When it comes to economic policy, Donald Trump is a statist menace. Full stop.
His obsession with tariffs isn’t grounded in just classic protectionist aid to domestic industries, but actually embodies a much grander and more dangerous Caesarian notion: Namely, that America is a giant corporation and Trump its all-powerful CEO, empowered to gallop around the globe cutting great big beautiful deals to bring investment, jobs, production, societal uplift and foreign policy victories, too, pouring into America’s hinterlands.
In that context, the Donald has tortured the nation’s poorly drafted trade statutes into economic battering rams, thereby enabling him to deploy tariffs for any purpose that suits his momentary fancy. Thus, his initial 25 percent “reciprocal” tariff on Japan was reduced to 15 percent in trade for $550 billion of ill-defined Japanese investments in the US. Likewise, the BRICS were threatened with a 100 percent tariff if they didn’t use the dollar to conduct trade with each other, and India got clobbered with an additional 25 percent tariff because its refineries found it economically expedient to buy the cheapest crude on the market — Russian Urals — in defiance of Washington’s nix on the latter.
In a similar manner, consumers of Chinese imports such as toys and kitchen cabinets got nailed with a 20 percent “fentanyl tariff,” a tax on American buyers, but allegedly to punish Beijing for not stopping the export of the drug’s chemical precursors. Of course, the next one-step-removed intermediates for making precursors like NPP and ANPP can be sourced from almost any chemical industry on the planet, while the only reason there is a US market for synthesized fentanyl in the first place is that Washington’s war on drugs has driven prices of other illicit drugs sky high.
Still, Trump is now crowing that he eased his spanking of Chairman Xi to just 10 percent because at their recent summit, the latter apparently pinky swore that he’d do better limiting precursor exports in the future.
Moreover, the president’s tariff mayhem has little if anything to do with historic tit-for-tat import duties because there flat-out isn’t an unfair tariff problem in today’s world. The weighted average tariff on goods traded internationally has dropped from nearly 10 percent in the early 1990s to barely 2 percent at present.
But the smoking gun lies in America’s own trade statistics, which the president obviously ignores. To wit, in 2024, the US had a massive trade deficit in goods, with exports of $2.06 trillion being dwarfed by imports of $3.27 trillion. But that imbalance had nothing whatsoever to do with tariffs. According to Elon Musk’s Grok 4, the US tariffed these imports at 2.2 percent in 2024, or slightly higher than the average 1.6 percent tariff levied by trading partners on our exports. And it wasn’t non-tariff barriers either: America’s NTBs are among the worst in the world.
No, the problem isn’t bad trade deals and foreign cheats; it’s the fact that the Fed has inflated the bejesus out of domestic prices, wages, and costs for decades. The CPI is up by 700 percent since Nixon severed the dollar’s anchor to gold in 1971, and that has pulled production and wage costs in the US relentlessly higher. It is no wonder, therefore, that thanks to the Fed’s pro-inflation policies, fully loaded manufacturing wage rates at $44.25 per hour in the US tower over those of our competitors, including Japan and the EU. So if you want to find the culprit look no further than the figures below.
Average Fully Loaded Manufacturing Wages Per Hour in 2024
Vietnam: $3.50.
India: $4.50.
Mexico: $5.00.
China: $6.00.
South Korea: $20.50.
Canada: $22.00.
Japan: $28.00.
UK: $30.00.
EU-27: $32.50.
USA: $44.25
But if there is no valid predicate for Trump’s unhinged tariffing, his recent slapping of an extra 10 percent tariff on Canada reminds us that Trump’s rendition of Caesarian statism is an exceedingly dangerous thing: Ottawa’s offense was that one of its provinces dared to run a video clip from a full-throated pro-free trade radio address by President Reagan in 1987.
Yes, US imports of $412 billion from Canada in 2024 vastly exceeded exports to Canada of $350 billion, but tariffs had nothing to do with it: The tariff rates were essentially 0.0 percent on both sides thanks to President Trump’s own ballyhooed USMCA free trade agreement.
The latest 10 percent levy on American consumers of Canadian goods, therefore, represents the pure pique of an unhinged wannabe global wheeler and dealer who thinks he’s still playing hardball with plumbing subcontractors in Queens. The fact is, Trump can’t huff and puff his tariffs high enough to eliminate the huge trade deficit with our neighbor to the north because the real problem lies in the Eccles Building.
Meanwhile, Trump’s claim that Ontario’s ad was a fraud because Ronald Reagan loved tariffs, too, is truly preposterous. The Gipper, for whom I worked as Director of the Office of Management and Budget from 1981–1985, was a true-blue believer in free markets and would have never dreamed of storming around the globe making ad hoc economic deals while sliding by the seat of his pants. President Reagan believed that government was the problem, not the solution, and that its main job was to get out of the way to the maximum extent possible so that businesses and entrepreneurs operating on the free market could take care of investment, job creation, and the resulting rise in societal wealth.
Yes, he deviated from strict free trade a few times, but I know from personal experience that it wasn’t because he thought tariffs, quotas, or other protectionist measures would help. In the case of the largest deviation from free trade — the 1.68 million cap on Japanese auto imports — President Reagan got flat-out tricked.
The protectionists in the Administration led by DOT Secretary Drew Lewis of Pennsylvania and Commerce Secretary Mac Baldrige, a New England manufacturer, fostered a legislated auto quota bill on Capitol Hill and then secretly urged the Japanese to offer a “voluntary” export limit to thwart it. President Reagan was very busy with other things in the spring of 1981, including getting shot, and never did realize there was nothing much “voluntary” about it.
In the case of the semiconductor tariff, it was a case of national security hawks and neocons painting the usual false story that it was too dangerous to rely on semiconductors from Japan. Then again, America had an army of 50,000 troops in Japan, and the island was surrounded by the US Seventh Fleet, while Japan was still essentially disarmed. In this case, Reagan had an unfortunate weak spot for national security canards, not a Trumpian lust for trade restrictions.
The most telling case, however, was when the drumbeat for steel quotas reached a fever pitch. But in this case, the Gipper authorized me to negotiate a deal with the steel industry when Mac Balridge was out of town. I worked hurriedly and cemented a quota deal with the industry that had more loopholes than a block of Swiss cheese, thereby putting Baldrige and the steel protectionists out of business without too much damage done.
At the end of the day, Ronald Reagan would have abhorred the entire Trumpian TariffPalooza. That’s because he knew that in a free economy, the job of the President is to keep the Leviathan on the Potomac at bay, not usurp the jobs, income, and wealth-creating function of free men on free markets.
