The Geopolitics of Tariffs
The negative effects of the Trump tariffs are not only economic, but heavily implicate the future of American global power.
It has been just over a week since the Trump administration’s self-declared Liberation Day, when the White House unilaterally leveled tariffs against nearly every nation and territory on the planet, including several uninhabited islands and at least one US military base. Since then, there has been unmitigated chaos in markets around the world. Many Asian markets hit automated shutdown points, volatility has been enormous, and the US stock markets fell more than 10%, wiping out trillions of dollars in economic value. Companies and countries are scrambling to figure out what these tariffs mean, how and when they will be enforced, and if it is possible to reverse the policy, either through trade deals or lobbying. As of this writing, the president magnanimously paused some of the tariffs for 90 days – but many remain, including 10% on nearly every nation on Earth, and there is no guarantee that they won’t simply be re-applied at the end of that period. The administration’s handpicked public advocates for this massive restructuring of the global economy have often been at odds, making mutually exclusive and contradictory arguments. The rollout of this policy and the choices made in doing so have been egregious, compounding the main problem: that tariffs are dumb and bad.
Still, populist backers of the president have sloughed off criticism, arguing that those who prefer not to destroy the world economy are evil elites, RINOs (Republicans in Name Only), out of touch with the common man, unpatriotic globalists, or simply don’t understand the amazing 4D chess that the president and his team are playing. Some even have averred that Americans should be happy to spend more on a less expansive selection of goods, while also losing significant portions of their long-term asset base. These are unserious arguments that deserve nothing more than mockery and scorn. But there are some Trump supporters who have glommed onto a more nuanced and potentially persuasive case: that this whole policy is laser-focused on putting America in the best possible place to counter China.
They claim that the universal nature of these tariffs ensure that China is not simply able to shift its production to a nearby country and avoid the duties the US is levying on its trade. They say that the tariff regime was needed to bring critical industries back to the United States, force new trade deals with nations that have been ‘ripping us off’ via trade deficits, and rebalance the world economy to favor America and disfavor China. Finally, they argue that the tariff-driven market crash is a deliberate ploy meant to cool down equities and reduce Treasury rates, allowing the US to refinance a major portion of its debt load and eliminate deficits (reality has since shown this to be patently false, as Treasury yields are rising). To this set, Trump and his team – particularly Treasury Secretary Scott Bessent – are doing exactly what is needed to defeat China and make America into the strongest it has ever been.
The problem is that the tariff regime so beloved by the MAGA set is doing nothing of the sort. In fact, it is leading to the exact reverse outcome that it is supposedly intended to bring about. Instead of strengthening America in the face of an imminent Chinese threat, it is making us less capable, ruining our ability to create and sustain durable alliances, hurting and alienating potential partners, throwing away our credibility, and undermining our key rationale for countering the CCP.
The idea that this tariff regime is laser-targeted to hurt China is belied by the truth of the matter: that tariffs have been imposed on a near-universal and completely non-reciprocal basis. The administration’s formula for the tariff calculation is laughable; they simply took the bilateral trade deficit divided by the imports from a foreign country and halved it. That’s literally it. This is meant to be the sum of all unfair trade practices, but it does not at all account for other factors that may drive a trade imbalance, like comparative advantage or differential incomes. It certainly does not reflect actual tariff rates charged against US goods, as places like Switzerland that do not impose tariffs on American products were hit by large ‘reciprocal’ rates. Nations that preemptively removed their levies on American imports were not treated reciprocally, with Israel, for instance, getting slapped with a 17% levy despite its friendliness. And Australia, with whom we have a trade surplus, was still tariffed at 10% despite that fact.
This is all explained away by claiming that tariffs need to be universal, otherwise China would simply transship their products to more favorable markets. Transshipment is indeed a problem, but it can be addressed by far more targeted means, particularly secondary tariffs on any product having a Chinese origin or manufactured by a Chinese company. The same applies to other means of undermining China economically. Instead of going after every nation on Earth and hurting many friends in the process, we could actually focus directly on China. Tariffs could play a role in this approach, but there are far better ways to decouple and punish the regime in Beijing. We could delist Chinese companies from American capital markets. We could increase export controls and back them up with powerful secondary sanctions. We could work with allies to expel China from international trade organizations. We could debank Chinese entities, making it nearly impossible for them to receive debt financing in the West. We could enforce existing sanctions and increase them dramatically to encompass all Chinese state-backed economic activity – which is pretty much the entire Chinese economy. We could enhance and expand our trade with allies, picking up the slack after a split from Beijing. These are difficult, but effective means of accomplishing the righteous goal of decoupling from China and dealing it a severe economic blow.
