Guest Post: Trump, Trade and Coercion
The first year of Trump’s second term has been a chaotic one for trade, as for so much else. Before inauguration, the President had already threatened tariffs against Denmark to force a “sale” of Greenland. Within days of taking office, he began threatening or imposing illegal tariffs against Colombia, China, Mexico, Canada, all steel and aluminum exporters, the EU, and now virtually all nations that trade with us. Each of these blows is a stark reminder that we live in a time when economic coercion masquerades as trade policy.
As with any crisis, we should take this moment to rethink what we want trade policy to be. Doing so will involve critically assessing the many rationales offered for this dark and self-destructive turn in our economic policies. Most importantly, this is a key opportunity to recognize and reaffirm trade’s true nature, because it is closely interwoven with our own, and thus begin to see what role trade might play in a post-authoritarian future.
Trade and Its Pathologies
Even a brief reflection on our own experience at the mall or a neighborhood garage sale will remind us that for an economic exchange to be “trade,” and not something else, it must be truly reciprocal, and considered by each party to be beneficial. Most importantly, it must be consensual. If we remove or weaken the element of consent, as Trump’s tariffs seek to do by undoing bargains and creating leverage, we no longer have trade but something else: coercion, exploitation, or outright theft.
Coercion, for example, involves a transaction that seems mutual and in some basic way consensual, but one of the parties has done something illegal or threatening to affect the fullness or freedom of the other’s consent. This results in bargains that are not truly voluntary—but for this coercive leverage, they would not take place—and are likely to be damaging to the weaker party.
While Trump has made it a hallmark of his Presidencies to pursue coercion as trade, he did not invent it. This systemic form of violence in our economic relations, this forcing or taking instead of trading, has a long and unfortunate history. Already in the 18th century, Immanuel Kant was criticizing European colonialism—the violent economic taking of his day—for “confusing trade with conquest.” What has changed since then is our global economy, but one globalized along certain problematic lines. The consequences of economic coercion, exploitation and predation masquerading as global “trade” are no longer comfortably confined abroad, but are increasingly recognized as impacting U.S. prosperity. This is a key reason for Trump, his “trade” policy, and its many rationales.
The Tariff Wars
The Administration and its defenders have offered a number of justifications for recent trade and tariff decisions. These range from the plausible to the absurd, and aim to speak in the language of rational policy, while also masking something more troubling.
First, the Administration has widely touted its idea of tariff “reciprocity:” insofar as our tariff rates are lower than the corresponding tariff rate of any of our trading partners for a given good, this shows we are being treated unfairly, and we need to raise our tariffs to make trade “reciprocal.” This is misleading and false. Never mind the absurd formula used to calculate the level of imposed tariff penalty—there is nothing reciprocal or fair about these new tariffs at all. Tariff rates are negotiated in packages—accepting a higher rate against our exports in one area, means we’ve negotiated for a lower rate in another export area that’s a key priority, and we’ve decided on balance that the whole package is a fair deal. It’s already reciprocal, but across tariff lines, not directly. Imposing higher tariffs now is not “fairness,” it is breaking our word, undoing the original bargain, and undermining the basis for all future bargains.
This clumsy “reciprocity” rationale hints at a larger set of ideas at work, which some have called a return to mercantilism. Prior to the advent of modern trade theory, the dominant political ideology of trade was mercantilism, the view that a country’s success in trade involved selling more than it bought, as measured by the net increase in a country’s gold reserves. Mercantilism was Adam Smith’s chief target in The Wealth of Nations. Smith argued that the real wealth of a nation was not gold but the range and quality of goods available to its consumers. Crucially, these consumers are themselves workers who can afford these products because they are earning living wages, and selling their goods into a functioning, legally protected marketplace.
Workers feature in a further Administration rationale, namely that we have mistakenly surrendered key industries offshore and thus lost jobs and weakened our economy, hence the call to incentivize industrial relocation through punitive tariffs. There is certainly something to the notion that we have mishandled trade policy and economic policy more generally at a cost to our workers and communities, but not in the way it is currently being argued. The Administration’s re-shoring policy is another false and misleading promise.
Decades of U.S.-led trade, investment and tax policies have encouraged U.S. companies to relocate factories overseas in pursuit of greater profit margins due to lower regulatory and production costs. If warranted, any shift towards re-shoring into the US would need to be part of a coherent, consistent and long-term strategy reliable enough to allow businesses to reconsider current production investment plans. There are ways to use tariffs in support of such policies, but they need to be legal, and not themselves part of undermining the larger trade framework. Otherwise, they will only further hurt American workers and consumers. Illegal and punitive tariffs disrupt trade, and signal that we cannot be trusted as a bargaining partner by the very parties we’d need to work with for the success of such a shift.
