In a remarkable commentary published at the end of June, a former leading economist in the Trump administration acknowledges (and endorses) what many have suspected: The function of the US President’s foreign economic policy is to act like a 21st-century robber baron.
The original robber barons were greedy industrialists who grew rich through monopolistic practices in the US during the Gilded Age. In the late 19th century, men like John D. Rockefeller and Andrew Carnegie built massive fortunes by suppressing competition and charging exorbitant prices in industries such as oil and steel.
They were called ‘robbers’ because exploiting your consumers to enrich yourself is probably the most denigrated business practice in the world. Yet that is precisely what the US has been doing over the past year and a half, boasts Stephen Miran, chair of Trump’s Council of Economic Advisers until February 2026, who now serves on the board of the US Federal Reserve. Miran applauds this approach, arguing that it is working wonders for the US (never mind others).
Miran does not state his case this clearly, of course. Couching his argument in technical terms that obfuscate the full implications of his argument, he appeals to the idea of an ‘optimum tariff,’ which states that a country can make itself better off by applying protective import levies.
Of course, such a strategy works only if a country is large enough to wield market power in the world economy—that is, if it acts as a monopolist. An optimum-tariff policy is the country-level equivalent of the strategy perfected by Rockefeller’s Standard Oil in the 1880s.
By reducing demand for goods sold by its trade partners (and equivalently reducing the supply of its own exports), an optimum tariff shifts world market prices in favour of the home economy, essentially making foreigners pay a large chunk of the tariff.
When the tariff is set at the right level, whatever the country loses on gains from trade is more than made up for in monopoly rents. The losers are the country’s trade partners (and the world economy as a whole).
Although this is the archetypal beggar-thy-neighbour dynamic, Miran thinks it is a great deal for the US because it kills two birds with one stone.
Aside from monopoly rents, the policy allows the federal government to reduce inefficiencies associated with domestic taxes. Tariffs generate revenues for the Treasury, which can be used to offset revenue losses from reducing other taxes, such as those on income. The economic logic, to his mind, is impeccable.
One difficulty is that despite its size and apparent market power, the US may not have as much ability to make foreigners pay tariffs. Recent evidence suggests that the bulk, if not all, of US tariffs are passed on to domestic consumers.
But the real problem with Miran’s argument lies elsewhere. It beggars belief to suggest that, in this day and age, it makes sense for a major power to extract tribute from other countries so blatantly. In his calculus, Miran seems not to have considered the credibility loss that the US suffers by acting like a robber baron. The fall in stature is substantial, even if not easy to price.
Miran may not care about America’s standing in the world, but his economic argument is also self-defeating. When economists discuss an optimum tariff, they typically hasten to add that it does not work in the long run. After all, more than one country can play the same game.
The EU and China each account for roughly similar shares of world trade as the US. When the US jacks up its tariff to improve its terms of trade, other trading powers can do the same. And since retaliation offsets the terms-of-trade effects but magnifies the loss in gains from trade (leaving all countries worse off), it can be an effective deterrent.
Miran claims that there was no retaliation when Trump first imposed his tariffs, which he sees as a strike against those economists who claimed the optimum tariff would fail.
But while it is true that Europe’s response was muted, China did retaliate against ‘Liberation Day’ tariffs. Vowing to match every further tariff increase on the US side, the Chinese ministry of commerce said: “China will fight till the end if the US side is bent on going down the wrong path.” The US and China eventually lowered their mutual tariffs.
Ironically, Miran’s willingness to say the quiet part out loud virtually ensures that others, the EU included, will retaliate if the US persists with its optimum-tariff logic.
It is one thing to claim that you are raising tariffs because of national-security concerns or because you want to revive local factories. These are plausible objectives, even if one disagrees on the usefulness of import tariffs in achieving them. But it is quite another thing to say, as Miran does, that the goal is to squeeze monopoly rents out of other countries by manipulating their terms of trade. With this presented as the objective, others respond accordingly.
I was among those who argued against retaliation a year ago, because I saw Trump as impervious to the damage high tariffs would do to the US economy. The logic of retaliation works only if political leaders understand the economic consequences of high tariffs and care about the gains from trade. The paradox is that by replacing Trump’s illogic with an economic logic that now justifies retaliation by other countries, Miran’s argument undermines itself.
A trade policy based on the optimum-tariff argument amounts to a naked assertion of economic power designed to harm others, including long-term US allies. At best, it offers short-term gains at the expense of soft power and global leadership. It is also economically self-defeating and will inevitably backfire. ©2026/Project Syndicate
The author is a professor of international political economy at Harvard Kennedy School, and the author of ‘Shared Prosperity in a Fractured World: A New Economics for the Middle Class, the Global Poor, and Our Climate .’