The Case for Giving This Trade War a Chance: interesting times

"Oren Cass argues tariffs are worth it.

Is the short-term economic pain of President Trump’s unpredictable approach to tariffs a reasonable price to pay for a more resilient America? Mr. Trump appears to think so, and so does Oren Cass — sort of. On the first episode of “Interesting Times,” the founder and chief economist of the think tank American Compass joins Ross Douthat to discuss and debate the Trump administration’s drastic trade war.

Below is an edited transcript of an episode of “Interesting Times.” We recommend listening to it in its original form for the full effect. You can do so using the player above or on the NYT Audio app, Apple, Spotify, Amazon Music, YouTube, iHeartRadio or wherever you get your podcasts.

Ross Douthat: Donald Trump has taken a sledgehammer to the global economy as his new tariff regime yields crashing stock markets, rising global uncertainty and widespread fears of a recession.

So, to try to understand where this radical policy came from and where it might be taking us, our 401(k)s and our unemployment rate, Oren Cass joins me. He’s the founder of American Compass, a populist conservative think tank that has been arguing for tariffs for a while now, along with dramatic changes to America’s relationship to global trade.

So, Oren Cass, welcome to “Interesting Times.”

Oren Cass: Thank you. It is indeed a pleasure to be living in interesting times.

Douthat: I hope it is. So, you and I are speaking on Monday morning. The markets are open and down, since Donald Trump announced the great liberation of America from the foreign yoke. But I want to start with a big-picture question.

When Donald Trump was re-elected, a lot of people thought he had gotten very lucky because he inherited an economy that was in really good shape with low unemployment and a high stock market. Inflation was finally coming down after the Biden era, and there was a sense of big technological breakthroughs potentially on the horizon.

What’s wrong with that narrative from your perspective, Oren? What is wrong with the American economy in the year 2025 that could make anyone interested in any kind of radical or dramatic restructuring?

Cass: Well, I think you described where we were in the business cycle quite well, but I think it’s really important to distinguish the business cycle from the long-run secular trajectory of the economy.

I’ve used the metaphor of bumps on a downward slope: If you’re sledding down the hill, you can go over a really big bump and go soaring through the air and scream, “Wheeeee!” But you still land even further down the hill afterward. And I think what we’ve really seen going on in the U.S. economy for 50 years now is exactly that dynamic. Not in terms of overall G.D.P., or economists’ favorite measures of wealth and material living standards.

But when we’re looking at the actual well-being and flourishing of the typical working family and their ability to achieve middle-class security, we’ve seen real decay. And I think that explains why somebody like Donald Trump has become as successful politically as he has.

It’s a problem that has been decades in the making and is going to take a long time to turn around and recover from. I think it would be a terrible mistake every time we’re at the top of a business cycle to say, Well, unemployment is below 4 percent, therefore the problem is solved. Unemployment has been top of mind in every business cycle throughout this period. And that hasn’t changed the picture of the broader challenges that we have.

Douthat: So let’s be a little more specific about those broader challenges. As you mentioned, G.D.P. in the U.S. has continued going up throughout this period, and in fact, middle- and working-class incomes went up in Trump’s first presidency. And they went up in Biden’s presidency even though inflation ate into them. And in terms of the numbers, middle-class Americans are meaningfully better off than they were in the 1970s.

But you think there’s something missing from those numbers?

Cass: I think there’s a few things missing.

When you’re looking at these household income numbers, it’s important to notice how much they rely upon the household having two earners and how much more reliant they find themselves on government programs than in the past. I also think it’s important to notice rising inequality, which conservatives have traditionally pooh-poohed in the last 40 years. That’s because you’re not supposed to have any right to complain about the broader shape of the society as long as you have more stuff than you did 40 years ago. But I think we’ve seen a very clear divergence in the fortunes of the typical worker, who does not have a college degree, and the upper middle class, who has seen so much of the benefit.

