"Donald Trump is shredding American trade policy -- in real time. On April 2, which he deemed "Liberation Day," he slapped almost the entire world with "reciprocal" tariffs: 10% for most countries and higher rates for the "worst offenders," including 46% for Vietnam, 34% for China and 20% for the European Union.
In effect, Mr. Trump also slapped tariffs on 10005, Wall Street's ZIP Code, for America's markets cowered in horror. Dollar assets experienced such a rout that Mr. Trump himself took notice of the damage he'd done, postponing most of his latest tariffs for 90 days on April 9, the day they were to take effect. Except, that is, for China, whose cost of selling to the U.S. he hoisted to 145%.
Watching from the sidelines at Dartmouth College is Douglas Irwin, an economics professor. He knows more about U.S. trade policy than anyone alive, having written "Clashing Over Commerce" (2017), the first definitive economic history of trade since Frank Taussig's "A Tariff History of the United States" (1931). In a Zoom interview, I ask what governments and businesses around the globe should make of Mr. Trump's mercurial approach to trade and tariffs.
"It is incredible," he says, but he doesn't seem disbelieving. "Well, Trump twice said that the 25% tariffs on Canada and Mexico would take effect and twice pulled them back, so perhaps we should have expected this. I think his heart is with this reciprocal tariff plan, and to walk that back because of pressure from the markets must be a big disappointment."
But Mr. Irwin, 62, like most mainstream economists and business leaders, is unhappy. "To whipsaw the markets like this amounts to grossly irresponsible economic management." On April 4 Mr. Trump asserted on social media that "MY POLICIES WILL NEVER CHANGE." "And yet, after pausing the tariffs, he said, 'You have to be flexible,'" Mr. Irwin notes.
Any relief that foreign governments might have over the tariff pause "will be accompanied by utter dismay over the shambolic nature of U.S. policymaking." He calls Mr. Trump's actions "cavalier" and says there is "no strategy. And this uncertainty is a tax on the economy, undermining consumer confidence and freezing up investment spending." It could bring a recession.
Mr. Irwin notes that Mr. Trump "tolerated big losses in stocks for several days." The president said on Wednesday that he decided to pause the tariffs because bond traders "were getting a little bit yippy, a little bit afraid." As Mr. Irwin observes, "the bond market strikes right at the heart of the ability of the federal government to finance its operations."
Mr. Irwin's book recounts the history of U.S. trade policy from colonial days to Mr. Trump's First Inaugural Address, in which he promised to "protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs." He identifies three alliterative eras, "revenue, restriction, and reciprocity."
In the first era, up to the Civil War, there was no income tax and "revenue was the key objective of trade policy." In the second, which spanned the Civil War to the Great Depression, the main goal was "the restriction of imports to protect domestic producers." The third era has focused on reciprocal agreements to reduce trade barriers, such as the North American Free Trade Agreement and the World Trade Organization.
Are we entering a fourth era? Does Mr. Trump herald the death of reciprocity? "Well, Trump has a different view of reciprocity," Mr. Irwin says. "But the interesting thing about Trump is that he likes all three of the Rs." How so? "He loves the revenue. He thinks we're going to be able to cut taxes and pay for some of the tax cuts with the revenue that's going to flow in" from tariffs. He likes restriction and wants "to keep out foreign goods so he can reindustrialize and create jobs here." And he likes reciprocity, "because he always wants to bargain, too, but it's a slightly different take on reciprocity than we've seen in the past 80 years." It is a "retributionist view of reciprocity, which is 'You're not treating us well, so we're going to raise the tariff, and maybe we'll make a deal, maybe we won't. But we'll see.'" (Mr. Irwin notes that "retribution" could also become a fourth R.)
This helps make sense of the contradictions in Mr. Trump's trade rhetoric. He embraces revenue, restriction and reciprocity, but "it's not clear which one's the priority, because there are conflicts across them. If you're going to bargain the tariffs away in reciprocity, that's not a stable source of revenue. If you're using tariffs to restrict imports into the U.S. in order to reindustrialize, well, then you can't bargain them away either, because if you put the tariffs up and then put them down, businesses aren't going to make decisions based on these quick tariff changes."
We don't know when Mr. Trump's words are deal-making feints and when they aren't. "Is that statement a negotiating statement? Or maybe it's the end-game. When will the tariffs take effect? Are they still going to be in effect a year from now?" In July 2020 the U.S.-Mexico-Canada Agreement supplanted Nafta. "The USMCA is Trump's agreement," Mr. Irwin says. "He negotiated and signed that in his first term. What's the value of that trade agreement if he can come up with some new rationale to impose tariffs that's outside the bounds of what was negotiated?"
Mr. Irwin sees Mr. Trump as "historically unique." Previous big shifts in trade policy were the result of major "exogenous shocks." The move from revenue to restriction in the 19th century was a consequence of the Civil War, and the switch from restriction to reciprocity in the 20th century happened because of the Depression, which the Smoot-Hawley tariff of 1930 deepened. In each case, change occurred through a "societal and political consensus, including Congress, that we have to move the direction of trade policy."
This time, Mr. Irwin says, "we're changing direction in a major, historically unprecedented way on the whims of one person. Because Congress has not signed off on this. There's no political and societal consensus." Opinion polls show, Mr. Irwin says, that trade is low on the list of the American public's concerns -- behind inflation, the cost of living, healthcare, and the fiscal deficit.
