Trump the Protectionist: Canada and Mexico Are the First Salvos
President Trump is and always has been a protectionist. So, in assessing his rationale for slapping across-the-board tariffs on Canada and Mexico, forget the notion that they have not enforced their borders and have thus allowed fentanyl and illegal immigrants to flow into the United States. That’s just a smokescreen. (Consider that Canada has more opioid deaths per-capita than the United States.) He simply needed the pretext of an emergency so he can invoke the U.S. International Emergency Economic Powers Act (IEEPA) and impose tariffs to benefit U.S. companies, his true end game.
What is behind Trump’s radically nationalistic protectionism? First, he is reacting to the excesses of the globalists who dictated trade policy in Washington from the 1980s to 2016. If they had their way, there would be no tariffs and little trade enforcement, even against China. But while it is true that the pro-globalization establishment had become too rigid and attached to the outdated idea of an international economic utopia with no borders to trade, Trump and his apostles are proving themselves to be what could be called “antipodalists”—people who habitually take things to the absolute opposite extreme. If the last phase of global trade was bad, then by their logic the only fix is to close our borders, to everything. Don’t even bother with how to make globalization work for America in a new and complicated world in which China has emerged as America’s existential threat.
Second, Trump embraces protectionism because he was always a national businessman, and his circle included other national businessmen, running companies that largely sold to U.S. consumers. Many of these companies find a home in the Coalition for Prosperous America (CPA), a lobby group representing domestic producers. At least CPA is clear about its goal: “to advocate [for] the implementation of strategic trade, tax and growth policies so our members can prosper.” There is nothing wrong with an interest group lobbying for its members’ interests. What is wrong is when they incorrectly claim that their members’ interests equal the national interest.
Finally, Trump is a protectionist because, in his heart, he wants to return the Republican Party to its pre-New Deal ways. From Lincoln to Hoover, the Republican Party was the party of tariffs, because its power base was the industrialized Northeast and Midwest, where industries benefited from high tariffs that shielded American industry from foreign competition. William McKinley, the strongest advocate for high tariffs, is often called the “Napoleon of Protection.” Like McKinley, Trump—who calls himself “Tariff Man”—sees tariffs as the principal economic development tool.
While it is true that the pro-globalization establishment had become too rigid and attached to the outdated idea of an international economic utopia, Trump and his apostles are taking things to the absolute opposite extreme.
Unfortunately, the initial responses to Trump’s tariffs have been predictable, but impotent. Some rightly say that it will raise prices. Well, so what? That’s the point: Given America’s massive trade deficit, it needs to raise prices of imports by devaluing the dollar and restricting unfairly made Chinese imports. The issue is not price increases, per se, but whether they are warranted to achieve an overarching goal. Others argue that it will lead to a trade war. Well, of course it will. Trump doesn’t care; he’s Tariff Man and his arsenal is far bigger than Canada’s and Mexico’s combined. Others claim Trump’s actions violate global principles of free trade. You might as well waive a red flag in front of a bull with that argument. The Trumpian protectionists wear that as a badge of honor.
Instead, there are three main arguments opponents need to make.
1. This beef with Canada and Mexico is trivial. America’s real adversary is China, which is an unreconstructed mercantilist, which is now engaged in a campaign of advanced industry predation designed to take over the commanding heights of global advanced industry production. If that happens, China becomes the global hegemon and America a drawer of water and a hewer of wood, without companies and industries that need global markets to succeed.
2. Without allies, America will lose the war against China. Full stop. Trump’s trade aggression will only alienate the United States from its allies, and it may encourage them to side with China, especially as you can bet Xi Jinping will play the “America is a protectionist, China follows the rules” card for all it’s worth. Trumpian isolation is a path to American decline. It’s the exact opposite of making America great again.
3. A key way to beat China is to develop a North American production system. The global free traders wrongly thought there’s no appreciable difference between producing potato chips and producing computer chips, and ironically Trumpian protectionists are making the same mistake. The former group didn’t care whether America had either industry onshore; they assumed the U.S. economy could simply import them. Whereas, the latter crowd wants both onshore, as if they’re equally valuable. Moreover, Trumpian protectionists believe there should be no division of labor, even within North America. The United States should make everything it consumes, even low-skill products that Mexico can make. This is not just economic nonsense, but also a prescription for GDP decline. As bad as the past phase of globalization may have been, correcting course shouldn’t involve rejecting the basic notion of comparative advantage. The United States will never be able to onshore low-wage production (unless it levies massive tariffs), nor should it want to. The goal for U.S. policy should be to encourage low-wage production to leave China for Mexico and other parts of Latin America, while integrating with Canada even more.
What is most troubling about Trump’s actions is that they show he is abandoning national developmentalism—the economic doctrine that prioritizes advanced-industry dynamism and selective globalization—which is the best way to ensure that the West beats China. In Trump’s mind, China and Canada are both guilty of the same sin of running a trade surplus with America. Ergo, America has been a “sucker” in its dealings with both of them. Never mind that Canada’s tariffs on the United States are lower than U.S. tariffs on Canada, and with the exception of a few non-critical industries, like milk and wood, Canada generally plays by the rules. And never mind that Canada’s trade surplus with America would disappear tomorrow if Trump stopped defending the value of the U.S. dollar.
Given Trump’s massive failure of strategic vision, it is time for Congress to step in. First, lawmakers should immediately pass legislation to limit the ability of a president to impose such tariffs based on flimsy excuses. Second, Congress should hold a series of hearings on what America’s strategic trade orientation should be. The United States can’t just go from almost mindless support for globalization to protectionist autarky. There needs to be a “third way” that puts countering China at the center; that works through programs like the CHIPS Act to build up U.S. strategic industries; and that comes to a new modus vivendi with America’s core allies, including the Commonwealth nations; the EU, Taiwan, Japan, and Korea.
Trump’s current path will lead to national economic and foreign policy decline. Congress needs to turn U.S. economic and trade policy in a new direction.
