Why Is Trump Pursuing a 19th Century Trade and Economic Agenda in the 21st Century?

“I am a tariff man standing on a tariff platform.” Who said this? You may have assumed it was President Donald Trump, touting his major economic argument. Actually, it was former President William McKinley in 1896. One could be forgiven, though, for attributing it to Trump, whose views on economic policy mirror those of McKinley. In fact, Trump has repeatedly highlighted McKinley as an economic role model. McKinley’s Tariff Act of 1890, for example, increased tariffs by roughly 10 percent on all imports—a policy that is eerily similar to Trump’s proposed across-the-board tariff proposal. Notably, McKinley’s 10 percent increase raised many tariffs to almost 50 percent, since at the time, tariffs were used to fund the government—a strategy Trump has also championed.

The problem is that Trump’s trade policies, along with McKinley, are stuck in the Gilded Age of the 19th century. This may have been a “golden age” for the very wealthy, but it was a time of immense inequality, devastating recessions, and rampant corruption.  Trump’s tax policies are also badly outdated—as they seem to reward wealth with even more wealth, usually at the expense of everyone else—and so too are his expansionary ideas of acquiring new territories for the United States (see: Greenland, the Panama Canal, and Gaza). Equally concerning, though, is that the response of many to Trump’s tariff and corporate tax cut agenda is just as anachronistic, embodied by an embrace of the tariff-cutting liberalized trade that defined the late 20th century. What is needed is neither.

The 21st century requires its own modern, pragmatic approach to tariffs, taxation, and investment that learns from the past but is designed around contemporary goals and shaped by the circumstances and issues of the day. Trade and economic policy should make workers everywhere more prosperous, reduce inequality between and within nations, and make the world safer and more sustainable, but that is only possible if policymakers consider how trade and economics have changed and adjust their policy prescriptions accordingly. This isn’t about finding a model to copy from the past; it’s about shaping the future. That is what the great economists of yesteryear did, and it is the challenge for the world today.

Take, for example, President Trump’s nationalistic approach to trade, where tariffs are imposed on entire countries and potentially negotiated away in exchange for bilateral concessions to him—usually in the form of a positive headline or (optimistically) to the United States. The Trump approach seems to view tariffs as the full extent of industrial policy, which is itself harmful to efforts to coordinate trade policy with other economic tools such as procurement, regulation, and investment. It is also so evidently outdated. In McKinley’s day, most towns had their own blacksmith, and most exported goods included only products or materials sourced locally. Tariffs that were country based thus made sense, even if they conjured images of trade being conducted via convoys that took products from one market and then sold them at huge profits in foreign capitals. The British East India Company may have recognized that approach, but trade hasn’t been conducted in such a manner in the past 100 years, if not more.

Today, traded goods include component parts and materials sourced from everywhere, with exporters often managing vast cross-border supply chains. Exporters are also not directly affiliated with their home government—with the exception, sometimes, of nonmarket economies such as China—nor are they motivated by a mercantilist accounting of the trade deficit, as the Trump administration seems to be. They care about maximizing the profits of their shareholders, even if many of those shareholders are based abroad. So why then does trade policy still reflect a past that is now centuries old in some cases?

Yet the easy alternative—to eliminate tariffs altogether, as many multinationals would prefer—is equally outdated. Decades of tariff reductions, tax cuts, and deregulation wiped out millions of family-sustaining manufacturing jobs and undermined the social fabric of countless communities both in the United States and elsewhere. Neoliberalism may have been a recipe for keeping great-power conflict to a minimum (a mid-20th century priority), but it pushed multinationals to reduce costs wherever possible, often at the expense of their workers and the climate. And it too often rewarded countries that looked the other way in terms of environmental protection, labor rights, and corruption.

The 21st century requires something different based on the realities of the modern economy, including vastly integrated, often global supply chains. Soon, every product will have a digital twin that can be 3D printed and then sold commercially. How will trade and intellectual property rules deal with this eventuality? Why is the Trump administration so focused on the trade deficit in manufactured goods when digital trade, artificial intelligence, and trade in services are likely to shape national power structures far more in the decades ahead—as well as support far more jobs? Why, when traded goods account for 20 percent to 30 percent of global emissions, is the United States not leveraging trade in a manner that makes a meaningful contribution to the world’s fight against climate change? And why should corporations whose CEOs make almost 200 times the salary of their average employee receive a huge tax cut and trade protection without any commitment to increase the wages of their employees, improve working conditions, or even expand production in the United States?

The building blocks of a modern trade strategy

There is a better way forward. At a minimum, Congress should consider updating the country’s trade enforcement toolkit to reflect how trade works today, taking into account the influence of multinational companies, integrated global supply chains, and competition from nonmarket economies. Congress, for example, should authorize customs officials to assess tariffs based on the internal component parts and materials of imported goods, ensuring that a finished good from one market is not a vehicle for the duty-free importation of products that would otherwise be subject to tariffs. It should also make the investments necessary to make sure that that the U.S. industrial base can benefit from smart, targeted, protective tariffs.

The Trump administration must also recognize that tariff threats against partners and allies do little to build the multilateral coalition necessary to increase supply chain resilience or address a rising China. The United States has tried for the past several years to convince others of the revisionist intentions of China and Russia. But what happens when the United States itself becomes a revisionist power intent not on making the current order better for everyone but instead on tearing it down so that American size and raw power can be maximally flexed? This is not a recipe for global leadership or for making progress on shared challenges. It is a recipe for feigned strength through bullying—and ultimately, for the degradation of American influence around the world.

