Can We Do Better Than Trumpian or Neoliberal Trade Policy? Yes.

U. S. President Donald Trump has remade the international trading system by ending the so-called “free trade” era and bringing back protectionism. In doing so, he has created massive uncertainty in the U.S. and global economies and has thrown into disarray the traditional left-right divide on international trade. However, as left-wing economist Arthur MacEwan argues in the interview that follows, neoliberal regimes and Trumpian tariffs are not the only options for organizing international trade. As an alternative, he makes the case for a progressive U.S. world trade policy. MacEwan is professor emeritus of economics at the University of Massachusetts Boston. Among his many publications are 25 years of columns in the progressive magazine Dollars & Sense. His most recent book is Ask Dr. Dollar: Essays on Economic Power, Inequality, and Climate Change.

C. J. Polychroniou: Trump has made trade tariffs a key component of his foreign policy strategy. In doing so, he is trying to rewire the global economy in a manner that will be serving U.S. interests. Indeed, the plan behind Trump’s protectionist policies seems to be the improvement of U.S. economic competitiveness, bringing manufacturing back to the United States, and paying off the deficit. Is the bet paying off or is this a strategic blunder since tariffs are putting the squeeze on businesses and consumers and causing significant uncertainty?

Arthur MacEwan: Tariffs are unlikely to regenerate manufacturing in the United States, and especially important, tariffs are not likely to lead to a substantial increase of jobs in manufacturing.

The changes in U.S. manufacturing have not resulted simply because of competition from production in China and other countries. Production in manufacturing between 2000 and 2024 was relatively stagnant, rising by only 2.4% in this period while overall GDP (adjusted for inflation) rose by 65%. The manufacturing sector’s contribution to GDP dropped from 15% to 10%. A significant portion of this was, indeed, the replacement of domestically produced goods by imports.

However, another significant part of the decline was due to the fall of the U.S. share of manufactured exports to global markets, as China replaced the U.S. as the leading supplier of manufactured goods to the rest of the world. In 2000 the U.S. exported $648 billion of manufactured goods, almost three times as much as China’s $220 billion. But in 2024, China’s export of manufactured goods had risen to $3.26 trillion, while the U.S. amount had risen to only $1.24 trillion. U.S. tariffs on imports from China (or elsewhere) are not going to do anything to restore the global market for U.S. manufactured exports.

And then there are the jobs. A primary rationale offered for the Trump tariffs is to restore jobs in manufacturing. Yet, that 2.4% increase of manufacturing output was accompanied by a 26% decline of workers in manufacturing—from 17.2 million in 2000 to 12.8 million in 2024. Automation, which increased output per worker by almost 40%, accounted for a large amount of the employment decline. U.S. tariffs will not replace the jobs—the many, many jobs—lost to automation.

Furthermore, and somewhat ironically, while tariffs might seem to favor U.S. production over imports for the domestic market, those tariffs will also undercut U.S. production by raising the prices of inputs. U.S. manufacturing, now and in a potential future, is highly dependent on imports of raw materials and parts. Tariffs will raise the price of these inputs, reducing any overall shift to domestic production.

There is no way of getting around the price problem, and it is much larger than the difficulties caused by the rising prices of inputs to manufacturing production. The whole purpose of tariffs is to raise the price of imported goods so that domestic production will be able to compete with the imports! If, for example, no tariffs were imposed on China-produced electric cars, they would make large inroads in the U.S. market for electric cars, replacing the more expensive U.S.-produced models. But with the tariffs, the China-produced cars become more expensive in the U.S. and the U.S.-produced cars might be able to compete.

In other words, U.S. buyers—the population in general—pay higher prices to generate more domestic production of goods now imported. Theoretically, this could be worth it, as I will take up shortly, but it is unlikely to be popular.

All in all, the extent to which the new tariffs will succeed in generating more domestic manufacturing is questionable. However much new manufacturing takes place, the creating of new manufacturing jobs will be much less. And, in our role as consumers, none of us will be pleased by the higher prices.

