USMCA Was Never Meant to Be Permanent

Less than a month after taking the oath of office for his second term, President Donald Trump’s madman theory of trade policy is firing on all cylinders, leaving observers dazed, confused, and asking: What are tariffs—a tool to rebalance trade, raise revenue, or decouple the US economy from China’s? Or are they instead a mere instrument of leverage to extract concessions from allies and adversaries alike?

The answer is yes—all of the above. And if we are to believe the repeated claims of Trump and his top economic advisors (which we should), the new administration will use tariffs during the next four years to achieve each objective as part of a broader ambition to reform the international trading system or establish a new one.

It will be a wild ride. Markets and the business press were on the brink of a breakdown amid the tariff showdown with Mexico, Canada, and China. But for all the weeping and gnashing of teeth, the policy that emerged from the fog of the trade war’s early battle—an additional 10 percent tariff on China’s goods and greater scrutiny of its de minimis shipments—is eminently reasonable and reflects what level-headed policymakers might implement. Perhaps there is a method to the madness.

Trump’s critics aren’t so sure. In addition to standard opposition from those who believe tariffs are always bad or should be used to protect only industries closely related to national security, others have raised concerns about what it all means for the future of North American trade flows. Does Trump not realize that the United States-Mexico-Canada Agreement is his trade agreement that he negotiated to replace NAFTA? Why is he threatening to impose tariffs that might blow it up? And won’t these threats undermine the prospect of a future bargain?