One of the main activities at CSIS is trying to figure out what is going to happen next. Our readers want to know that. Our donors want to know that, and, of course, reporters want to know that. Like many of my colleagues, I spend a good bit of my time trying to predict the future. Of course, the future is unknowable, so the best we can do is make informed guesses. The nice thing about the job is that nobody remembers if you’re wrong. The future becomes the present and then the past pretty quickly, and people move on to the next future. Of course, if you’re right, you can remind everyone, ceaselessly, but if you’re wrong, it is easily swept under the rug. This column will depart from that and admit what I got wrong about President Trump’s trade initiatives—so far. Days 1–5 are behind us, but there are many days to come, so there is plenty of time for the things I predicted to happen, and I’m still predicting at least some of them.
Because trade and tariffs were a centerpiece of the Trump campaign, I expected him to take some of his threatened actions on his first day in office, in particular, China tariffs because they were on more solid ground legally and were more acceptable politically (not many China fans in the Congress or, for that matter, the American public). On Canada and Mexico, I expected him to announce tariffs and then immediately suspend them in an effort to force a negotiation on migrants and fentanyl. (The irony is that the USMCA was due for review in 2026 anyway, so all he would be doing now is moving the talks up a year.) I got both of those wrong, although, on Canada and Mexico, he did essentially the same thing by threatening to impose tariffs on February 1. It seems clear that was a leverage move intended to force a negotiation on his terms. That will probably work—agreeing to talk is a low-cost move for Canada and Mexico, particularly when they would have had to do it anyway in a year. Of course, if talks stall, the tariffs will return.
The threatened 10 percent China tariff was also a leverage move. Recently, Trump seems interested in the idea of making a deal with Xi Jinping and knows that a 60 percent tariff, as he threatened during the campaign, would kill that possibility. In his mind, a 10 percent threat would push China without destroying the relationship he hoped to build. Of course, he tried negotiating with China in his first term and got played—abandoning his policy demands for commitments to buy more U.S. products that the Chinese did not fulfill. There is no reason to expect a different result the second time around but apparently hope springs eternal.
As it turned out, instead of tariffs, the president ordered studies. For a president who revels in breaking conventions, these are conventional proposals. Opposing unfair trade practices, currency manipulation, counterfeit goods, and persistent trade deficits is not revolutionary. Making sure trade agreements prioritize Americans is up there next to apple pie. They have a short deadline—April Fools’ Day—no irony intended I assume—which should not be difficult to meet.
The most important study is on the causes of the trade deficit because it will end up providing justification for the universal tariff Trump has proposed. One prediction I got right was that the president would not implement a global tariff on day one. I thought that would raise more complicated legal issues than the China tariffs—how do you argue that a trade deficit we have had since 1975 constitutes a national emergency justifying action against everybody—and would lead to more retaliation since there would be so many victims. There were global sighs of relief when that did not happen, but they were premature. Trump believes in the “rebalancing” theory—that the United States foolishly reduced its tariffs in the post-war era in order to spur European reconstruction while other nations did not, and now we are suffering the consequences. He apparently wants to raise our tariffs to match those of others. If they reduce theirs, we can reciprocate; if not, we will capture the additional revenue and benefit from the rebalancing.
In terms of negative economic impact, this is the prime candidate, but the administration appears to be living in a parallel universe where they are convinced consumers will not be affected. So, I expect this to happen once the studies are submitted.
The wild card in that scenario is the search for revenue to pay for the proposed extended tax cuts. Incoming Secretary of the Treasury Scott Bessent laid out three reasons for tariffs—countering unfair trade practices, raising revenue, or providing leverage for negotiations. Trump’s early actions were in the third category, but as the reconciliation bill begins to move forward, revenue will become a prime consideration. It has been well-demonstrated that the math doesn’t add up—tariff revenue has been less than $100 billion while the estimated cost of extending the tax cuts is over $4 trillion—but every little bit helps, I suppose. The challenge will be finding the most profitable level. If the tariff is too low, it won’t raise much money. If it is too high, it will stop trade, and revenue will decline.
So, the bottom line is that sighs of relief after day one were premature. Trump’s reputation for doing what he says he is going to do is well earned, and we should expect more trade actions coming soon.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