Worse still, the tax—and the tariff is a tax—will fall disproportionally on low-income people. In effect, the tariff/tax is a sales tax, raising the cost of purchases. Low-income people spend a higher proportion of their incomes on purchases, while high-income people spend a smaller proportion of their income on purchases. Thus, the tariff/tax is what we call a “regressive” tax.

Certainly, this appears to be an economic and political blunder. But Trump and his minions, crying “American First” and stressing the nationalism and xenophobia of a tariff-based economy, might get away with it.

C. J. Polychroniou: Free trade agreements have been a hallmark of neoliberalism while left-wing parties have stood for the most part in support of protectionist policies. Does this mean that Trump’s obsession with tariffs has put an end to the traditional left-right divide on trade policy?

Arthur MacEwan: It is correct that many people on the left have responded to neoliberalism by calling for the protection of U.S. production from foreign imports. Yet, there are important elements of neoliberalism that cannot be characterized by “free trade” but, instead, are protectionist. The U.S. has used international trade agreements to extend the U.S. system of patents and copyrights. This amounts to protecting the monopolistic position of, especially, large pharmaceutical and large high-tech companies. Moreover, “free trade” agreements tend to include dispute resolution procedures that are highly favorable to business interests. For example, if new environmental regulations are established to reduce imports of Canadian tar-sands oil (which is especially bad for the environment), the trade agreement gives the Canadian oil-producing companies the right to sue because their profits have been lost.

Nonetheless, “free trade” has come to mean opening domestic markets to imports without restriction. It is understandable why workers and people on the left oppose such openings. Workers understandably fear that they will lose their jobs and not be able to obtain reasonably equivalent new jobs. Workers’ power and the power of their unions is undermined by the “free trade” of neoliberalism. At the same time, by giving businesses more options—e.g., the option of importing goods instead of producing at home—the power of business is enhanced.

So, I think it best to see the left-right divide on international trade as a divide over power. If international commerce would be organized in a way that would maintain or even increase the power of workers, it would have the support of the left—but the right would not be so happy.

C. J. Polychroniou: Are there other ways to organize U.S. international trade besides neoliberal free trade agreements and Trumpian tariffs?

Arthur MacEwan: Disputes over how to organize international commerce are usually structured by a simplistic dichotomy between “free trade” and Trumpian tariffs (or other forms of restricting trade). Yet, there are alternatives. In particular, it is possible to set out a progressive form of U.S. policy on international commerce.

One element in the foundation of a progressive trade policy would be recognition that there are real gains that can be obtained, and should be preserved, from international commerce. Some of these gains are economic—there are goods and services that can be produced more effectively in some places than in others due to differences, for example, in natural resources and in the historically developed skills and specializations in different places. There are also great cultural, culinary, and scientific gains that can be obtained by international connectedness.

Also, a progressive trade policy would be based on protecting workers and their power, not on protecting jobs. However, many workers and progressives see the trade problem in terms of jobs being destroyed. For example, when more cars and car parts are imported from other countries, jobs are lost in the U.S. auto industry. But this does not mean that a progressive trade policy should throw up tariffs to protect those jobs. There is nothing intrinsically more valuable about those jobs than many other jobs. It is workers, not their jobs, that need protecting. Just like workers who lose their jobs because of automation or because their bosses made stupid mistakes, workers who lose their jobs to foreign competition—which is not the workers’ fault—should be protected. And protecting workers means protecting their power.

Because it is workers, not jobs, that should be protected, it becomes clear that a progressive trade policy depends on a progressive domestic policy. For example, a national single-payer health care program (such as Medicare for All), would ensure than workers who lost their jobs for whatever reason would not lose their health care. Similarly, higher education and skills training should be free, so that, if workers lost their jobs, their children would not lose their educational opportunities and the workers themselves could be readily trained for other jobs.

Further, those other jobs need to have reasonable wages, which requires a progressive domestic policy of generating higher wages and reducing inequality. Good places to start would be with pushing the minimum wage up and up and reinforcing the opportunities for workers to form powerful unions. Also, workers need to eat while they are getting retrained, which means a progressive trade policy would provide income during the retaining period.

