“For the past few decades, policymakers have embraced neoliberalism, a broadly open-market political philosophy whose effects have been to redirect more power toward the economically powerful and marginalize the economic majority. Things may be changing.”
I don’t make it a habit to read Politico, but this one’s sensible.
The One Thing Trump Gets Right About Tariffs, by Jennifer M. Harris and Todd Tucker (Politico)
… Much as it pains their colleagues—and as hard as it is for Washington to process this—Trump and his backers have a real point. Not about his immigration policies, which are part of a harmful cultural war and stand a real chance of inflicting long-term damage on the American economy. But the administration’s use of tariffs to push its foreign policy goals is not as irrational as Trump’s enemies make it seem. It shouldn’t be this way, but in 2019, if the United States wants to fix some of the big policy arguments it has with its trading partners, it has left little leverage besides the blunt tool of tariffs.
For that, the blame lies with Democratic and Republican administrations alike, including Trump’s predecessor Barack Obama, who collectively have let U.S. economic policy shrink in ambition—a battle fought on a narrower and narrower field, leaving us with so few weapons that tariffs have become the most useful last resort.
A nation as powerful as the United States would traditionally be expected to have a fully developed economic and industrial policy, one that integrates incentives and priorities on the domestic front with carrots and sticks for foreign partners. In that universe, Mexico’s own immigration enforcement might be part of a much wider package of goals negotiated between the two nations, one that creates strong incentives for Mexico to comply, without hurting American consumers and companies the way tariffs would.
This fuller agenda, which some experts call economic statecraft, has been the norm for much of the country’s history. But unlike America’s competitors, the United States has largely shelved this kind of economic thinking. President Obama, for instance, pitched the Trans-Pacific Partnership trade agreement as a way to ensure that America, rather than China, would write the rules of the global economy. But under the hood, it was never a very compelling economic argument for the United States: The rules that China negotiates in its own trade deals overlapped considerably with the American proposal, meaning that the TPP was more a matter of diplomatic gamesmanship than a real plan to advance workers here at home
To politicians like Obama, raised in the heyday of global free-market consensus, government industrial policy is a thing of the past, and trade relationships are really just a matter of opening as many markets as possible—regardless of whether the benefits actually outweigh the losses for a given country. The evidence now strongly suggests that consensus has been wrong. To take just one problem, the magnitude of corporate tax evasion made possible by modern trade agreements should make all of us question whether the traditional lifting-all-boats assumptions of trade efficiency still hold up.
With Trump’s election, it’s now acceptable to at least name the problems the U.S. has confronted on the world stage, ranging from coercive Chinese requirements over our manufacturers to corporations invoking their global supply-chain decisions as a reason we can’t fundamentally rethink U.S. trading rules. But Trump’s solutions to those problems suffer just as much from an absence of creative ambition …