There is a tendency in American politics to turn economic policy into tribal identity. If you support Donald Trump, you are expected to support tariffs. If you invoke Ronald Reagan, you are expected to defend free trade. But the reality is considerably more complicated, and I think four things can be true at the same time.
First, free trade has the greatest utility over the long term. Second, tariffs can have a legitimate purpose in the short term when they are used strategically against countries that refuse to play by the rules necessary for a functioning free-trade system. Third, tariffs are not a substitute for free trade and, if maintained indefinitely, can become counterproductive. Fourth, the free-trade agreements themselves have to evolve as the economic environment changes.
That last point is particularly important because it provides a useful way of understanding both Ronald Reagan and Donald Trump.
I am fundamentally a believer in free trade. When countries specialize, compete and exchange goods with relatively few artificial barriers, consumers benefit, businesses gain access to larger markets and capital and labour can be allocated more efficiently. Over time, open markets tend to produce greater prosperity than protectionist walls.
But free trade only works when the participants are actually playing by something resembling the same rules.
A country that subsidizes industries, steals intellectual property, manipulates its currency, erects non-tariff barriers or systematically discriminates against foreign competitors cannot reasonably demand that its trading partners simply keep their markets open in the name of some abstract economic ideal.
This is where tariffs can have a legitimate role. A tariff can be used as leverage. It can be a warning shot intended to persuade another country to change behaviour. It can provide temporary protection to an industry that is being subjected to unfair practices while negotiations take place. It can also be used to force an issue onto the negotiating table when diplomacy and conventional trade discussions have failed.
But there is an enormous difference between using a tariff as a negotiating instrument and making protectionism the permanent architecture of economic policy.
The first can be strategic. The second is usually self-defeating. This is where some modern conservatives have developed a rather selective memory of Ronald Reagan.
Reagan was not a protectionist. In fact, he was one of the most important American political advocates of freer trade in the modern era. His administration negotiated the United States-Canada Free Trade Agreement, which Reagan signed in 1988. The agreement eliminated tariffs between the two countries over a ten-year period and became an important foundation for the broader North American trading relationship.
The Gipper was remarkably explicit about his philosophy. In a 1988 address on free and fair trade, he argued that protectionism would impede growth and cost jobs, while describing the U.S.-Canada agreement as the kind of trade policy that could promote growth and prosperity.
His administration also entered a framework with Mexico concerning trade and investment in 1988. The broader North American arrangement subsequently evolved into NAFTA under George H. W. Bush and Bill Clinton.
So if someone invokes Reagan as the patron saint of modern Republican economics while simultaneously arguing that permanent, sweeping tariffs are inherently conservative, they have some explaining to do.
Reagan's conservatism was not based on the idea that American prosperity required putting a wall around the American economy. It was based much more heavily on competition, markets and the removal of unnecessary barriers.
That does not mean Reagan believed in some simplistic version of unrestricted trade under every conceivable circumstance. He used trade remedies when he believed American interests required them. But his underlying philosophy remained unmistakably pro-trade.
At the same time, defending free trade does not mean pretending that every free-trade agreement is perfect forever.
NAFTA was negotiated in a very different economic environment from the one that exists today. The North American economy changed dramatically after the agreement was implemented. Global supply chains became more complex. China became a vastly more important economic power. Digital commerce exploded. Manufacturing patterns shifted. Labour markets changed. Intellectual property became increasingly important. The geopolitical relationship between the United States, Canada and Mexico evolved.
The obvious question, therefore, was not whether NAFTA should be preserved forever exactly as written.
The question was whether it remained fit for purpose.It was reasonable to argue that it did not.
And this is where Donald Trump deserves more credit than some of his critics are willing to give him. The Trump administration negotiated the United States-Mexico-Canada Agreement, or USMCA, which replaced NAFTA. The agreement updated rules involving automobiles, labour, intellectual property, digital trade, agriculture and other areas of the North American economy. The Trump administration itself described USMCA as a modernization of the North American trading relationship.
That is an important distinction. Trump did not simply blow up North American trade and walk away. His administration renegotiated the framework and produced a new agreement. One can reasonably criticize the manner in which Trump conducted those negotiations while acknowledging that the underlying objective—modernizing an aging trade agreement—had merit.
Where I become much more skeptical of Trump is when tariffs cease to be a leverage and become an end in themselves.
There is a seductive simplicity to tariffs. A politician can say, “They are taking advantage of us, so we will tax their goods.” It sounds decisive. It sounds patriotic. It sounds like someone is finally fighting back.
But economics doesn't care how satisfying a policy sounds. Tariffs are ultimately taxes on imports. Depending on market conditions, the burden can be distributed among foreign producers, domestic importers, businesses and consumers. And when another country retaliates, the problem compounds. Your tariff becomes their tariff, their tariff becomes your response, and before long both sides are engaged in a trade war that nobody necessarily intended when the first measure was imposed.
That is the danger. A tariff should therefore have a purpose. What behaviour are we trying to change and what concession are we seeking? Do we have an exit strategy and what happens when the other country retaliates? Also what happens when the tariff has achieved its objective?
If the answer to those questions is unclear, then we are no longer talking about strategic trade policy. We are talking about protectionism.
This is why I don't think the choice has to be “Trump or Reagan.” There is a legitimate synthesis available.
Reagan was right that free trade produces enormous long-term benefits and that protectionism can ultimately damage the economy it is intended to protect. Trump was right that free-trade agreements cannot be treated as sacred documents immune from renegotiation and that countries which violate the spirit or rules of the trading system should face consequences.
Both propositions can be true.The mistake is assuming that because tariffs can occasionally be useful, tariffs are therefore inherently good.
They aren't. A hammer is useful when you need to drive a nail. That doesn't mean you should use it to fix everything in the house. Tariffs are much the same.
There is also a deeper philosophical point here.Conservatives traditionally believe in competition, markets, limited government and skepticism toward politicians who claim they can engineer economic outcomes from Washington.
Permanent protectionism cuts against much of that philosophy. If an American company can only survive because the government prevents consumers from buying a cheaper foreign alternative, that is not necessarily evidence of economic strength. Sometimes it is evidence that the company is not competitive.
The better conservative answer is usually to ask why. Is the tax system distorting investment? Are regulations making domestic production unnecessarily expensive? Are foreign governments cheating? Are American companies failing to innovate?
The lesson I take from Reagan and Trump is therefore not that one was right and the other was wrong. It is that economic policy requires both principles and pragmatism.
Free trade should remain the long-term objective because open markets, competition and voluntary exchange generally produce greater prosperity. But free trade cannot survive if countries systematically abuse the system. Tariffs can therefore be useful as a temporary weapon to enforce the rules and bring reluctant partners to the negotiating table.
However a weapon is not a strategy. The ultimate objective should be to return to a functioning trading system in which tariffs are unnecessary because the participants have agreed to—and actually follow—rules that allow them to compete fairly.
That is essentially what happened with NAFTA. The agreement wasn't perfect, and the economic world changed. Trump was right that it needed to be renegotiated. The result was USMCA, a modernized framework rather than the abandonment of North American free trade.
It is the model worth pursuing .Not blind free trade or permanent protectionism. Economic nationalism for its own sake is a flawed approach. Tariffs are not a vehicle to highlight political performance.
The goal should be free and fair trade. Free trade when the rules are respected and tariffs when they are necessary to enforce those rules. After this you need negotiations,
Trump adhered to all of this in his first term. He appears to have lost the message in the second.
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