At American Compass, we look at the cost of attaining the sort of basics of middle-class security, like health insurance, housing, transportation, the ability to send your kids to public university, a basic basket of food. Now, that frustrates economists because that’s not the standard inflation measure, but those costs resonate with a lot of people because it speaks to the reality of their lives. It has become much harder for the typical worker to afford all of that, especially on one income.

I think we have a problem, particularly for the right of center that sold this idea of a rising-tide-lifts-all-ships model and we all march forward together into the brave new future. What people are seeing instead is that some people got to march ahead into the brave new future and a lot of folks did not.

This may be somewhat narrow, but I think it’s really important to look at particular groups, like young men, if you want to know how your society is doing.

Research at very optimistic groups like the American Enterprise Institute shows that young men ages 25 to 29 are earning the same or less than they would’ve been 50 years ago. And I think it’s hard to sell that as a successful economy or one that’s likely to produce a flourishing society.

Douthat: As you mentioned, the American Compass index of human flourishing is hotly contested and much argued over. But stipulate, for the sake of argument, that there is some kind of stagnation here, especially for young men. What does trade have to do with it?

Cass: To answer that, I have to highlight one other element of what’s gone wrong in the economy, which is the deindustrialization of the economy.

What we have seen going back into the ’90s after NAFTA, and certainly after welcoming China to the World Trade Organization, is a real hollowing out of the manufacturing sector.

The loss of manufacturing has been a serious problem, and trade is at the heart of that. So, figuring out how to make it relatively more attractive to make things here in America is therefore becoming a really big — and correct — focus for policymakers.

Douthat: But is the issue that we’ve lost manufacturing, or that we’ve lost manufacturing jobs? One of the arguments that you often hear is that American manufacturing, in terms of how much stuff we produce, is still roughly where it’s been for decades now.

The reason we’ve lost ground in comparison to China is because China has become such a powerhouse, right? But the American manufacturing sector has not collapsed. What’s collapsed is the number of Americans who work in jobs in that sector.

Do you agree with that?

Cass: I think that’s approximately right, with the caveat that a flatlining in the manufacturing sector is a form of collapse that weakens the American ability to essentially keep up in all sorts of vital areas. And as a result, as you just said, leads to a real loss of opportunity for people.

Douthat: What is so special about a manufacturing job as opposed to a service sector job?

Someone might say, yes, the U.S. economy has fewer people working in factories than it did in the heyday of Detroit and the big three auto manufacturers. But America is also a lot richer than it was back then. And I think most people argue that global trade has led to lower prices in at least some areas for some goods.

So what’s wrong with a world where someone works in a service sector job instead of a manufacturing job, enjoys lower prices and then, presumably, the richer U.S. economy can pay for under earned-income tax credit or a larger child tax credit to essentially increase wages and give a premium based on the surplus of a wealthy society?

Why is that not just as good as a world with many more manufacturing jobs?

Cass: Well, I think it’s important to say that there’s nothing especially valuable in the abstract about a manufacturing job. That being said, one thing that is very good about manufacturing jobs is where they tend to be located. If we want a broad prosperity with diffusion across the country, then it’s important to have strength in a variety of sectors in different places, not just knowledge work that’s going to agglomerate in a few big cities.

Based on logistics, access to natural resources, the need for a lot of space, the need to avoid having the facilities so close to where people live, what happens is that you’re a lot more likely to see manufacturing in a lot of the areas that do not have finance and technology and media and so forth.

And so they provide an incredibly valuable diversification in that respect. A second thing that’s really nice about them are the kinds of people who tend to work and excel in them. It is nice to have a pluralism in our economy where people who prefer to be making things and doing that kind of work have good opportunities, too.

It’s also the case that if you want to have good, highly productive jobs that pay a good wage, empirically, what you see is that those opportunities exist in the manufacturing sector, especially for people with less formal education, even though the average manufacturing job doesn’t pay more than the average services job.

If you zoom in on one type of worker, like someone without a college degree, then what are the comparable service jobs they would otherwise have? The manufacturing jobs tend to be better.

