Trump Won’t Give Up Tariffs, and Neither Will His Successors

President Donald Trump said his tariff regime would make the U.S. “rich as hell.” The U.S. government collected nearly $70 billion in tariff revenue in the first five months of the year. (Scott Olson/Getty Images)

About the author: Christopher Smart is managing partner of the Arbroath Group, an investment strategy consultancy, and was a senior economic policy advisor in the Obama administration.

President Donald Trump’s trade strategy is barely six months old, but it has been exhausting America’s commercial partners, geopolitical allies, and corporate leaders since day 1. Public markets may be buoyant. But investors and CEOs are complaining that they have to delay big decisions because there is so much confusion and uncertainty around the administration’s tariff intentions.

Amid all their fussing about the president’s grand experiment to rewire global trade, however, there are early lessons coming into view.

Tariffs are here to stay. Future presidents will struggle to give up a tool that gets so much attention, even if it doesn’t always deliver clear results. They will also be reluctant to give up the hundreds of billions of dollars in tariff revenue, which will help close America’s deficit.

Tariffs aren’t just for trade. The president’s great policy innovation is the application of tariff threats to concerns unrelated to trade policy, from Mexican border security, to Chinese fentanyl exports, to the prosecution of Brazil’s ex-president. Now, with overwhelming bipartisan support, Congress plans to approve 500% tariffs on any country that buys Russian President Vladimir Putin’s oil. Watch this space!

20% is the new 2%. The trade-weighted average tariff before Jan. 20 was around 2%. That includes the tariffs implemented during Trump’s first term and extended under Joe Biden. They now stand at 16.8%. And that is before the implementation of all the Section 232 investigations due soon, which may be used to justify additional tariffs on steel, timber, copper, pharmaceuticals, aircraft, and much more on national security grounds.

America’s got leverage. So far, at least, Trump has been right that most countries care more about access to the U.S. economy than the U.S. cares about access to any one of them. U.S. exports represent just 11% of gross domestic product, and 40% of those go to Canada, Mexico, and China. So when Trump threatens even higher tariffs for those who retaliate against his initial threats, most countries freeze. And what was once considered an outrageous 10% tariff baseline tariff on all imports is now the baseline minimum available only to a lucky few.

But “deals” matter less than relationships. After any deal is signed, the two sides must manage the implementation and the enforcement of what was agreed. They must figure out how to address the emergence of new products or trade patterns that the agreement didn’t cover. Any deal that feels lopsided risks backlash and makes enforcement difficult.

Tariffs alone won’t create more “good jobs.” As any foreign investor will confirm, building a factory in the U.S. also requires a strategy to overcome environmental hurdles, construction delays, skills shortages, and healthcare costs. Even if the president rolls out a strategy to address these challenges, the simple fact remains that advanced manufacturing just doesn’t need as many people as it once did.

Clarity will improve, but not by much. Hopes for more certainty were dashed when the president extended the July 9 tariff negotiation deadline to Aug. 1. More realistically, we will only see frameworks with key partners like Japan, Europe, and Korea over the next few months. That may reduce uncertainty, but will still leave plenty of questions unanswered. Already, Vietnam is questioning the details of the framework Trump unilaterally announced earlier this month, since neither side has signed onto a final agreement. And as any trade negotiator will tell you, the devil is in the details—in this case in the phase-ins, carve-outs, and dreaded rules of origin. It is also a mantra of every good trade negotiator that nothing is agreed until everything is agreed.

Don’t forget the judges. Even if we get more clarity from the White House in the coming months, courts will add to the confusion. The Court of International Trade has already ruled against Trump’s use of “emergency economic powers” to justify “Liberation Day” tariffs. Other challenges are pending. Investors and companies face, at best, months of appeals and challenges.

And then there are the midterms. For all the president’s threats to set tariffs unilaterally, the Constitution actually gives that authority to Congress. If congressional control switches to Democrats, there will be even greater confusion about which tariffs are in force and which may be overturned by congressional vote.

But remember that tariffs are still bad—always and everywhere. Ignore what you are starting to hear from commentary that “sometimes” or “under the right circumstances,” some “targeted” tariffs make sense. All tariffs distort incentives, coddle lazy companies, and subsidize the lobbyists who try to keep them in place.

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