Tariffs, Trade, and Machiavelli

Trump is right to say that trade needs a reset. But his response so far has amounted to a chaotic blitz of tariff declarations, suspensions, and threats.

President Donald J. Trump joins Xi Jinping, President of the People’s Republic of China, at the start of their bilateral meeting Saturday, June 29, 2019, at the G20 Japan Summit in Osaka, Japan. | Official White House Photo by Shealah Craighead

Tariffs are neither inherently good nor bad. They are tools. And with any tool, their utility depends upon how they are wielded, and by whom.

Used wisely, tariffs can nurture developing industries, such as AI and digital currency, or serve as leverage in multi-national negotiations. Used poorly, they generate unintended economic consequences, stifle investment, and punish consumers and businesses alike.

President Trump’s return to the White House has brought with it a renewed reliance on tariffs — wielded not as a surgical instrument of policy, but as a jackhammer of personal and political whim. Since taking office, he has imposed sweeping tariffs across multiple sectors, citing the need to revamp a global trading system that, in his view, has disadvantaged American workers and companies. His approach has already had visible success: General Motors announced a $4 billion investment in U.S. manufacturing, a move the White House touts as proof that tariffs work.

But for every GM announcement, there is a sobering counterpunch. The World Bank projects a sharp economic slowdown in the United States, with growth dropping from 2.8 percent in 2024 to a mere 1.4 percent in 2025. This halving of American growth is largely attributed to the uncertainty and disruption caused by Trump's tariffs. Elon Musk, former friend and advisor to the President, went so far as to post on his social media site, “The Trump tariffs will cause a recession in the second half of the year.”

Yet Trump’s rationale for tariffs rests on a fundamental truth: The global trading system is outdated and in need of serious reform. The structure of global trade agreements and institutions, such as the World Trade Organization (WTO), was designed for a manufacturing-driven world economy of the late 20th century. Today, the global economy is dominated by services, digital commerce, and complex supply chains; yet only a small fraction of trade agreements have kept pace.

For decades, international trade policy has lagged behind the realities of digital commerce, geopolitical competition, and new forms of state intervention. The U.S.-led global trading order, built in the aftermath of World War II, is unraveling. Growing distrust of free trade is no longer a fringe view, it is a bipartisan sentiment.

So, yes, Trump is right to say that trade needs a reset. But his response so far has amounted to a chaotic blitz of tariff declarations, suspensions, and threats. This approach undermines the very stability that markets need to function. His administration has hardly made it through a month without a major tariff policy shift, creating what economists call "uncertainty-induced investment slowdown." This erratic means of operating stifles long-term planning and discourages capital investment, especially from foreign partners.

Still, embedded within the noise is an opening. Apparently, Machiavelli was the first to advise, “Never waste the opportunity offered by a good crisis.”

Strategic thinkers, in both parties, should use this moment to design and articulate a “worker-centered” trade policy for the 21st century. That means moving beyond both the free-trade absolutism of the past and the blunt-force nationalism of the present. It means being open to, and considering, strategic tariffs, sometimes referred to as “strategic protectionism.”

---

---

These targeted, temporary measures are designed to foster innovation and protect vital supply chains. Countries like South Korea, Taiwan, and Japan have used such tools effectively in their development. The usefulness of tariffs as one piece in a larger economic plan lies in the skill and judgement of the policymakers.

China is one country the United States should consider deploying strategic tariffs upon or negotiating targeted sectoral trade agreements. The United States should continue to trade with China in low-end manufacturing, agriculture, and a handful of other areas. But in more strategic sectors, such as chips and pharmaceuticals, we should prioritize “de-risking” from China, even if it means initiating changes to global commerce.

Whereas disruptive tariffs can create an opportunity, that doesn’t mean they should be used as a performance act. The current approach may win headlines and provoke action, but it is unlikely to deliver sustainable economic benefits. That said, it has created a moment of opportunity; a chance to reimagine trade not as an ideological battlefield, but as a strategic frontier.

There is mounting evidence that the international trade system is overdue for a fundamental reset. Our trade policy must evolve with it. That means building a smarter system that serves workers, fosters innovation, and ensures that America competes and leads in the world, not just reacts to it.

Resets are never easy in the short term, but they are an unavoidable phenomenon. In the best-case scenario, if we’re bold enough to use this moment well, we won’t just survive Trump’s tariffs. We’ll emerge stronger because of them.