Douthat: But suppose you had a resurgence of manufacturing jobs right now. Wouldn’t they look quite different from manufacturing jobs in 1985? Or even just before the China shock?

We have passed through an age of automation and robotics, and we are entering some kind of age of artificial-intelligence-driven automation.

But when I hear people talk about the factory jobs of the future, it’s taken for granted that these are not actually the kind of jobs that a blue-collar steelworker would have had in 1977.

The argument is, well, these are actually better jobs. They’re less backbreaking. They require more skills. But if that’s the case, are they not filling in the same niche in the economy?

When I interviewed Vice President JD Vance before he became the vice president, he talked about the six or seven million American men who have dropped out of the work force and who are particularly vulnerable to opioid addiction and family breakdown.

Are those the kind of workers who are likely to be hired in the factory of the future that is highly, highly automated?

Cass: Generally speaking, the answer is yes. And to understand what this highly advanced manufacturing would look like, look at what’s starting to happen with the CHIPS Act, where the high-end chipmakers are locating and who they’re hiring.

TSMC is locating outside of Phoenix. Intel is locating in the middle of Ohio. Micron is focusing on upstate New York. If you look at who they’re hiring and how they’re doing it, yes, you see some very high-skilled employment and very sophisticated types of work. And I think it’s also a good thing to bring more people with those types of skills to those communities.

But on top of that, you’re also seeing a lot of what gets typically called mid-skill jobs. You’re seeing the companies partner with community colleges to equip people with the kind of training they need to be technicians in these factories. You see a lot of partnerships with labor unions. You’re seeing the same thing from the big tech companies as they need to build out data centers. Suddenly they’re very interested in electricians and figuring out how to work well with labor unions.

I think the caveat that’s fair, but also unfair, is to then focus on the specific example of somebody who has been so harmed by deindustrialization, and the people in these communities that have been left behind and who are out of the work force entirely. Are those the particular people who are going to be able to take these jobs? In some cases, probably yes. And in some cases, probably no.

I think we certainly have a lot of other work to do to think about how to engage those folks. But what having this will do is make sure that the next generation has a lot more opportunity than this past one did.

And so the fact that it doesn’t necessarily resolve every problem we have today is certainly not an argument against building in this direction going forward.

Douthat: But do you think that there is a cost to overall G.D.P. from using tariffs?

To wildly oversimplify the argument for tariffs that is implied by what you’re saying is that you raise the cost of importing from factories outside the United States, so it becomes more economically viable to build factories inside the U.S.

The typical economist would say: Look, the overall society’s going to be somewhat poorer. Is that a trade-off we should be willing to make? Should we trade off some points or fraction of a point off G.D.P. to have more people working in upstate New York and central Ohio?

Cass: I think that is a trade-off we should be willing to make. But I think when you’re asking what is the effect here, I would really separate the short run from the long run.

The funny thing is that when we have talked about short-run costs of globalization, economists just waved them away and said, Oh, don’t worry. Let us tell you about our long-run equilibrium model that says, you know, someday this will be for the best.

It’s only when you’re talking about policies that are not their ideological preference that they suddenly zoom in and focus very heavily on the immediate short-run transition costs. So I certainly acknowledge there are short-run costs, but I think they’re worth it.

Not only because of the other things beyond G.D.P. that we might accomplish, but I think they’re also worth it because they point in the direction of a much stronger and healthier economy in the long run. And so we’re looking at what trajectory is the right one for the American economy across the next generation or two.

I absolutely think that we’ll be much better off if we make a commitment to reindustrialization rather than saying, Well, according to the economic model, we should just be happy with everything being produced in China because it’s more efficient there and we get cheaper stuff.

Douthat: I concede that, relative to how the U.S. economy was doing in the immediate postwar period, the age of globalization has been a disappointment, but it’s not like there is some counterexample where you say, Oh, the French practice more protectionism, or the Germans and the Japanese economies are in much better shape.