Mr. Irwin wonders where Mr. Trump gets his history. He's "lost track of the number of times the president has invoked William McKinley as his role model." As chairman of the House Ways and Means Committee, McKinley sponsored the Tariff Act of 1890, which raised import duties to nearly 50% to protect American industry. But as president, McKinley changed his mind on tariffs.
Also puzzling is Mr. Trump's insistence that the high-tariff Gilded Age is a model to emulate. "Yes, there was a period of industrial expansion then. But there was another one between 1830 and 1860, before the Civil War. And during that period tariffs were going down. So this idea that we owe American industrial might in the 19th century to the tariff is erroneous. There were so many other factors going on that were making the U.S. economy wealthy" -- among them technological change, mass immigration and capital inflows from Europe. "We were open to ideas, capital and people from the rest of the world."
Republicans were the leading party between the Civil War and the Depression. "That's important to understand," Mr. Irwin says, "because the Republican Party got its political support from the North, the home of manufacturing that faced competition from abroad." The tariffs of 1890, 1922 (known as Fordney-McCumber) and 1930 "reflect the same political coalition. You don't really need to understand the details of the different bills. Their thrust is the same."
The GOP shifted toward free trade during Ronald Reagan's time as "its support began to move to the South." The Democrats became more protectionist at the same time as their political support moved north. "The parties switched the regions they were representing."
In keeping with this domestic geopolitical analysis, is it fair to ask whether Mr. Trump's trade policy has been hijacked by the Rust Belt. "I'd put it the other way around," says Mr. Irwin. "Trump tried to put Michigan, Pennsylvania and Ohio into play for the Republicans by appealing to the antitrade sentiment in those states -- the idea that the Rust Belt has been a big loser here." Even though Republican support from the 1970s and '80s moved to the South, "you've still got to win some states in the North. And this [trade focus] has proved to help those swing states move Republican."
Our conversation turns cultural. "Trump was playing on a victim mentality. 'Other countries have been taking advantage of us.' He said workers lost their jobs not because of state tax policies that pushed work to the South . . . because a lot of manufacturers moved from the North to the South. I mean, it's not like we've just lost manufacturing!" Mr. Trump's rhetoric told voters that "America isn't responsible for the pain that you're experiencing, it's other countries. And we're going to strike back at them. It's trade as grievance."
Mr. Irwin is on to something. The purely economic case for his sweeping tariffs is hard to make, if not impossible. Only the more partisan economists buy into it. So what does Mr. Trump do? He frames trade as part of the culture war he's been so adept at winning. "Trump is saying other countries are taking advantage of us. We're going to stand up -- a very masculine virtue -- and fight back. We're not going to take it anymore. And if people don't fully understand the nuances of trade, and what foreign trade policies are, standing up sounds like something that wimpy Democrats wouldn't do. 'They haven't been standing up for us, have they?'" McKinley in 1890 sounded a lot like Mr. Trump. "What American," he asked, "can oppose these worthy and patriotic objects?"
Mr. Trump has turned trade into an issue steeped in fairness and morality. "For decades, our country has been looted, pillaged, raped and plundered by nations near and far, both friend and foe alike," the president said on Liberation Day. "American steel workers, auto workers, farmers and skilled craftsmen -- we have a lot of them here with us today -- they really suffered gravely."
To which Mr. Irwin responds: "You don't have to understand the facts, but who's against fairness? Who's against reciprocity? These concepts come naturally to people. And if someone's doing some harm to you, should you fight back or just take it? He's saying 'Let's fight back,' even if the reality that other countries are taking advantage of us is very elusive."
Smoot-Hawley taught generations of policymakers -- including Reagan -- to avoid tariffs. But that was 95 years ago, and Mr. Irwin says "that memory is lost." The MAGA narrative insists that globalization has been bad for the U.S. "If we were talking like this in 1960," Mr. Irwin says, "anyone who said, 'We have trade problems, we have to raise tariffs,' would have been told, 'We just tried that. It didn't work very well.' It was lived experience. And we've lost that lived experience."
Mr. Irwin believes we're on the cusp of recovering some of that experience -- in the most painful way. "We're in a teachable moment, in some sense. Milton Friedman always said that it's not ideas that change the world but experience that does." Mr. Irwin reminds us that we hadn't had any experience with inflation for a while "until the Biden bump-up, and that reminded people how much they disliked inflation, because people thought we could run the economy hot and all that sort of thing."
"Maybe this is a period in which the younger generations that I'm teaching in my classroom will live through the experience" of a worldwide tariff war. "When they're 60 or 70 years old, they'll remember, 'Gee, protectionism didn't work out so well for the U.S.' That's a lesson that has to be relearned every generation or so."
Does he plan a new edition of "Clashing Over Commerce" to account for the Trump years? "Let's wait for the dust to settle."
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Mr. Varadarajan, a Journal contributor, is a fellow at the American Enterprise Institute and at the New York University Law School's Classical Liberal Institute." [1]
Nobody has a crystal ball, even historians. The tariffs might be next best thing after sliced bread for the West, since there was no China before. We will see.
1. The Weekend Interview with Douglas Irwin: Trump's Tariffs Are Unique in History. Varadarajan, Tunku. Wall Street Journal, Eastern edition; New York, N.Y.. 12 Apr 2025: A11.
