America’s Confederation of Trade Policy Dunces

Which do you think has been the bigger leadership failure? Was it the thousands of impeccably credentialed economists and other experts who insisted for decades that free trade was inherently beneficial, even as it became obvious that America’s productive capacity was being stripped away, feeding the rise of its main geopolitical rival?

Or is it President Trump and his inner circle of highly successful businesspeople who have convinced themselves that America’s declining industrial base, supply chain dependencies and trillion-dollar trade deficits can be magically cured if only we put punitive tariffs on friend and foe alike?

While the Trump administration’s tariffs have been much more immediately harmful (and possibly catastrophic), they can be ended or improved with a stroke of the pen. In contrast, the damage caused by the globalists has gone on for so long that it’s close to irreversible in many areas. Future elections may well hinge on which set of leaders gets most of the blame over the longer term.

But regardless of which debacle proves to be bigger, the failure of both the globalists and the Trumpists begs the question of why America’s leaders have gotten things so wrong? Was it the buzz of a once high-flying stock market? Too much short-term thinking? Unwarranted faith in neoclassical economics? The arrogance of American power? Prioritizing military and foreign policy goals? The foolish and sometimes racist belief that China and Asia can’t innovate? Political polarizations that make compromise impossible? Filter bubbles and groupthink? Being afraid to speak truth to power? All of the above?

Sadly, America’s lurch from naïve free trade to self-defeating trade wars makes it appear that there is no place in between. But this is not the case. For many years, independent voices have understood that coping with the rise of China requires a coordinated, focused and sustained public and private sector response. At a minimum, this response should include three steps.

First, America must identify its most strategic industry sectors—be they aerospace, semiconductors, biotech, pharmaceuticals, energy, automobiles, critical commodities, AI, etc. These sectors should be prioritized and supported, and if necessary, protected. Less strategic areas should be broadly left to the market.

America must also better understand the current and evolving value chains within these sectors. It is shameful how little the administration, Congress, and other government entities seem to know about even the most strategic industries, and how out of date and irrelevant many of today’s statistical metrics are. Developing much deeper industry awareness requires close collaboration between businesses and government. While such cooperation was once frowned upon, the appetite is growing.

Only after strategic industries have been identified and adequately understood can the United States effectively enhance its capabilities and leverage those of its friends and allies. The goal isn’t necessarily to defeat or punish China, but to prevent China or any other adversary from gaining a chokehold in a highly strategic sector.

Many Americans, and even many politicians will say they agree with such thinking. But over the last few years, how often have you heard Donald Trump, Kamala Harris, Mike Johnson, Chuck Schumer, Hakeem Jeffries, John Thune, or even a technologist like Elon Musk say such things? Pretty much never.

The failures of the past demonstrate that neither absolute faith in the market nor bullying, go-it-alone strategies work. But the combination of strategic industry support, value chain awareness, international cooperation, and yes targeted tariffs can. This is the opportunity that the Trump administration has completely missed so far. Trump could have been seen by many as a global hero if he rallied the West around such an approach. And while it’s not too late to change, changing course requires changing minds, and throughout the 21st century that’s been the hardest change of all.