Isn’t the U.S. economy still in the best shape of any big, rich, developed nation right now? And doesn’t that suggest something about the potential scenarios on the table?

Cass: Well, I think you’re absolutely right. What I find so funny is that when you say, Hey, globalization has a lot of costs, all of the biggest pro-globalization fans will post a chart and say, See, G.D.P. went up, so obviously globalization was great.

But if you actually look at performance during this era, it has been weaker, not stronger. You’re absolutely right that the U.S. economy has been performing well relative to a lot of other developed economies, and I think that’s a function of a few things.

One is there are a lot of other things that, for all of America’s challenges, we still get right, whether that is the flexibility of our economy, the way that we embrace innovation in a lot of areas, and what is generally a lighter regulatory environment.

At the same time, I think we have to step back and look at the indicators of social well-being and how the typical working family is doing. While they do have more stuff, I think there is a lot of very well-placed frustration with the bargain that was struck with globalization.

Douthat: So what do you make of other arguments for tariffs? We’ve been focused on manufacturing, but in the swirl around President Trump’s tariffs, you’ve had a lot of other cases made.

One that is pretty clearly linked to the rebuild manufacturing case is a national security case which says, look, China is a great power competitor. It’s possible that a global pandemic originated in China in one of their own laboratories. They could invade Taiwan.

There’s all kinds of ways where we could have to decouple from them. And so, again, it’s worth a little bit off G.D.P. to have more of our supply chain domestically, and so on. I assume that you find that argument somewhat convincing as well.

Cass: I do. I would split it into two pieces, though: the China-out step and then into the U.S. step.

The decoupling side of things is a really important thing to do because what we’re concerned about is the overdependence on China. So to the extent that we can just impose tariffs on China and try to push supply chains anywhere else and then say we’re happy to get it from India or Mexico or other countries we expect to be allied with, as long as it’s not China, that’s where particularly high tariffs on China are valuable.

The other question is: What do we actually want to have made in the United States? And some of that is just the basic manufacturing case for all the other reasons we just discussed.

There’s one piece I would add to the national security side. I think it’s really important to recognize that you can’t maintain a strong defense industrial base independent of a strong industrial base. We’ve essentially tried to do that. We’ve said we still need to be able to make our own aircraft carriers and submarines and fighter jets and so forth. But the other stuff doesn’t matter because it’s not national security.

And what we’ve seen is that is not a stable equilibrium. If you let all the basics go away, then you can’t believe you’re going to remain good at the very high end of the supply chain.

Douthat: But isn’t that partially just a case for industrial policy similar to what the Biden administration tried to pursue? I’m looking for substitutionary policies that serve the same kind of goals without taking the growth hit from tariffs.

You could argue we have a certain set of industries that aren’t technically part of the defense budget, but that in America, we want more chips and so forth manufactured in America. Why not just make that part of our spending program and support those industries because we know the specific things that we want instead of putting up general barriers around the world that slow growth?

Cass: So, obviously, I’m a very strong supporter of industrial policy. I think when we identify something in particular that is absolutely critical, like advanced semiconductors, industrial policy absolutely makes sense. I think the problem is that when you’re talking about a strong industrial base broadly, there isn’t some narrow set of most important things to worry about, right?

If you actually want to be an industrial power, you need the actual materials themselves. You need to know how to make the tools that make the materials, things like machine tooling, the actual excellence in engineering that’s going to lead to efficient production.

I was just having a discussion with Congressman Ro Khanna, who was making this exact point that we should have very narrow, targeted tariffs and be using industrial policy to support the kinds of factories we want. Otherwise, we don’t have a plan for the factories.

And I sort of smiled because I think this actually gets at an interesting left-right divide, where the left of center tends to have much more confidence that, yes, we can figure out all the things we need and design a sort of broad range of industrial policies to support each of them.

