Protectionist and isolationist policy has become the norm, but we can still reverse course. Other countries would also prefer to trade with us. Instead of accepting the decline of the global world order into nationalism and tit for tat trade policy, we can leverage our position into a freer and fairer market. Climate change policy requires buy-in from emerging countries as well; this can bring us that. We can use it to bring in workers with skills that we need right now, like nurses. To bring it home, we still need to invest in retraining to make sure those who are negatively impacted still make out ahead.
Tariffs make things more expensive for US consumers, sure, but it also has created problems for consumers abroad who want US-made goods. When then-President Trump instituted huge tariffs on steel, manufacturers of finished goods had to pay higher prices for their raw materials, which made them less able to compete. On net, we had to pay more for the same thing and lost jobs. It doesn’t end there. While the small group that benefits from tariffs is enriched, they become weaker competitors without being pushed by international companies to keep them sharp. American automakers in the 60s and 70s are a great example. Quality deteriorated to the point that cars only lasted a couple of years before falling apart while Japanese firms like Toyota made high-quality cars at lower prices. In the end, US automakers (with the exception of Ford) went into bankruptcy, wiping out their investors, before finally coming back stronger and using some of the same practices as Toyota.
The costs of the tariffs in our Toyota example were borne by buyers of cars who had to either settle for an inferior product or pay the pass-through costs of the tariffs. It is exactly the same for consumer goods now and it functions as a regressive tax – many of the higher-end products are made in the US, so the tax is not paid by wealthy consumers. We can roll back tariffs in a negotiated way that requires other nations to sign agreements giving US firms an equal footing to compete in their own markets (particularly important in markets like the EU and China, where some local producers are protected by steep regulatory bulwarks). This is a much better method than Trump’s unsuccessful attempt to negotiate quotas, which again bypasses markets completely and coddles legacy producers.
Labor standards, meanwhile, can be addressed in emerging markets like Indonesia where some factories have been found to use child labor. Raising labor standards limits exploitative practices that are both damaging and unsustainable and it makes firms in those countries compete on a more equal footing. Further, we can import some of their skilled workers. That directly addresses shortages here (such as nurses, as mentioned above) and, frequently allows those workers to send remittances to families. This export of dollars effectively lowers the dollar relative to other currencies, making our exports more competitive.
Those emerging markets eventually should attain a higher standard of living and the one thing that always comes with higher income is more energy usage. The Biden Administration has been vocal about environmental policy, but none of that will matter if emerging economies in Asia and Africa continue to build out coal powerplants. We can invest in their energy infrastructure as part of a broader deal, which in turn expands our soft power as well. Further, establishing demand for low-cost renewable energy in emerging markets, both decentralized and more grid-based, will continue to reduce prices.
All of these ideas are synergistic. They create virtuous cycles and, for the vast majority of Americans (and citizens of the world), they will be net positive. However, some people inevitably lose out when they have to compete on the global stage. Jobs that would exist in a protectionist environment disappear. This was a major reason for the populist backlash that saw Trump get elected in 2016. The answer is not easy, but large-scale investments into retraining have been successful in Scandanavia and Germany. President Biden has suggested two years of free community college. I would suggest continuing education. Some companies have already been using VR train workers. This tool gives us the opportunity to create a workforce ready to tackle whatever the future brings.