trump’s isolationism, bullying of neighbors and allies and protectionism or we will continue to swing back and forth between radical populist and progressive governments and become poorer for it.
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Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.
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