I always emphasize that I actually see tariffs as the much more free-market position. Because, yes, they are a significant intervention into the market, but they are a relatively simple, broad and blunt one. And once you’ve changed the constraints such that domestic production is relatively more attractive, you then are able to leave more to the market to figure out. Under these conditions, what else do we want to produce here? And how do we do that effectively?

And so I’d much rather see us pick a few things that we know really matter for industrial policy and then support that with a broad tariff policy that creates the conditions, generally speaking, to promote reindustrialization rather than look to Congress again every time we realize there’s another product that we need.

Douthat: And what about deficits? One of the arguments that has floated around in the last few weeks is that tariffs are a way to raise revenue, which they obviously are. The U.S. has a big deficit problem. And the deficit problem is itself connected to the global trading order. And it has to do with the strength, in part, of the dollar relative to other currencies.

So you have people arguing, one, tariffs will raise revenue directly, help cut the deficit, and you don’t have to do some kind of grand bargain between Democrats and Republicans. That’s very difficult. The president can just go ahead and do it. It’s the only way a Republican president can ever raise taxes, I’ve heard people say that.

And then, maybe, people say it can also be linked to some global negotiation, where countries come to the table and all agree to change how their currencies work, or accept lower rates on U.S. debt, or something that helps us deal with our budget deficits. The difficulty there is, especially in the first case, if tariffs do what you want them to do and lead to the reshoring of manufacturing, over time, they raise less and less revenue.

So a successful tariff that helps reindustrialize America is not gonna be a big revenue generator. So where do you see deficit cutting fitting into this? And do you buy the idea that you could do some sort of grand renegotiation of U.S. debt?

Cass: I guess the first thing I would say is I think tariffs can be a significant revenue raiser. It’s just important to be clear on what your vision for the tariff is. If you’re proposing a tariff as a negotiating tool and you’re saying we hope we can take this away when the country behaves the way we want, obviously, you shouldn’t count that as long-term revenue.

When you’re talking about an actual permanent tariff — let’s take something like the kind of 10 percent global tariff that Trump seems to want to have as a permanent tariff — that I think is a significant revenue raiser.

And it’s worth keeping in mind that it will be for the long run, because the equilibrium you’re headed toward is not one where we shut off trade. It’s one in which there’s more friction in trade, so that there’s a preference for domestic manufacturing, but at the same time, you’re still likely to have quite high levels of trade with a 10 percent tariff.

The goal of permanent tariffs is not to achieve autarky and shut off trade. So I do think we should celebrate the role that they can play in raising revenue and also recognize how that therefore reduces the cost of the approach.

One thing that really frustrates me when folks talk about all of the costs associated with tariffs is they tend to assume we’re collecting all this money and just setting it on fire.

Douthat: I mean, the U.S. budgeting process has been known to do that with money.

Cass: Fair enough. It could be spent very poorly.

Douthat: Hypothetically, yeah.

Cass: Well, look, by default, if we collect all this revenue and all that means is that deficits are lower, that has some substantial upside, and you were just elaborating some of that. The flip side, as you just mentioned, is that some of these tariffs — certainly that Trump is using — do seem intended to be used for negotiation, with the goal not being that they’re permanent, but the goal being that they bring countries to the table to reach other arrangements.

And there, I think the most constructive agreements we’re likely to reach are around pushing toward balanced trade and around pushing toward getting China out of our markets. I think we can make a lot of progress there. I don’t think we’re going to solve our deficit problems through those negotiations.

Douthat: OK, so you have brought us to the actual tariffs, not the theoretical tariffs. And I’m going to put words in your mouth and say that the Oren Cass preferred tariff program is one that specifically tries to isolate China, generally imposes a 10 percent global tariff that is stable, persistent and compatible with global trade, and maybe includes some other country-specific tariffs related to negotiations.

Now, you could argue that is what Trump has done. The tariffs on China are quite high. There is a flat 10 percent tariff, and then there are these country-by-country tariffs that people have been arguing about. But I read your take on the tariffs and it seemed like it was very general praise wrapped around a pretty specific critique. So I want you to tell me what you think is wrong with what Trump is doing on tariffs.

