The wide-ranging application of tariffs by the United States, imposed unilaterally by President Donald Trump, will radically restructure 80 years of international trade that was engineered by the Bretton Woods Agreement following the end of World War II. Trump’s actions will have a plethora of consequences, but the economic strategy is “madness”, a term used by Justin Wolfers, a Professor of Economics and Public Policy at the University of Michigan (The Cost of Living, CBC Radio, April 6, 2025).
“Trump comes from the world of real estate,” explains Professor Wolfers. “He thinks that business is pure competition. I win, you lose. If the price is fixed, a loss on you is a win for me—this is a zero-sum mentality. The problem with this is that it fails to understand the basic principle of economics. Economics is basically about cooperation, so we can do things more efficiently.”
If Trump’s goal is to make the U.S. more self-sufficient, explains Professor Wolfers, there may be a military advantage—for which North Korea is a perfect example. But this would deny Americans the rich diversity of products that are available to them from the rest of the world.
According to Professor Wolfers, Trump sees a trade deficit as a subsidy that can be fixed with tariffs, but this is “crazy”. It would be like going to buy food at your local supermarket and then declaring that you have an unfair trade deficit with it because it has your money. Such an attitude completely misses the cooperation that goes into the production, processing and distribution of food.
Consider a bag of flour. Without the cooperation of trade, we would each have to grow our own wheat, harvest it, grind it, and store it safely until needed throughout the year. The reason we can buy the flour at an affordable price is because of the network of agreements that exist between the farmers, the builders of their tractors, the truckers, the millers, the packagers, and those who constructed the supermarket and run the generation stations that provide the electricity for the lights, freezers and cash registers. And all this is supported by those who have made the trucks, built and maintained the highways, produced the necessary fuel, operated the ferries, and manufactured the lumber for the farmer’s house so he has a place to live while growing the wheat. An economy, in other words, is a complexity of interrelationships that benefits all participants, and it only works when founded on cooperation and trust. Trade is sharing resources for everyone’s gain, and the more we trade the more we gain as we build efficiencies and economies of scale. Trade gets us computers, the internet, coffee, tea—and provides us with bananas, avocados, mangos, and a convenient bag of flour throughout the year.
Many economists are skeptical about the benefits of tariffs because they impair trade. History has confirmed that trade benefits everyone who participates. Indeed, it’s one of the first transactions that occurs when one culture meets another. And the fairer the negotiated agreements, the greater the benefits. America has, as much as any country, benefited from the Bretton Woods Agreement that globalized trade, communication, technology, diplomacy, governance and human values. The Agreement has not, as yet, produced the perfect world order, but it’s far better than the alternative of isolated and individual countries struggling against each other to survive, which was the recipe for creating two world wars.
Trump’s tariffs are essentially regressive, and wholly incompatible with the values and workings of the modern world. Which raises the issue about America’s trade deficit with other countries, and Trump’s rationale for imposing tariffs on their goods. The obvious explanation is that the superiority of America’s industrial and technological capabilities is being challenged, so unless it finds a new way to lead the world into the 21st century it will continue to experience the sunset on its economic and political dominance since the Bretton Woods Agreement at the end of World War II.
The restructuring of global economic, political and military forces are serious and disquieting enough, but the unfolding disaster that needs the attention of the worldwide community is global climate change. Without the concerted and coordinated effort of all countries working co-operative and strategically, the likelihood of an environmental Armageddon is increased. Significantly, because of Trump, America has withdrawn from the very international organizations that we need to combat an environmental and humanitarian crisis.
We live together as a human species on Spaceship Earth, and we have reached a time in history when we must understand and accept that reverting to the fractured schisms of tribal chaos will be a disaster for the diversity of life on our planet, including ourselves. We cannot live together without cooperation, and we cannot have cooperation without trust. If we abandon these two guiding principles of civilized human behaviour, then we can be almost certain that the future will be considerably worse than even the worst of the present.
Ray Grigg for Sierra Quadra
Links of Interest:
- The Quadra Project: Globalization – Part 1
- The State of Globalization in 2023 – Harvard Business Review
- Globalization Is about People, Not Governments – The Cato Institute
Top image credit: Donald Trump on the campaign trail – photo by Gage Skidmore via Flickr (CC BY-SA 2.0)