Still, there are times in the U.S. and elsewhere when tariffs or other forms of protection could be justified, even if they force people in general to pay higher prices for goods than they would if imports could freely enter the country. Historically, in the United States and in the United Kingdom, trade restrictions were important in allowing certain manufacturing industries to get started, and these industries generated the development of many connected activities. The long-run results seem to have been favorable for economic growth and, ultimately, wide benefits. This argument of protecting “infant industries” could apply in many developing countries, but it is of dubious validity in one of the world’s most advanced economies.

In today’s United States, there could be issues of markets being flooded with products produced abroad with very, very low wage labor. Those conditions might justify restrictions on imports, even though there would be real costs. The extreme cases would be when products are produced by prisoners, slaves, or children. Then there are situations where workers do not have the right to organize to form independent unions. Similarly, when goods are produced abroad in environmentally destructive ways, restrictions on importing those goods could be reasonable.

But, again, the issue of domestic policy arises: How can we defend, through trade barriers, the rights of workers elsewhere when many workers in this country have their rights to organize greatly restricted? Or when child labor is on the rise here? How can we demand that other countries follow good environmental policies when our own are so insufficient?

Support for a progressive trade policy will, of course, be attacked by the traditional arguments for “free trade.” Yet, these arguments lose their force when it is recognized that there is really no such thing as “free trade,” if by that term we mean the absence of actions by government that affect international commerce. Yet, innumerable actions of government have impacts on a country’s international commerce. Education policies that affect the structure of the labor force, for example, play a role in determining the kinds of goods that are produced in the country and their position in global trade. Or consider agricultural policies that, in the history of the United States, have had the impact of making this country a major exporter of agricultural commodities. Tax policies and other government programs could also provide examples. So, the issue is not whether or not to adopt government policies affecting international trade. The issue is which policies!

C. J. Polychroniou: A recent story in the New York Times pointed out that hundreds of thousands of manufacturing jobs in the U.S. are currently unfulfilled. First, is this evidence that the industrial sector has bounced back, and second, how do we explain the alleged labor shortage in manufacturing jobs?

Arthur MacEwan: It is best not to take business complaints about a labor shortage too seriously. What they generally mean is that with the wages, benefits, and working conditions that they offer, they can’t get enough workers.

Traditional orthodox economics has a simple answer to such complaints: offer higher wages! And, of course, better benefits and improved working conditions. The workers will come.

But, unsurprisingly, this has not been what employers have been doing. In May of 2025, the average hourly wage for production and non-supervisory workers in manufacturing was $28.79, while for all private-sector production and nonsupervisory workers the figure was 7.6% higher, at $30.97. This was a switch from 25 years ago: In May of 2000, the hourly wage for manufacturing workers was 2% higher than the hourly wage for all private-sector workers.

Moreover, in from 2000 to 2023, while the real (i.e., inflation adjusted) median household income rose by about 15%, the wage for production and nonsupervisory workers in manufacturing, adjusted by the consumer price index, rose by only 5%. (Real household income data are not yet available since 2023.)
Employers in manufacturing have accomplished this relative decline in workers’ wages by several means—automation, union busting, and shifting (or the threat of shifting) production abroad. In short, they have done just about everything they could to keep wages down. And now they have the audacity to complain about a “labor shortage.”

C. J. Polychroniou: Are there lessons to be drawn for the left from Trump’s approach to international trade?

Arthur MacEwan: There are several lessons for the left. Some of these are implicit in my answers to previous questions—for example, the importance of protecting workers and their power instead of protecting jobs, and the essential complementarity between international and domestic economic policy.

Further, there are different ways that policy can protect the interests of business—that is, the power of capital. Trump’s program and the neoliberal policies that came before him have substantial differences, but both preserve and even worsen the great economic inequalities and uneven power arrangements that dominate our society. In fighting against the depredations of the Trump era, we need to look beyond what came before to determine how to create something new.