Cass: Yeah, I think that’s quite a good summary of my general views on this. I think the tools that the administration is using here are the right tools, and they can do a lot of good. The question is, how do you use them?

I have a few concerns — quite serious concerns — with what the administration has done, at least in these first few days after the announcement. I think one real issue is with phase-in. I think it’s important to be credible that you are in fact doing these things, but snapping them all in immediately imposes all the costs upfront, long before it’s plausible to expect anybody to have actually adjusted.

So, reasonably, even if everyone starts moving today, it’s going to take a couple of years to actually bring new capacity online domestically, to be moving supply chains and so on and so forth. You want everyone to firmly believe that the tariffs will be in place by then, and so they better start moving immediately. So I think phase-ins are very important, and something that we don’t have right now.

The other one, on the flip side, is just predictability and certainty. I think you need much clearer guidance on if this is going to be permanent versus not, and a real sense of where we’re going, what is the ultimate end goal that we want people planning around? My hope, that I think is consistent with what folks in the Trump administration have said, is we want to have a large, U.S.-centered economic and security alliance. We want to have very low tariffs within that group, obviously Mexico and Canada, obviously other core allies.

But unlike in the past, we have some demands. We want to see balanced trade within that group so that we reshore and reindustrialize significantly in this country, and we want to see a common commitment among all these countries to decoupling from China. And I think if we communicated that clearly, we said, That’s where we’re going toward, here’s what’s gonna be permanent, and we’re phasing-in in that direction, then there would be costs — absolutely — but the costs would be much lower and more manageable.

You would induce much more of what you want. You would get more of the kinds of investments that you’re trying to create the incentives for. So these are all things that the Trump administration could still be moving toward, but it’s really important to actually get there if we’re going to achieve the kind of things that we’re talking about.

Douthat: And what about the country-by-country tariffs as they exist right now? Because the Trump administration used the rhetoric of “reciprocal tariffs,” which implied to most people that essentially we were saying, If you have X tariff on our goods, we will have the same tariff on your goods, and we want to mutually negotiate down from there.

Instead, the Trump administration has a formula that’s seemingly designed around trade deficits with other countries: If you have a trade deficit with us, we are putting a big tariff on you.

It seems to me pretty obvious that in a global economy we’re going to have lots of countries that we have trade deficits with. Maybe we want to have trade surpluses with more countries, fair enough, and that’s what we’re working toward. But it seems completely bizarre to say: Any random country that has a completely different economy from ours, if you’re not importing exactly as many American goods as you’re exporting to us, we’re gonna tariff you.

Isn’t that just daft?

Cass: Well, I think there are a couple of problems here.

Douthat: You could just say it’s daft.

Cass: I don’t think that the idea of these tariffs being proportional to the size of deficits is daft. I think you’re right that the idea of an end state where we have perfectly balanced trade with every partner is daft. That’s not what we need to be pushing toward.

But to me, what the Trump administration is pushing toward with these reciprocal tariffs is something quite obvious that I wrote about a couple of months ago. And maybe the word “reciprocal” is too confusing and they should have called them proportional tariffs.

Douthat: Possibly. Wouldn’t that have been a good idea? That seems like it would’ve been a good idea.

Cass: Just putting that out there. But the thing about the reciprocal tariff is that if your goal is, we want your tariff down and our tariff down, then holding up a mirror to other countries might make sense.

As the Trump administration has made clear, it is deficits that they’re concerned about. So that basic, reciprocal tit-for-tat model was never actually going to be responsive to what they were concerned about.

If what they’re concerned about is the trade deficits, particularly with our very large trading partners, then creating tariffs that are proportional to the size of those deficits is a good starting point. And you’re right that in a healthy, balanced economy, we could have surpluses with some countries and deficits with others.

But the reality is that that is not our system.

We essentially have large deficits with all of them, which should be a red flag that there are real imbalances in the system that are not what the economists envision and are not healthy.

