The false promise of tariffs
LONDON – In this era of rising protectionism, defending globalization may seem like a lost cause. But rather than retreating from the debate, it is more urgent than ever to explain the costs of a trade war, which threatens to accelerate the fragmentation of the global economy because, in reality, it is a war on trade itself. To effectively challenge the logic underlying the US administration's protectionist agenda, we must first understand it clearly and concretely.
The Trump administration's tariff regime rests on four arguments. The first is that tariffs are a tool to raise government revenue—specifically, to help reduce the U.S. budget deficit, which many economists consider unsustainable. The Congressional Budget Office projects that the federal deficit, currently at 6.4 percent of GDP, will remain above 6 percent through 2035, considerably above the 50-year average of 3.8 percent.
High deficits could limit the U.S. government's ability to sustain key entitlement programs such as Social Security, Medicare, and Medicaid. To prevent this, Treasury Secretary Scott Bessent has pledged to reduce the fiscal deficit to 3% of GDP by 2028, using tariff revenue as the primary tool.
By imposing tariffs, the argument goes, the U.S. government would generate revenue from imported goods that are currently exempt from federal taxes. The U.S. government also loses income tax and corporate tax revenue that would have been collected if those same goods and services had been produced in the United States. In theory, tariffs would offset these losses.
The second argument in favor of tariffs centers on reciprocity. Proponents argue that while U.S. exports are typically subject to high tariffs and taxes, imported goods face few, if any, barriers to entering the United States. Therefore, the Trump administration is fully justified in imposing equivalent tariffs to level the playing field for U.S. producers.
Third, supporters argue that tariffs will protect domestic industries and help restore the U.S. manufacturing base, which has been hollowed out by decades of free trade agreements that shifted production to low-cost countries like Mexico, India, and China. By incentivizing domestic manufacturing, tariffs will spur reindustrialization and job growth.
Tariffs are also often presented as a means of rebalancing the economy and redistributing the fruits of globalization, which have disproportionately benefited capital over labor. According to this view, tariffs would help restore the living standards of American workers, who have endured decades of stagnant or declining real wages.
But the arguments for tariffs go beyond economic rebalancing and job creation. Proponents of tariffs argue that the United States has become dangerously dependent on fragile and unreliable global supply chains. Relying on other countries—including ideological and geopolitical adversaries—for critical goods like semiconductors, food, and pharmaceuticals poses a serious national security risk. In their view, tariffs are not only about competitiveness, but also about resilience and sovereignty.
Of course, these arguments largely ignore David Ricardo's theory of comparative advantage, which holds that countries should produce the goods and services for which they are best equipped. They also deviate from current economic reality in several important respects.
Consider, for example, the claim that tariffs would increase government revenue. While this may be true to some extent, tariffs also increase the cost of imported goods, placing a disproportionate burden on low-income households with limited purchasing power. They will effectively harm the middle- and working-class Americans they are intended to protect.
Furthermore, the government may collect less revenue than expected if consumers avoid imports and opt for American-made products. This outcome, which tariff proponents claim to seek, would undermine the case for tariffs as a reliable source of federal revenue.
Then there's the question of reciprocity. Trump's tariffs have already triggered an escalation of retaliation, most notably with China, which had a nearly $300 billion trade surplus with the United States in 2024. In addition to driving up prices, these conflicts will likely limit Americans' access to foreign-made products, reducing consumer choice. As Amazon CEO Andy Jassy recently noted, many sellers will simply pass on the additional costs to American consumers.
Meanwhile, using tariffs to protect American manufacturing requires massive government subsidies to rebuild and support uncompetitive domestic industries. The risk is that shielding American companies from global competition undermines their incentive to innovate and evolve, ultimately weakening American competitiveness in the long run. This approach also underestimates the disruptive impact of emerging technologies like AI, which are poised to reduce the demand for human labor.
Twentieth-century economic history offers us a warning. The Smoot-Hawley Tariff Act of 1930, which imposed tariffs on tens of thousands of U.S. imports, is widely believed to have worsened the Great Depression. By curbing trade and slowing economic growth, it significantly delayed U.S. recovery and contributed to the global instability that preceded World War II.
Amid the current debate over the pros and cons of tariffs, one thing is clear: returning to the global economic model of the past 50 years is neither economically viable nor politically realistic. While identifying and dismantling the claims of tariff advocates is a useful first step, those who defend global markets and free trade must go further and articulate a credible alternative to Trump's protectionist agenda.
The author
Dambisa Moyo, an international economist, is the author of four New York Times bestsellers, including Edge of Chaos: Why Democracy Is Failing to Deliver Economic Growth—and How to Fix It (Basic Books, 2018).
Copyright: Project Syndicate, 1995 - 2025
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