Donald Trump’s two minds on tariffs
Summary
For him, massive duties on foreign goods may be good policy, but threatening them is more useful.
Donald Trump contains multitudes. Trying to understand his thinking or divine his motives can drive you insane—which is maybe the point.
The uproar over Mr. Trump’s decision to impose and then postpone tariffs on Mexico and Canada offers competing interpretations. But I am partial to one that doesn’t seek coherence. Mr. Trump, as a variety of writers have long noted in these pages, holds two contradictory views on tariffs. First, he believes they are capable of raising enormous revenue. Second, he believes the threat of their use can persuade other nations to behave in ways that align with U.S. interests. The problem is that success in one precludes success in the other: Either you raise revenue by imposing tariffs, or you push other nations around by merely threatening to use them.
If the test of a first-rate intelligence, as F. Scott Fitzgerald observed, is the ability to hold two opposed ideas in the mind at the same time and still retain the ability to function, Mr. Trump has a lot going on upstairs. He states the first view with conviction. He often compares himself to President William McKinley, who “made our country very rich through tariffs and through talent," as Mr. Trump put it in his Second Inaugural Address. “My message to every business in the world is very simple," he said at last month’s World Economic Forum: “Come make your product in America, and we will give you among the lowest taxes of any nation on Earth. . . . But if you don’t make your product in America, which is your prerogative, then, very simply, you will have to pay a tariff . . . which will direct hundreds of billions of dollars and even trillions of dollars into our Treasury to strengthen our economy and pay down debt."
Put aside questions of the wisdom and practicability of such a policy (there is little of either) and consider the reality that imposing it would require uncommon patience and a determined inactivity. The president would need to enact the levies on foreign goods and do nothing when levied nations cried foul, begged for exemptions and, receiving none, retaliated. Mr. Trump isn’t famous for patience and inactivity. In his first term, he placed tariffs on steel and aluminum from many countries, then rescinded them on Canada and Mexico. And he imposed much broader tariffs on China, which remained in place and expanded in this last round of duties. But these are negligible compared with the universal 20% tariff, and the 60% duty on all Chinese goods, he proposed during the campaign.
Mr. Trump’s second view of tariffs accords much more with his disposition. He plainly enjoys using American economic power to effect changes in other nations’ behavior, and he isn’t keen on distinguishing between allies and enemies. Much has been said about his use of tariffs as leverage, but the important fact about any single point of leverage is that it can be used only once. If the president imposes, say, a 10% tariff on a certain country, he can add to it later (and increase the pain for both parties), but the original threat is spent. For Mr. Trump, the threat is more useful—and I think it’s fair to say more fun—than its use.
But an important point is often overlooked here. The second view of tariffs only works if the first is credible. Foreign officials are far more likely to bend to the threat of tariffs if they believe Mr. Trump wants to impose them not simply as some remedial measure but for the purpose of enriching his nation.
He often sounds such notes. Canada and Mexico “have treated us very unfairly on trade," Mr. Trump said in the Oval Office last week. “And we will be able to make that up very quickly, because we don’t need the products that they have."
We don’t? Readers with any understanding of economics will recognize a terrible argument when they see one. The idea that the U.S. can or should make automobiles without any foreign-made parts is preposterous. But Mr. Trump isn’t stupid. I doubt he believes his words with self-conscious certitude.
The upshot of last weekend’s frenzied negotiations is unclear. Mexico has evidently agreed to send 10,000 troops to its northern border to prevent narcotics and illegal aliens from entering the U.S., and Canada has agreed to some similar measure. Mr. Trump has postponed the tariffs, but only for 30 days. He may express other demands soon.
Listen carefully, though, and you will note that Mr. Trump’s language on tariffs is usually pragmatic rather than dogmatic. He doesn’t defend his protectionist policies in the high-minded rhetoric of his economic-nationalist boosters. He doesn’t speak of America’s manufacturing base having been “hollowed out" by free trade or “neoliberal" policies. Mainly he says we’ve been “taken advantage of" and “ripped off" by other countries. The latter terms suggest the need to right wrongs or readjust the balance; they don’t suggest an urge to remake an entire economic system. Mr. Trump is still a real-estate magnate from Queens, and not an ideologue.
Mr. Swaim is an editorial page writer at the Journal.