This gets to the heart of the matter: that this tariff policy is about rectifying a problem that doesn’t exist, not trying to isolate China and build a strong coalition against it. Trump’s tariff policy – even after being paused temporarily – is designed to punish every nation we trade with, regardless of surplus or deficit, regardless of whether they’re friend or foe, and regardless of our national interests abroad. That’s why there are punitive tariffs on nations like Japan, South Korea, Vietnam, Taiwan, the Philippines, and more. Good luck building a successful, durable, and resolute anti-China coalition by attacking the very nations we need to engage in such a coalition. Already, we have seen Tokyo and Seoul enter into expanded trade discussions with Beijing, Manila claim it would be unable to complete a key weapons purchase with the United States, and Canberra look for closer ties with the other Anglosphere nations, leaving us aside. The economic damage, uncertainty, and reduced capital investment caused by these tariffs – which, by the way, remains even with the worst tariffs temporarily reduced – will stifle economic growth and production in these critical Asian nations, reducing tax revenues. With lower gross receipts and an emerging economic crisis, it will be nigh-impossible to convince these nations to spend significantly more on their own defense. And it will be even harder to convince them to buy the weapons systems needed from a country that has just done the equivalent of sucker-punching them in the head.
We cannot and will not defeat Chinese ambitions in the Pacific alone. We need our allies to be fully onboard with our campaign to forestall Chinese hegemony in the region. Luckily, most of them are very skeptical that such a system would be good for their own interests, which naturally brings them into our camp. But this unnecessary economic own-goal will temper that enthusiasm and, with the right moves from Beijing, could lead to bandwagoning with the region’s rising power. These tariffs in general, as well as the specifically haphazard way they were imposed and announced, neutralizes several of our key strengths versus China: our credibility, reliability, and predictability. If we are seeking to paint Beijing – accurately, I might add – as a predatory economic power that wants to abuse its neighbors for its own benefit, it would be very helpful for us not to look exactly the same. In that case, why rely on a nation that is thousands of miles away and very well may abandon the region at the whim of their leader when there is a nation that is geographically located in Asia, is a rising economic power, and is less unpredictable than America?
The damage to our credibility here cannot be understated. Alliances, especially informal ones directed against major powers, rely almost exclusively on the credibility of the primary actors in the group. That is how new nations are drawn into partnership, how nations can plan strategically and militarily, and how they make their own geopolitical calculations. In his 2021 book, The Strategy of Denial, the newly-confirmed Pentagon planning chief Elbridge Colby argued that what matters in our differentiated credibility – essentially, what matters to Asian partners is our credibility vis a vis Asian issues and China in particular. But this has been proven wrong by the past several years, when our actions in theaters like Central Asia and Europe have sapped our credibility in Asia itself. And this trade nonsense is doing the same thing, but in an even more pronounced and direct way. If we are unreliable and discredited as a trading partner, we surely cannot be a reliable geopolitical partner.
Proponents of the Trump strategy claim that we needed to levy these tariffs to negotiate better free trade deals from a position of strength and that over the coming months all of this will be forgotten due to the plethora of new deals we will ink. This flies in the face of reality. Nearly every nation that engages in trade with the US, the world’s largest and most dynamic economy, would jump at the chance to negotiate a strong trade deal with us and regularize our bilateral or multilateral commerce. In fact, many of them already had; remember the Trans-Pacific Partnership? You know, the free trade deal that included most key Asian nations, isolated China, and reduced trade barriers in our favor across the region? We didn’t need to impose historically-large tariffs to get them to sign on to that deal, as they did so willingly. Unfortunately, President Trump threw that arrangement out immediately upon gaining the White House in 2017. (Yes, Hillary Clinton also campaigned against it, stupidly.) But it proves that free trade agreements, either on a bilateral or multilateral basis, do not require the imposition of brutal economic pain and uncertainty to achieve.
Nations have long memories when it comes to the credibility and reliability of others; we are largely still coasting on the yeoman efforts we put in during the Second World War and the ensuing Cold War against communism, for example. But that will not last forever, particularly in the face of new and contravening evidence. Even if trade deals are signed, why would a nation like Japan or Taiwan put its full trust in us after we backstabbed them like this once? Why would they think that trade deal is worth anything in the long run if we scrapped a similar deal that Trump himself negotiated with Canada and Mexico just a few years ago? The Trump approach simply ignores reality in favor of an imaginary world where we can bully whoever we want without any sort of consequence for our geopolitical or economic standing.
As a result, our European allies are looking for new deals with China – not us. Our Asian friends are looking to diversify away from the United States. And our closest geographic partner, Canada, is now more antagonistic toward Washington than at any point in my 35 years on Earth. This is not how you deal with the gravest threat to American power, prosperity, and sovereignty since 1991, if not 1945. Instead, you treat these necessary nations as such, allowing them the room to negotiate without the economic Sword of Damocles hanging over their heads. We will not deter or defeat China in Asia alone. We will not stop their malign aims of global domination alone. We need partners. Yet we’re alienating them at best and driving them into Beijing’s arms at worst. And for what? Because the president doesn’t understand trade deficits and is obsessed with tariffs?
These are concerns for peacetime. But we are not at peace. We are embroiled in a multifront global conflict against enemies who seek to overthrow the international order that we have used to make us the richest and greatest nation in world history. China, Russia, Iran, and their satrapies are treating this like the war that it is. If only we thought the same way. Instead, we’re busy undermining our alliances, our geopolitical standing, and our ability to project economic and military force in conjunction with our partners. I cannot imagine a worse way to achieve victory in what is a truly existential conflict for the United States. But, given the past few weeks, I’m sure the administration will surprise me with their creativity on that front.