Trump’s trade war will be MAGA economics' Waterloo

Trump's heavy-handed tariff policy will test the limits of the entire Trumpian project — and begs the question of what exactly Trumpism is trying to achieve.

On the morning of January 20, 2017, as a traumatized Washington establishment watched a beaming Donald Trump deliver his first inaugural address as president, the words he spoke appeared to confirm the worst about what might be in store.

“For too long,” a triumphant Trump declared from atop the dais, “a small group in our nation’s capital has reaped the rewards of government while the people have borne the cost. Washington flourished, but the people did not share in its wealth.” Promising to end American decline, Trump spoke with pathos of “mothers and children trapped in poverty in our inner cities, rusted-out factories scattered like tombstones across the landscape of our nation,” and a middle class whose wealth had been pillaged “from their homes and then redistributed all across the world.” Finally, promising a grand restoration of American greatness, he added an emblematic nationalist flourish. “From this day forward,” he asserted, “it’s going to be only America first. . . . Every decision on trade, on taxes, on immigration, on foreign affairs will be made to benefit American workers and American families.”

Whatever exactly this was, it didn’t sound like Republicanism as most of us have known it. In important ways Trumps’s rhetoric represented a marked deviation from the standard Chamber of Commerce-approved boilerplate and social Darwinism that have defined conservatism for decades. The nativism, of course, might have been nothing new. But, if paired with a populist economic program, the ingredients for a new and menacing right wing synthesis appeared to be on the table. The bravado of figures like Steve Bannon, who spoke explicitly in these terms during the first Trump transition, only added to this impression:

“Like [Andrew] Jackson’s populism, we’re going to build an entirely new political movement…It’s everything related to jobs. The conservatives are going to go crazy. I’m the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything. Shipyards, ironworks, get them all jacked up. We’re just going to throw it up against the wall and see if it sticks. It will be as exciting as the 1930s, greater than the Reagan revolution — conservatives, plus populists, in an economic nationalist movement…If we deliver, we’ll get 60 percent of the white vote and 40 percent of the black and Hispanic vote, and we’ll govern for fifty years.”

As I put it in a 2023 essay for Jacobin, MAGA economic nationalism initially seemed to gesture at a new and heterodox direction for the conservative right, fusing the usual nativist appeals with a muscular statism that abandoned the market dogmas of the Reagan era for activist industrial policy and a renewed (if highly selective) commitment to welfarism and redistribution.

This neo-Herrenvolk vision, as it turned out, was basically a sham: more bark than bite; more bluster than reality. The key legislative victory of Trump’s first term was not, to say the least, Bannon’s touted $1 trillion infrastructure package nor the new taxes on wealth he would periodically brandish in interviews. Trump himself occasionally talked the same way about taxation, but absolutely nothing came of it. What did come, however, was the massive tax cut for high earners Republicans had been pursuing long before Trump. Trump technically renegotiated NAFTA, but the new United States–Mexico–Canada Agreement (USMCA) was more of a cosmetic overhaul than a fundamental shift in the North American trade dynamic.

This, more than anything, is the key point. In terms of rhetoric, Trumpism has frequently broken from the pre-2016 GOP consensus. In practice, however, it has pursued a much more familiar and orthodox suite of policies across a number of key areas, and has frequently hit a wall when it comes to doing anything that meaningfully runs afoul of organized capital. Even in a profound moment of crisis like the Coronavirus pandemic, Trump failed to seize the initiative or discipline big business in any way that was lasting (the momentary fear of people like myself he’d suddenly announce a public option for Medicare or shift his relief policies in a more populist direction quickly coming to nothing).

Which brings us to Trumpism Mark II’s belligerent direction on trade policy and the massive North American trade war it has initiated. Within hours (or possibly minutes) of Trump’s tariff announcement last week, the editorial board of the Wall Street Journal — effectively the hivemind of American finance capital — had come out strongly against the move. “The president is right to focus on major problems like our broken border and the scourge of fentanyl,” adds US Chamber of Commerce senior vice-president John Murphy. “But the imposition of tariffs…won’t solve these problems, and will only raise prices for American families.”

