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Trump’s tariffs: Returning to Gilded Age protectionism and inequality

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In the days leading up to his inauguration, Donald Trump outlined an ambitious course of action to be implemented immediately upon taking office. Addressing Republican senators, he announced plans to issue 100 executive orders, targeting various high-profile issues such as ending the war in Ukraine, pardoning January 6th prisoners, revoking birthright citizenship, carrying out mass deportations, and closing the southern border. Among his most prominent priorities is his economic plan, centered around the imposition of tariffs.

Soon after his swearing-in, Trump previewed his tariff strategy on social media, stating, “We’re thinking in terms of 25 percent on Mexico and Canada…. I think we’ll do it Feb. 1st.… The American dream will be back like never before.” His rhetoric, equal parts spectacle and grievance, frames the tariffs as a tool for retribution — punishing neighboring countries for alleged complicity in illegal immigration and drug trafficking — while promising to restore American greatness by rebuilding domestic production.

Trump’s tariff plan rests on three key justifications. First, he aims to revitalize American domestic production, particularly in industries like steel and aluminum that would be directly impacted. Second, he views tariffs as a means to replace revenue lost through sweeping tax cuts. Third, consistent with his negotiating style, Trump positions tariffs as leverage in trade negotiations, a way to strengthen U.S. power on the global stage. Beyond purely economic motives, his bellicose protectionism aims to reaffirm American prestige in symbol and in practice.

Beneath the bombast, his vision is rooted in a familiar form of protectionism, drawing from the nationalist mercantilism of the 19th century, which he credits with spurring the U.S.’s industrial development. However, many economic historians dispute this interpretation. Douglas Irwin, for instance, argues that “tariffs coinciding with rapid growth in the late nineteenth century does not imply a causal relationship.” He notes that the U.S. manufacturing boom began before the Civil War during a period of low tariffs, driven in part by capital generated through slavery.

Trump’s current targeted tariff proposal represents a departure from his earlier universal tariff plan, though he has not ruled out instituting the latter. During his campaign, he proposed a 10-percent tariff on all imported goods, claiming that “essentially all countries take advantage of the U.S.”  

In addition to tariffs, Trump has called for investigations into trade relations with foreign countries to develop aggressive policy recommendations. To facilitate tariff collection, he proposed creating a new agency called the External Revenue Service, a counterpart to the Internal Revenue Service.

The tariffs Trump proposes on Mexico and Canada — 25 percent on imports — are particularly alarming. These countries are not just America’s neighbors but its largest trading partners, intricately tied to the U.S. economy through the United States-Mexico-Canada Agreement (USMCA).

For instance, the auto industry would be particularly hard-hit, as vehicles cross the U.S.-Mexico border an average of eight times during production. A 25-percent tariff on auto parts — 16 percent of which are sourced from Mexico — and steel from Canada would significantly increase production costs, potentially leading to job losses reminiscent of the 2021 supply chain disruptions.

The leaders of Mexico and Canada have already signaled their intent to retaliate. In November, Mexican President Claudia Sheinbaum warned Trump that Mexico would retaliate with tariffs on American goods. She also emphasized the severe economic consequences of souring trade relations between the three countries, as, for example, there are General Motors and Ford factories in Mexico, as well approximately 3 million jobs reliant on imports and exports.

Similarly, Canadian Prime Minister Justin Trudeau spoke of a retaliatory plan that includes tariffs and export restrictions. Tariffs would destabilize both Canadian and American energy sectors, as Canada not only exports a significant amount of oil and gas to the U.S, but also hydroelectric power, which supports much of New England. Canadian Foreign Minister Mélanie Joly recently visited Congress to try to allay these tensions diplomatically.

Furthermore, as the tariffs would be a violation of the USMCA, their enactment will cause an antagonistic review of the agreement in 2026 and their trade relationships at-large.

Trump’s tariffs on China, which he has suggested could range from 10 to 60 percent, would escalate tensions with that country even further. Trump initiated a trade war with China when he placed tariffs on $380 billion of U.S imports on objects such as washing machines, solar panels and metals. Employment in affected industries did not increase; in some cases, such as agriculture, it declined as other nations retaliated with tariffs of their own.

China is better positioned now than eight years ago to respond to U.S. tariffs. The renminbi could be devalued to offset the impact of tariffs, and China could impose export controls or relocate manufacturing to other countries, strengthening its global influence while circumventing American restrictions.

The broader economic consequences of Trump’s tariff policies are stark. The World Bank estimates that a 10-percent tariff on all imports would reduce global economic growth by 0.2 percent — a figure that does not account for the ripple effects of retaliatory measures.

Domestically, the tariffs are unlikely to revitalize American manufacturing. Revenue from tariffs goes to the Treasury and cannot be directly invested in factories, worker training or research and development. Instead, the revenue would offset corporate tax cuts, benefiting businesses rather than workers.

American households would bear the brunt of these policies. Organizations like the Peterson Institute for International Economics estimate that median-income families would face additional costs of $1,500 to $1,700 per year, as businesses pass tariff-related expenses onto consumers.

The tariffs would hurt American employment. A study by the Federal Reserve found that Trump’s 2018 tariffs caused a net loss of 300,000 jobs, as higher costs and retaliatory tariffs rippled through the economy. The potential for retaliation is greater now, which means the damage to jobs will also be more severe, with losses primarily affecting export-driven industries, manufacturers dependent on imported materials, and consumer-facing sectors struggling with higher prices.

Trump frames his protectionism as a revival of American strength, specifically invoking the policies of William McKinley and the Gilded Age. The tariffs McKinley championed enriched industrial tycoons while deepening the economic divide, a dynamic Trump seems intent on replicating. Similarly, Trump’s policies seem poised to benefit modern oligarchs like Elon Musk and Mark Zuckerberg, further entrenching them in American politics, and ushering in a new era of systemic economic exploitation akin to the Gilded Age.

Carter Myers-Brown is a New York-based essayist who writes about labor policy, the environment and social movements.

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