Douthat: OK, but you were just telling me, in the case against industrial policy from the right, that the free-market-oriented conservative would say, We’re not gonna be able to micromanage which factories to build exactly which industries to support. We want to set something low and flat in tariff policy that just encourages domestic manufacturing in general.

It seems to me like the same has to be true with this country-by-country stuff. The idea that we’re going to be micromanaging the trade balance with Italy, Hungary, Turkey, India, Bangladesh, to figure out how we get them all back in balance — one, that seems unworkable. Two, and this is something that hangs over this whole conversation, it just seems like a way to fit in with the president of the United States’ particular obsession with the idea that, from his perspective, all trade deficits seem to be bad. At least in the way he talks about it.

So everyone who’s designing these policies in the White House is sort of working around a core Trumpian perception that probably is wrong. Right? I mean, his view is: Anytime you have a trade deficit, you’re getting ripped off. And that’s wrong, right? So you shouldn’t make policy on that basis.

So why wouldn’t you just say: We’re going to have the 10 percent Oren Cass tariff. And maybe where you have countries that are particularly abusive in their tariffs, you’re gonna have actual reciprocal tariffs.

Why are you going to embark on this global economic engineering project that seems destined to fail?

Cass: So I agree with some of that. I agree with your point, and I’ve written this, that there are plenty of reasonable reasons to have bilateral deficits or surpluses, and you shouldn’t expect them to balance in every case. That’s certainly true. I also agree with your point that the global tariff is preferable to the reciprocal tariff model, for all of those is-this-workable reasons.

The piece of the reciprocal tariff case that I think is interesting and worth really grappling with — and this is why I don’t think “daft” is fair — is that there is a question of how do you get from here to there on the kind of system we want to move to.

As a thought exercise, let’s just stipulate that we really do want a large trading block, with relatively free trade therein, and for all of those countries to agree that China is out.

You actually do need each of these countries to change their policies. You have to have some basis for the negotiation.

If you actually do want these countries to change their policies toward bilateral trade to the extent that they really are distorting the relationship, you do need to have something to bring to the table.

And the classic example that we always highlight in American Compass is a Ronald Reagan example.

When the Japanese autos were flooding into the U.S. in 1980, 1981, Reagan went to Japan under threat of heavy tariffs from Congress and got the Japanese to commit to self-impose a quota on cars from Japan and instead send Honda and Toyota to build in the United States.

And I think it’s very hard to describe that as anything other than an enormous success, certainly for the U.S. economy, and frankly for the U.S.-Japan relationship.

Douthat: But don’t you think the American government is only capable of doing that kind of thing, let’s say in the next few years, in three or four specific cases with specific countries? You say, OK, there’s this thing that’s currently manufactured in Germany, and we want more of it here. There’s this thing that’s currently manufactured in Japan; we want more of it here. There’s this thing that our NATO ally, Turkey, is doing, and we can do that.

But beyond that, let’s concede the Reagan approach worked with one really big, important country that we had a longstanding, complex, intimate relationship with. You set a particular goal and you can get it to work. But again, the Trump administration is not doing that. Right now it is setting out a plan where we’re going to play Reagan and Japan with 137 countries around the world in the next five years. And obviously, that’s not going to happen, setting aside questions of competence and implementation.

Cass: Yes, I think that’s right.

Douthat: It seems like everything that you’re saying in critique of the Trump administration is they went too far, too fast, too big. Too many countries are trying to do a Japan-style negotiation at the same time as phasing in the China tariffs too big, too fast. There’s not enough time for markets and companies to adjust. So how do they get to the best-case scenario?

At this particular moment, there is some talk that the Trump administration could announce a 90-day pause for most of the tariff program, maybe not including China, but certainly for most of the world.

And that could, in theory, create space for the kind of recalibration that you’re talking about. To walk certain things back, to slow certain things down. At the same time, can you really pull that off?

