Will Trump’s Tariffs Make America Great?

Since President Trump’s April 2 “Liberation Day,” much has been said about the contradictions of his tariff goals. He wants, for example, to bring manufacturing back to America. But this conflicts with other goals such as using tariffs as a “dealmaking” tool (which undermines the certainty manufacturers require to make long-term domestic investments) and raising trillions of dollars in revenue (which requires that imports continue to displace domestic production). Trump’s tariff goals also conflict with his domestic priorities—protection for semiconductor producers won’t mean much if he repeals the CHIPS and Science Act, and any tariff-induced improvement in our trade balance will be more than offset by his promised tax cuts (which, all things equal, will make the trade deficit worse). In other words, Trump’s tariff policy is an incoherent mess.

And yet, despite these well-documented policy inconsistencies, a substantial minority of Americans believe that Trump’s tariffs will strengthen America, at least in the long term. For example, in a recent poll, 42 percent of respondents said the tariffs would bolster U.S. economic leadership in the world. Given such views, it’s worth stepping back from the policy details and asking a broader question: will Trump’s tariffs, as he often claims, really make America great?

A good starting point for answering this question is economist Daron Acemoglu’s “Why not a political Coase theorem?” This paper depicts a game between a nation’s ruler and citizens: the former chooses a tax rate, while the latter decide how to invest scarce resources. If the ruler can commit to a tolerably low tax rate, citizens will invest in the productive but taxable formal sector because they’re not worried about their earnings being taxed away. In this scenario, everyone wins: the ruler obtains more tax revenue and the citizens enjoy higher incomes. However, if the ruler can’t commit to a tolerable tax rate, citizens invest in the less-productive but untaxable informal sector to avoid predatory taxation. In this scenario, everyone is worse off. The moral of the story is that societies prosper only when the government can make credible and durable commitments.

The model’s logic extends far beyond tax rates. To see its broader (and current) implications, simply replace “tolerable tax rate” with “high tariffs”—or, alternatively, “low tariffs,” “repaying our debts,” “spending congressionally appropriated funds,” “not politicizing monetary policy,” “honoring our NATO commitments,” or any other policy the government can promise and upon which people depend. In virtually every domain, the government’s ability to get what it wants depends on credible commitments. If you can’t credibly promise to repay loans, no one will lend you money—at least not without a big risk premium. If you can’t credibly promise to help your allies, those allies won’t help you. If you can’t credibly promise to keep tariffs either high or low, businesses won’t structure their investments around those tariffs. No one gives you valuable things in exchange for promises they don’t believe.

This is why governments have, through the ages, devised myriad ways to constrain themselves. They create political checks and balances to ensure that policy can’t be changed on a whim. They create independent central banks to guard against the siren song of politicized monetary policy. They create international institutions like the World Trade Organization (WTO) and the United States-Mexico-Canada Agreement (USMCA) to ensure predictability in international trade. All governments sometimes chafe at these institutions, as they prevent policymakers from doing things—even good things—they’d like to do. But the reward for these self-imposed constraints is huge: they reassure others that the government will do what it promises to do. Successful governments respect these constraints because, like Odysseus, they realize they’re better off tying themselves to the mast.

President Trump’s tariff policy respects no constraints. He has bypassed Congress’s tariff-setting authority by invoking emergency powers. His “reciprocal” tariffs violate the WTO’s most bedrock rules: nondiscrimination and tariff binding. His tariffs against Canada and Mexico additionally violate the USMCA—an agreement Trump himself negotiated and hailed as “the fairest, most balanced, and beneficial trade agreement we have ever signed into law.”

If Trump isn’t bound by his own trade deals, what does bind him? The answer, as Trump recently told a Republican dinner in Washington, is not much: “this time, I’m doing what I want to do with respect to the tariffs.”

In this, of course, Trump’s tariff policy mirrors his broader political agenda. He has silenced dissent within his own party. He has frozen congressionally appropriated funds. He has cowed civil society and appears to be defying court orders. He strives to be unconstrained because he views freedom as power. But, while President Trump may not worry about such things, this freedom will undermine his policy goals. Businesses will not make investments based on tariffs that could change next week, next month, or in the next administration—a real concern, since none of the new tariffs are written into law. Trading partners will not make meaningful concessions that they know will only lead to further demands—the concessions Canada and Mexico made in early February bought them only a one-month reprieve. Trump can do what he wants, but the problem is that everyone knows this. The cost can be seen in the uncertainty-induced stall in business activity, the slide in U.S. Treasury bonds (and consequent rise in federal borrowing rates), allies saying “we cannot leave the security of Europe in the hands of voters in Wisconsin every four years,” and foreign leaders declaring that the 80-year era of U.S. global leadership is over. The ultimate cost of President Trump’s freedom is the influence the U.S. government will lose because it can’t be trusted to follow rules—even its own.

Will all of this make America great? If by “great,” you mean “able to do what it wants, when it wants, as far as its power allows,” then sure. But if you mean “stable, prosperous, and capable of international leadership,” then not so much.

This is not to suggest that Trump’s tariffs aren’t good for anything. In fact, they serve one very important role. High tariffs lead companies and countries to seek exemptions by supplicating themselves. Research shows that the first Trump administration employed such exemptions as “a very effective spoils system” that enabled it to reward friends and punish enemies. What we are seeing now is the second, more dramatic act of the same tariffs-as-dominance play. If you don’t believe me, believe the president’s own words: “I’m telling you these countries are calling us up kissing my ass. They are. They are dying to make a deal. Please, please, sir, make a deal. I’ll do anything. I’ll do anything, sir.”

That’s what Trump’s tariffs are good for. Whether that’s also good for America is a judgment I’ll leave to you.

Daniel Y. Kono is professor of political science at UC Davis.

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