Most importantly, trade policy alone cannot restore basic U.S. industries and the employment base they represent, because technological change, not trade, has cost us the most jobs and led to the greatest structural changes in our economy. If we insist on nurturing grievances against our trade partners for the losses due to technological revolutions and their impact on industrial jobs, and for our failures to invest in new technologies and in the workers needed to produce with them, then we distract from the real challenges and only create further economic disruption and confusion.
The Politics of Resentment and Grievance
These rationales all fail in the end to fully account for the irrationality, arbitrariness, violence, destructiveness and—for some—rhetorical appeal of Trump’s tariffs. What Trump’s tariffs do accomplish is to give concrete expression to the ruling myth that seems to govern Trump’s actions in all spheres, the single overarching narrative of unfairness and grievance that bends and flexes like an umbrella stay in response to whatever events or resentments drive the reactivity of the moment. We are watching the politics of grievance take over economic relations, indeed the entire public sphere, in the U.S. and many parts of the world.
Recognizing this offers us a way into the darkest corner of the mystery of Trump’s tariff policy and its puzzling attractive power for his admirers. Trump’s tariffs make specific and concrete his repeated mantra that the world has been unfair to the U.S., but no longer, and that the injustice—in the form of trade deficits—will be made right, “they” will be punished, America will be “great” again.
Put plainly, grievance myth-as-policy rationale is an inaccurate and unstable way to assess any situation or craft a response. For example, we run a sizeable trade deficit with the tiny island of Madagascar: we buy fifteen times what they buy from us. This proves, says Trump, that Madagascar is being unfair, and they will be punished with a 45% tariff. It is irrelevant for the grievance myth that the deficit reflects our desire for their vanilla, while they have neither the wealth nor the level of development to need or afford enough of our exports in return. It is irrelevant that the tariff would only make vanilla scarcer and more expensive in the US, and decimate the Madagascar economy to the point that they might not be able to afford any of our exports, potentially increasing our trade deficit. If the tariff goes into effect, no one wins—not our consumers or our workers, or the workers and economy of Madagascar. But the grievance myth wins—hobbling Madagascar’s economy will be counted a victory in the unfolding narrative that unfair trade has been punished.
Absurd and chaotic it may be, but grievance myth-as-policy is proving powerful, even as it leads to loss and failure for all involved. Why are so many in the U.S. susceptible to the myth? To cite just one of the disturbing parallels to Nazi Germany, it helps to recall the Treaty of Versailles, subjecting Germany to vengeful economic policies and national humiliation in the wake of WWI. Our Versailles? The global failures of neoliberalism.
Understanding the dark appeal of Trump’s myth requires us to take a look at economic globalization as it has been practiced since the 1980s—in a word, neoliberalism. Starting with Reaganism and Thatcherism, we have experimented with a toxic combination of deregulation, cuts to social spending, and open trade and investment. Through the Washington Consensus that guided IMF, World Bank and other global policies, we’ve exported this form of underregulated and increasingly financialized capitalism. In doing so, we have undermined our own communities by facilitating the offshore transfer of jobs and industries into countries where wages and regulations have also been suppressed through these same neoliberal policies. Sadly, it is in these communities where Trumpism is most virulent. The more decimated the community, the more vulnerable it seems to be to grievance in place of policy.
The pain, losses and sense of betrayal are real, but Trump’s answers miss the mark entirely. Our collective way out of this morass of profiteering and precarity we call the global economy today will not be through unilateral, illegal and coercive tariffs that sideline us globally, punish our own citizens and offer the false comfort of a grievance myth. Instead, we need laws at home and abroad that protect consensual exchange, and reject predatory neoliberalism.
Rebuilding Trade
Rebuilding trade means, first, recovering Adam Smith’s view of markets as sites for consensual, mutually beneficial and reciprocal exchanges. Such markets need laws that protect consent from that tendency Smith warned us about for those with concentrated economic power—capital owners, monopolists, and would-be monopolists—to seek unfair advantage over workers through the political influence economic power can buy. If we remain committed to embedding markets in sustainable social welfare democracies, then we need tax and social investment policies that respond to Thomas Piketty’s insight that returns to capital will over time always tend to exceed returns to labor, with social policy the only corrective.
Moving beyond our own borders, we need rules that shape cross-border markets in ways that reflect our domestic commitments, toward consensual exchange and away from unfair advantage and speculative gain. We need real treaties that enforce these rules, instead of sham “trade” agreements that merely institutionalize coercive bargains. In building this, we aren’t starting from scratch—over these same neoliberal years, economists like Stiglitz, Piketty, Dani Rodrik and others have been developing blueprints for scrapping neoliberalism for a different kind of global market that works better for everyone.
Trade Will Endure
Long before we had governments as we know them, people have sought openings to exchange goods with each other, both in good times and in bad. This “propensity to truck, barter and exchange,” in Smith’s memorable phrase, is at the heart of trade’s resilience, and our own. Protecting consensual exchange against the temptation to force or take instead of trade, and resisting the lure of the grievance myth, could help us to begin to envision a flourishing post-authoritarian marketplace.