Is it plausible that the market will ever trust this administration again if it’s whipsawing between wild tariff announcements and then walking them back? Is it actually plausible for the Trump administration at this point to walk itself back to a more sane and sober tariff policy than the one it has?

Cass: The one thing I would add to the criticism is, I think communication matters here with allies, with the public, with markets. A lot of this is about everybody actually understanding where you’re going. As you just described, there’s plenty of room to correct course and say something like, the 10 percent global tariff is permanent and immediate, and we are asking Congress to pass a bill. By the way, conservative Democrat Jared Golden has introduced a bill on this already.

I think saying, look, China is not like the other countries. This is where we are actually going with China. Get used to it. But by the way, we’re essentially going zero to 60 right away. Let’s do this over in two to three years — I think that would be fully credible. And by the way, again, there was great legislation cosponsored, actually, by now Secretary of State Marco Rubio, to do that on China in 2024.

They should do that. Get Congress on board and make it permanent. And if they do that, they have some credibility that they mean it. This is serious.

And I think there’s room to say people are coming to the table quickly. We appreciate everybody’s interest in resolving this. And so let’s put these on hold, and put a deadline by which we need to see plans from people. And the countries that don’t get with the program get hit with half of this in six months, and get hit with the other half of it six months later if they still don’t get with the program.

I think all of that could be perfectly consistent with what has been said so far and would be an enormous improvement in reducing the costs and increasing the potential benefits.

Douthat: If you can indulge pessimism for a moment, what do you see as the worst-case scenario here? I will offer mine.

I do not think that the Trump administration will ride this exact policy mix all the way down into a recession. But I think there are reasons to think that Trump might stick with some bad policies. You have conceded throughout this conversation that any tariff regime probably comes with some cost to growth, hopefully modest, but some cost.

So you combine that cost with extra costs added by Trump’s nonoptimal policies with a general atmosphere of dismay and uncertainty, and that yields, if not a recession, at least, then, let’s say stagflation, somewhat higher prices from tariffs, and lower economic growth rates. The Republicans then lose Congress in the midterms. There’s no appetite for making these tariffs permanent via legislation because generally they’re extremely unpopular, but associated with Trump himself.

There’s no JD Vance presidency after Trump because he’s associated with these policies and they’re unpopular, and if I may personalize it a bit, the end of the story here is a Democratic president comes in and sweeps all of this away. No factories have been built because no one believed the policies were permanent.

And the project of American Compass and you, Oren Cass, are seen as bound up in the Trump administration, completely blowing an opportunity for conservative governance for years and years.

That’s my worst-case scenario.

Cass: I wouldn’t include American Compass in the worst-case scenario. American Compass will do our policy work as best we can for as long as we can.

Douthat: Until the angry 401(k) owners appear behind your snowy windows.

Cass: Yeah. I’m concerned about two very serious downsides. One is the very real costs. I think to some extent we get tied up in the abstract of the talking points or the stock market. The very real cost is actual harm to real people if you load up costs that aren’t going to produce benefits.

And then the second related cost is that this direction is discredited in the eyes of the American people. As a political matter, the idea that we can do better than this unfettered globalization and that there is a path back to reindustrialization is thrown out and becomes for a long time associated with high costs and low benefits.

I think that would be unfortunate for the country, because at the end of the day, I think it’s something we need to do.

Douthat: I think that note of pessimism is a good place to end, because I’m feeling fairly pessimistic about this policy course at the moment.

Thank you so much, Oren Cass, for joining us, and we’ll see how things look soon enough.

Cass: Thanks for having me, Ross." [1]

Biden's industrial policy was doomed for sure: "Chinese sophisticated products are almost impossible to manufacture in the US. It is estimated that a domestically US produced iPhone would cost more than three times its current price, or about $3,500. America simply lacks the manufacturing expertise and competitive industrial clusters needed to mass produce Apple products."

1.  The Case for Giving This Trade War a Chance: interesting times. Douthat, Ross.  New York Times (Online) New York Times Company. Apr 10, 2025.