The reason for these denunciations is obvious: the United States is an import economy in which key sectors depend on resources and material brought in from elsewhere. Slapping huge tariffs on Canada and Mexico is bound to raise prices for US industry and US consumers, especially when it comes to the cost of energy (Trump’s lesser tariff on Canadian oil is a direct concession to this reality). Big business pushed for free trade precisely because it was to the advantage of corporate America, and Trump’s trade war is an explicit transgression against its interests.

Trump likes tariffs mainly because they jive with his broader conception of “dealmaking” and are symbolic in his mind with the grandness and majesty of American power.

In this sense, the current direction of the Trump administration does represent a break from the pattern established during its namesake’s first term. So what does it mean? Perhaps the most useful way of answering that question is asking what exactly Trump’s tariff policy is meant to achieve. Here, I’m grateful for this recent intervention by Dominik A. Leusder in Jacobin, who I think rightly casts it as part of a broader posture of imperial dominance.

Which is to say: if a central ambition of Trumpism is to arrest America’s perceived imperial decline and/or restore its supposedly lost national honour, embracing a belligerent trade policy (while musing about annexing Canada and Greenland) is nothing if not ideologically consistent. The problem, as Leudser points out, is that tariffs are thus more of a psychological weapon than the instrument of any wider or more coherent vision:

Beyond the bluster and bellicosity, the aim of maintaining and expanding America’s full-spectrum global dominance — evinced by both MAGA and its thinking-people equivalent, Bidenomics — in the face of domestic social decline is consistent with the notion of tariffs not as tools merely for the coercion for rivals but primarily for the disciplining of allies, both at home and abroad…[Above all] it seems to coalesce more power in the hands of the executive. Perhaps the most plausible theory of Trump’s tariffs, then, is a psychological one, in which the greater political-economic goal of “Making America Great Again” is subordinated to his almost Nietzschean desire to accumulate personal power.”

I agree with Leudser, and believe Trump likes tariffs mainly because they jive with his broader conception of “dealmaking” and are symbolic in his mind with the grandness and majesty of American power. It’s for this reason I think that Trump, whatever his inevitable declarations to the contrary, is going to lose this trade war. Beyond blunt coercion and chest-thumping, his wider objectives here are decidedly murky. There is also, moreover, no corresponding legislative or executive push that suggests it is part of a larger economic program or strategy.

If and when a massive tariff barrier goes up along the US-Canadian border tomorrow the official organs of American business will be apoplectic and the pain will be felt by US consumers almost immediately…Little, and perhaps nothing, in the behaviour of Trumpism to date has suggested it has either the ideological coherence or political discipline to weather such a storm.

Most important of all, if and when a massive tariff barrier goes up along the US-Canadian border tomorrow — in the time it’s taken me to start and finish writing this, Trump has already announced a one month pause on the tariffs against Mexico — the official organs of American business will be apoplectic and the pain will be felt by US consumers almost immediately. (To digress from the main point here for just a moment, I think it’s worth registering that no one really knows what’s going to happen tomorrow or how economically disruptive the impact of a suddenly-imposed massive trade barrier between Canada and the US will actually be.)

Little, and perhaps nothing, in the behaviour of Trumpism to date has suggested it has either the ideological coherence or political discipline to weather such a storm. True enough, Trump is happy to foster chaos and cause radical disruption — look no further than his current assault on key institutions of the US federal government. But such disruptions have tended to have the support of corporate America or, at any rate, not flown directly in the face of its interests.

In such a volatile atmosphere, it’s anyone’s guess what exactly will happen in the coming days and weeks. When the dust settles, perhaps selective tariffs will remain in place for strategically-chosen industries (or something in that vein). But my instinct is that Trump will initiate some sort of climbdown in fairly short order, likely proclaiming — regardless of what actually occurs — that his objectives have been achieved (I wouldn’t even discount the possibility of Trump pausing the tariffs he’s threatened to impose on Canada before day’s end). The effect of his tariffs on the import-dependent US economy will be profound, and compounded by the impact of retaliatory tariffs planned by Canada, China, and in due course possibly Mexico and Europe as well.

A more competent, more coherent version of Trumpism might be able to translate its willingness to create chaos and disorder into a new economic consensus, both on trade and elsewhere. Should that ever happen, however, we’ll be dealing with a very different beast than the one we’ve known.