President Donald Trump’s latest tariff proposals, and the 90-day pause he announced this month to delay them, are an ironic reminder that without a persistent and genuine commitment to structural change in how America trades with other countries, the United States risks once again falling for temporary solutions that promise much but deliver little. The stability and prosperity of our economic future depend on breaking this cycle of superficial gestures and demanding authentic, lasting reforms.
Since World War II, U.S. economic policy has been anchored firmly in the dogma of “free trade,” driven by the optimistic assumption that America’s vast and unrivaled economy could benefit from even modest reductions in foreign trade barriers. In the 1950s, the U.S. economy as a percentage of world GDP was 40%, and this thesis probably had some merit. The policy served dual strategic purposes: first, cementing geopolitical friendships by generously opening our markets to allies such as Europe, Japan and later the Asian Tigers — even while these nations maintained substantial barriers to American exports — and second, prioritizing American consumers’ access to affordable, high-quality goods.
Under the banner of free trade, America effectively has become the world’s dumping ground for our trading partners’ products and their policeman, guaranteeing the free flow of goods and allowing for ever more stretched supply chains as multinational corporations seek cheaper sources of labor. This race to the bottom meant the United States hollowed out its own industrial base, which was tied to relatively expensive American labor and much more restrictive regulations, while enduring a growing imbalanced trade relationship with our partners — friend or foe. We knowingly permitted allies to shield their emerging industries behind protective tariffs and other non-tariff barriers, effectively subsidizing their growth through unrestricted access to U.S. consumers, transfer of advanced technology and abundant capital. Every decade or so, as our merchandise trade deficits continued to balloon — a clear signal of systemic imbalance — politicians have briefly recognized these inequities. Yet, due to entrenched special interests and consumer-driven politics, meaningful reforms were rarely achieved, and modest adjustments to barriers became the normal way to let off steam with our trading partners without truly addressing the underlying causes.
By 2017, the U.S. GDP had shrunk to 24% of total global GDP, with China indisputably becoming the world’s dominant manufacturer, replacing a position America had held for a century. Trump, following through on his threat to put America first, dramatically broke from longstanding orthodoxy and acknowledged the obvious that genuine free trade rarely existed beyond the rhetoric of American and British academics and policymakers still clinging to outdated theoretical economic models. Trump’s aggressive tariffs on steel, aluminum and extensive lists of Chinese imports were a bold shift toward addressing the systemic imbalance, which some call protectionism, and were intended to revive and protect U.S. industries in the same way our trading partners operated. However, the powerful realities of the American consumer’s preference for low-cost, high-quality imported goods quickly tempered the intended impact of these tariffs. Once again, political expediency led to limited enforcement and watered-down outcomes.
This cyclical pattern of strong initial responses to the inequities in the international trading system followed by modest outcomes is familiar territory. In the 1980s, President Ronald Reagan confronted fierce Japanese competition by imposing temporary measures like auto import quotas and negotiating currency adjustments such as the Plaza Accord. These policies achieved visible but mostly limited results — such as encouraging Japanese automakers to open U.S.-based factories — without addressing structural economic imbalances. Having personally participated in efforts to placate U.S. politicians in the 1990s because of Japan’s unwillingness to fundamentally change by providing reciprocal access to its markets for U.S. companies, we produced guidebooks for Japan Development Bank (a Japanese government agency) to help U.S. companies export to Japan. These books were handed out in business class on ANA flights to Japan to show how the Japanese government was trying to address the growing trade imbalance. In reality, this was but one example of a trading partner’s P.R. initiative designed to “buy off” American public opinion with highly visible but largely symbolic gestures. As someone who has spent a career working with U.S. exporters, first at the Export-Import Bank and later as a banker financing exports, I have seen firsthand how easily substantive reforms were sidestepped by token measures in Japan and elsewhere.
Just try to sell an engineered product made in the United States (believe it or not, there are still some American-made products) to any of our allies in Asia — Japan, South Korea, Taiwan, Singapore. Of course, forget about selling them into China. In Europe, the chances are only slightly better. Other than IT and leading-edge technology, American culture and access to U.S. capital, very few countries source American goods and services. The apologists will say, “But look at Boeing. It holds huge market share in all those countries.” What they don’t tell you is Boeing aircraft parts are increasingly manufactured in the countries in which they are successful in (Japan manufactures the wings on 787s) as both a way to control costs and hold on to market share.
Today, the stakes for the U.S. economy are substantially higher because our economic power has been diminished vis-à-vis our large trading partners — China, India, Japan, South Korea and the European Union. Decades of asymmetrical trade agreements have systematically eroded America’s manufacturing base, leaving factories shuttered, jobs lost and communities devastated. Trump’s renewed calls for aggressive tariff measures reflect justified frustration, yet the reality is that decades of damage cannot be undone swiftly or easily. Modest adjustments and superficial concessions from trading partners will no longer suffice. Unfortunately, recent news suggests Trump is already backtracking on his fair-trade agenda.
We stand at a critical juncture where genuine reciprocity and accountability must become central tenets of U.S. trade policy. America must demand substantial and enforceable market access from our allies — not mere window dressing — and remain relentless in holding geopolitical rivals such as China accountable in this fiercely competitive global environment.
Alan Beard, an expert and adviser on trade policy, is managing director of Interlink Capital Strategies, a financial advisory firm focused on financing exports and foreign direct investment in emerging markets.