The Trump administration’s latest gambit of threatening to impose 25 percent tariffs on Mexico and Canada is a good example. Placing such tariffs on the United States’ two closest trading partners and hemispheric allies would be the equivalent of playing a game against China and instead of coming up with a winning strategy, deciding to punch your teammates. Fourteen million Americans are employed in jobs tied to trade with the United States’ North American trading partners, not to mention the countless more whose jobs are supported by imports from these markets. In this sense, Trump’s trade policy isn’t exactly Teddy Roosevelt’s “speak softly and carry a big stick,” it’s more like speak belligerently and threaten to harm yourself and all your friends. That may work from time to time, as partners are afraid of the collateral damage, but it also sullies partnerships and breaks the trust necessary to solve complex problems.

This is not to say that tariffs are always bad. Rather, tariffs are a tool that should be used when the job calls for it—but not all the time, and not to solve problems that other tools are better at solving. In particular, Congress should double down on the Biden administration’s investment agenda, which through the Inflation Reduction Act and the CHIPS and Science Act has spurred a resurgence in American manufacturing might, creating hundreds of thousands of good jobs along the way.

Congress must also expand its concept of workforce training, so that American workers are prepared for the jobs of tomorrow. This goes way beyond trade adjustment assistance, which is available only after someone’s job is lost. Instead, the question should be, “How can we preemptively and proactively train workers to succeed in a world defined by hypercompetition?” The Trump administration may want to gut spending on domestic programs, but leaving American workers on their own when other countries are stepping up in support of their workers is a path to long-term decline and rampant inequality.

And it’s not just how tariffs are used but what they are used for that needs an update. The Trump administration’s 19th century model of blunt economic nationalism offers working people the same cold comfort that McKinley’s policies offered—none. In fact, Trump’s Cabinet, which is so wealthy, white, old, and male that it looks oddly like the Gilded Age Cabinet of McKinley, stands to gain so much personal wealth from Trump’s policy agenda, and deliver so little for the American worker, that the robber barons of the late 19th century would blush.

Here again, however, the answer to Trump’s folly is not a return to 20th century orthodoxy but rather a trade and economic agenda that moves the world into the future. This includes pairing strategic, targeted tariffs meant to protect key industries from the predatory export policies of others with real investments in growing U.S. manufacturing might. Such an investment would allow the government to legally bind recipient companies to decarbonize their supply chains; hire and train workers; and provide the employee benefits, such as child care, needed to support working families. Add to that effective procurement policies, thoughtful regulation, and a tax policy that incentivizes the right behaviors, and what begins to emerge are the outlines of a policy environment that can create and sustain good jobs; facilitate cooperation on key global problems; and build more sustainable, resilient supply chains.

Globally, too, there is a need to dramatically modernize the economic institutions that govern world trade. And yet, here again, the world seems stuck between a Trumpian approach that prioritizes national dominance and an equally outdated embrace of the status quo in many foreign capitals. If the Trump administration withdraws from the World Trade Organization (WTO) and the U.N, Framework Convention on Climate Change, it will be because it thinks that a unilateral, strongman-wins approach to trade makes the president look tough. In reality, that approach looks eerily like the “beggar-thy-neighbor” policies of the late 19th century, which ultimately ended in world war.

Updating institutions for the 21st century

Yet why would institutions designed in the middle of the 20th century not require some sort of update? Understanding that the WTO, the World Bank, and the International Monetary Fund must do more to facilitate the clean energy transition, address inequality, and improve workers’ rights is not an attack on the rules-based system but an obvious conclusion, given the need to evolve institutions to keep them relevant. Departing these institutions won’t accomplish this evolution any more than avoiding a serious conversation about their future.

For example, why do global trade rules not distinguish between lower carbon and carbon-intensive versions of the same product? Why do exporters that treat their workers poorly, destroy their local environment, or fail to meet the highest health and safety standards receive the same tariff rate as companies with higher standards? And why are “subsidies” treated the same regardless of whether they support predatory export practices or help local exporters decarbonize their production? This isn’t 1890, when the McKinley tariff took effect; or 1947, when the General Agreement on Tariffs and Trade (GATT) was established; or even 2001, when China joined the WTO. It is 2025, and global trade rules should not only reflect current needs but also positively affect the economy and the workers that make it tick.

Consider the Global Arrangement on Sustainable Steel and Aluminum (GASSA) that the United States and the European Union discussed over the past few years. It would have provided preferential tariff rates on the basis of carbon intensity, rewarding those exporters that invested in decarbonizing their production and supply chains with market access that dirtier producers would not receive. It would have also required—as a prerequisite for joining—that governments committed to a joint effort to address the nonmarket overcapacity of others and to support the labor rights of workers in their markets.

Negotiations between Washington and Brussels failed to land a deal, primarily because of the European Union’s focus on its own bilateral carbon border adjustment mechanism (CBAM). But the opportunity to organize trade in an industry responsible for 11 percent of global carbon emissions is too great to ignore. In fact, with its focus on climate, workers, and nonmarket competition, a multilateral GASSA-like agreement offers more than just a model for organizing the metals trade—it offers a new paradigm for what trade could look like in the 21st century.

There are countless ways to update and modernize trade policy, as well as economic policy more broadly. These are just a few examples, and new creative ideas from anyone should be welcomed. The world needs them, perhaps now more than ever. Trade officials, companies, and world leaders would be wise, though, to understand that the options put forward today by the Trump administration or those offered by staunch defenders of the post-World War II multilateral system are not the only two possibilities. What the world needs is something else—something modern, pragmatic, and innovative that can define the future.