US President Donald Trump’s announcement last week of his global tariffs program, followed by plunges in equity markets across the world, led many level-headed commentators, even before Trump’s partial reversal of the tariffs, to abandon the idea that there is any strategy at all behind the White House’s initiatives. Janan Ganesh at the Financial Times spoke for many when he said, “there are just too many contradictions in the Trump worldview to warrant any talk of a grand plan.” SIG’s view is that there is indeed a Trump strategy, it just does not have much to do with the world outside the United States. It is a strategy of maximal national self-sufficiency, with as much as possible made in the US — the American version of Xi Jinping’s strategy for China. And as in China, the main challenges to the strategy have to do with the labor force.
That has not so far been the focus of attention. Most analysts have concentrated on the logical flaws in President Trump’s claims. For example, the use of tariffs as a source of government revenue — a tax on imports — can only work if there are imports to tax. But President Trump’s declared goal is to reduce imports and substitute US production, at which point the tariff income disappears. As Benn Steil at the Council on Foreign Relations put it, “to the extent that tariff revenue is substantial, they have failed in their supposed main aim: shifting business to American manufacturers. If tariff revenues are high, it’s only because Americans continue to import — rather than buy American.”
A second stream of commentary has focused on the implications of Trump’s tariffs for the global economy. The implications are not good. Nearly every economy sells into the US market, which is still the world’s largest, and most foreign companies are not in a position to jump the tariff wall and relocate production on US soil. The global sell-off in equities reflected the reasonable expectation that high US tariffs would induce a global recession.
But for confirmed anti-globalists, as Trump and his team certainly are, causing a global recession would not necessarily be seen as a negative. There is a deep indifference in the White House to the fates of non-Americans. It showed itself in the ending of USAID, the deporting of immigrants to overseas prisons, the suspension of enforcement of the Foreign Corrupt Practices Act, the humiliation of Ukraine, and other policies. Vice President Vance’s recent reference to “Chinese peasants” taking advantage of the US was consistent with the tone and substance of White House policies with regard to the rest of the world.
Vance’s reference to foreign peasants is also important in a different way. It acknowledges what globalization’s defenders are often reluctant to admit: that low wages and poor working conditions have been critical comparative advantages in attracting the goods-producing capital that the White House wants to redirect to the US. It’s an old dilemma. Australian colonists 150 years ago excluded Asian migrants because of fears they would work too hard for too little, dragging down the general wage. At the Paris Peace Conference in 1919, Indian and Japanese negotiators quietly opposed potential global agreements on working hours and wages because they felt longer hours and lower wages constituted comparative advantages for them in global competition with higher-wage countries like the US. Trade is often about labor as much as it is about goods.
Trump and Vance would not be in the White House without the electoral support of working-class and aspirational middle- and lower-middle-class Americans, including many immigrants. The Trump campaign offered a vision that dignified work, ambition, and upward mobility, and framed these as more available in the US than anywhere else. Globalization was what was taking them away, because there really are peasants in the world, and they will work for less and in worse conditions than Americans. As Ian Bremmer wrote on Wednesday, the “core reason” poorer countries “have trade deficits with America is not because they protect or discriminate against US exports but because they’re poor.” They can’t afford to buy American. Globalization’s defenders downplay the role that actual poverty, expressed as low wages, plays in attracting capital. The Trumpian theory is that a post-globalization, self-sufficient US would be able to escape dependence on foreign poverty — Vance’s “Chinese peasants” — without recreating it on US soil.
But would it? The US runs a huge trade surplus in services with the rest of the world while also having very low unemployment. Total compensation has grown steadily. Real wages for the bottom 10 percent of earners have shown unusually strong growth, benefitting, in particular, black and Hispanic workers and younger people. As Fareed Zakaria stressed this week, Americans and their economy have done and are doing better than their counterparts in any comparable economy. The labor market has been tight for some time. Wage expectations are not low.
So where would the labor come from for the America Trump has in mind? Given opposition to immigration, it would have to come from some reconfiguration of the US labor market itself. Government layoffs can be seen as part of that, but the numbers are not there. Thirty-one states have considered legislation on weakening child-labor protections. Cutbacks to Social Security may force more labor at the other end of the age range. But measures like this are opposite to the idea of dignified work, if not quite to self-sufficiency (of a kind).
Ultimately, it is the nature of the domestic labor market that makes self-sufficiency impossible. Nonetheless it is a driving theme of the Trump presidency.