The global economy is a labyrinth of rapidly shifting interrelated markets. As a dominant small-c coastal power, the United States needs to be careful how it sails these waters in order to protect its interests. We have a largely overlooked but powerful tool at our disposal—tariffs, or taxes on imported goods. When used strategically, they offer a powerful tool to safeguard American jobs and stimulate domestic production, particularly in critical supply chains such as automotive and pharmaceuticals.
As someone deeply invested in understanding the intricacies of our economic landscape, I've seen firsthand the struggles of American industries facing unfair competition from abroad. The story that tariffs are bad, full stop is an extreme oversimplification. In practice though, strategic tariffs can be precisely the right intervention to force a fairer playing field and boost domestic growth.
Just look at the example of the automotive industry. For the past 30 years, American manufacturers have been battling against foreign competition. Most of these competitors are cushioned by advantages such as government subsidies and cheaper labor. Free trade is great in a vacuum, the truth is that too often it takes place on a deeply flawed and uneven playing field. Implementing tariffs on imported vehicles and imported automobile parts strengthens the playing environment for domestic manufacturers. This puts real muscle behind the Administration’s funding to spur them to invest in new technologies, expand production and create new jobs for American workers.
The pharmaceutical sector makes an important additional case for strategic tariffs. We have grown dangerously dependent on foreign suppliers—most notably, India and China—for generic drugs and APIs. This reliance not only presents great dangers to our national security and public health.
Such a tariff, applied to generic pharmaceuticals coming from these countries, would only raise costs in the short term. This measure is needed to complement domestic production and do more to deter crime. Critics contend that these costs will be absorbed by consumers, hospitals and other payers. The greater danger is to continue our dangerous dependence on foreign sources, most of which are highly unreliable. Foreign producers can hardly be expected to absorb the slam of the comparatively low gross margins in the generic drug manufacturing. This makes producing things closer to home a more attractive prospect.
Further, the claim that tariffs always and everywhere lead to economic catastrophe lacks historical basis. The Smoot-Hawley Tariff Act of 1930 is a prime example and a warning to us. Knowing the story behind it is just as important. The act was passed during the Great Depression. Most notably, it raised import duties on an unprecedentedly wide range of products. However, as shown above, more targeted tariffs—especially when used more strategically and as a necessary response to specific economic challenges—can prove more productive.
In reality, history provides plenty of precedents where tariffs have promoted home-grown development. The Tariff of 1816 was absolutely vital to protect nascent American industries during a deep economic depression. This protection was enormously instrumental in the growth of the US textile industry. Likewise, though controversial, the McKinley Tariff of 1890 was necessary to allow the fledgling US steel industry to take root and blossom.
The truth is that tariffs are not a panacea either. They need to be implemented with care and strategy, considering what any action will cause and ensuring that consumers are not harmed in the process. Imposing new tariffs on Canadian and Mexican auto parts can significantly increase vehicle prices. Common wisdom says this price increase will dampen consumer demand, to oily dollars’ detriment. Similarly, tariffs on Canadian goods like maple syrup and grains, or Mexican produce like avocados and tomatoes, could lead to higher grocery bills.
We need to consider these possible drawbacks very seriously. The payoffs of a stronger domestic manufacturing base and greater national security are enormous and long-term. What’s more, we know how to avoid or reduce these harmful impacts. For example, we might consider allowing for re-importation of generic drugs from high-quality, well-regulated markets such as Canada to alleviate these shortages.
Take a nuanced and long-term focus. Prioritize strategic tariffs that address clear, significant problems and boost home production in priority sectors. This requires admitting that tariffs are not the only instrument we have available to us. Second, subsidies, perhaps the favorite tool of most policymakers, can give much-hyped financial support to domestic producers, allowing them to compete with foreign firms. But subsidies aren’t always the neat solution they seem to be. Sometimes, they cause overproduction and inefficiency.
In my view, we should be applying smart tariffs and smart subsidies. In addition to these efforts, we need to pledge to make regulatory reform and workforce development priorities to bring industrial production back to American soil and create a healthier, happier and more successful economy. This will take a commitment to challenge the status quo and focus on a future-oriented, proactive approach to trade policy. It requires us to put the long-term goals of American workers and businesses ahead of the short-term benefits from rampant free trade.
This isn’t the moment for modest, meek half-measures. So let’s adopt the kind of bold vision that will ensure continued American economic leadership. By exercising the full potential of strategic tariffs, we can protect our interests and create a more prosperous and more secure future for all Americans. We need to make sure that the next generation inherits more than just a strong economy. It must be globally competitive, environmentally resilient, technologically innovative and perhaps most importantly intrinsically American. Our industries continue to prosper within this rosy future. Our workers thrive, and our nation remains competitive internationally.
