For over eight decades, the United States has championed free trade as a cornerstone of its economic policy. Since the implementation of the Reciprocal Trade Agreements Act (RTAA) in 1934, and later, the establishment of global trade institutions like the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), the U.S. has aggressively pursued lower trade barriers, multilateral agreements, and the expansion of international markets. Agreements such as NAFTA, the USMCA, and partnerships with the European Union and Asia-Pacific nations have facilitated the flow of goods and services, promoting economic growth, innovation, and consumer benefits. However, despite these gains, the resurgence of protectionist policies—specifically, tariffs—has gained traction in recent years. The driving force behind this shift is not a fundamental failure of free trade itself but rather a failure of Congress to modernize the tax structure and properly redistribute the gains of globalization, leading to economic disparities and political discontent.
The Economic Benefits of Free Trade—and Their Uneven Distribution
Free trade has been a boon to American consumers and corporations, reducing prices and opening new markets. The logic of free trade is as compelling as it has ever been: specialization leads to efficiency, efficiency leads to growth, and growth—at least in theory—should lift all boats. Yet, in practice, the economic gains of globalization have not cascaded evenly through the social strata.
Trade liberalization has disproportionately benefited capital over labor. Multinational corporations have prospered, leveraging low-cost labor abroad to maximize profits, while the American worker—particularly in the manufacturing sector—has been left behind. Towns that once thrived on industry have withered, victims of an economic realignment that policymakers saw coming but failed to address with meaningful redistribution mechanisms. The prescription for globalization’s harshest side effects was always clear: tax the winners, invest in the displaced, and cushion the transition. Instead, Congress dithered, letting outdated tax structures exacerbate inequality rather than alleviate it.
The deepening divide between urban and rural economies has only compounded the issue. Cities that have adapted to globalization and technological innovation have flourished, attracting capital, talent, and investment. Meanwhile, small towns and former manufacturing hubs have languished, deprived of the resources and infrastructure necessary to transition to the new economy. The result is an America where prosperity is not evenly distributed but rather concentrated in select pockets of wealth, leaving large swaths of the country economically and politically disillusioned.
The Role of Tax Policy in Exacerbating Trade Discontent
If the political economy of the past century has demonstrated anything, it is that free trade, untethered from a robust tax and redistribution framework, generates winners and losers. American tax policy, which should have evolved to mitigate the disruptions of globalization, has instead remained stagnant, largely favoring capital over labor. As corporate tax rates declined and loopholes proliferated, the government’s ability to channel trade-driven wealth into social programs, job training, and economic revitalization shrank.
Programs meant to support displaced workers, such as Trade Adjustment Assistance, have been underfunded and ineffectual, a testament to the political neglect of those most affected by globalization. Instead of recalibrating the tax structure to ensure that prosperity was widely shared, Congress left the distribution of trade’s benefits to the market, with predictable results: growing regional economic disparities, wage stagnation, and political upheaval.
This neglect is not a function of mere oversight but of structural political incentives that reward short-term electoral gains over long-term economic planning. Policymakers, beholden to corporate donors and entrenched political interests, have lacked the will to implement bold tax reforms. Instead, they have allowed corporate profits to soar while middle-class wages have stagnated. The chasm between executive compensation and worker pay has widened, reinforcing the perception—if not the reality—that globalization is a rigged game benefiting the few at the expense of the many.
The Political Appeal of Tariffs
In this climate of economic dislocation and government inertia, tariffs have found new life. They are, above all, a blunt instrument—economically inefficient but politically resonant. They create the appearance of action, the suggestion that the playing field can be leveled by executive fiat. While tax reform is a labyrinthine process requiring legislative consensus, tariffs are immediate and forceful, a rhetorical cudgel against foreign competition.
The appeal is bipartisan. To the right, tariffs embody economic nationalism, a reclamation of lost sovereignty from the forces of globalization. To the left, they represent an implicit critique of neoliberalism’s failures, a rejection of the laissez-faire orthodoxy that has governed trade policy for decades. Their power lies in their simplicity: tariffs are easy to understand, easy to implement, and—at least initially—easy to sell to a public hungry for economic redress.
Yet their effectiveness is largely illusory. While tariffs can temporarily protect domestic industries, they do so at the cost of higher prices for consumers and retaliatory measures from trade partners. The steel and aluminum tariffs of recent years, for example, provided a modest boost to domestic producers but simultaneously raised costs for downstream industries, from automakers to construction firms. The supposed gains were diluted by the broader economic consequences, illustrating the fundamental flaw in protectionist thinking: it treats symptoms while ignoring causes.
The Populist Use of Tariffs: Placating the Base, Consolidating Power
Donald Trump has wielded tariffs as a tool to placate his base while simultaneously consolidating economic power for the elite. By presenting tariffs as a decisive blow against globalization’s excesses, he taps into the economic anxieties of working-class Americans who feel abandoned by decades of free trade policies. His rhetoric frames tariffs as a battle against foreign exploitation, a narrative that resonates deeply in regions hollowed out by deindustrialization.
However, while Trump’s tariffs offer symbolic validation to these communities, their economic impact tells a different story. Rather than reviving American industry, these measures have burdened consumers with higher prices and provoked retaliatory tariffs that harm U.S. exporters. Meanwhile, the real beneficiaries of his trade policies have been corporate interests with the lobbying power to secure carve-outs and exemptions. Tariffs, in practice, have functioned less as a tool of economic justice and more as a mechanism for rent-seeking by well-connected industries.
Trump’s approach exemplifies the paradox of right-wing populism: while claiming to champion the forgotten worker, it often enacts policies that reinforce the economic status quo. By fixating on trade wars instead of substantive economic reforms—such as progressive tax restructuring or investment in worker retraining—his administration is perpetuating a cycle of economic grievance without offering a genuine long-term solution. The result is a political strategy that leverages tariffs for electoral gain while doing little to challenge the underlying structures that created trade-related inequality in the first place.
A Path Forward: Reforming the Tax Code to Redistribute Free Trade Gains
A serious response to the inequalities of globalization would focus not on restricting trade but on restructuring the economic mechanisms that distribute its benefits. This means revisiting corporate tax policy, closing loopholes that allow profit-shifting to tax havens, and ensuring that capital gains are taxed at rates that reflect their role in wealth accumulation. It means expanding programs that retrain workers displaced by automation and offshoring, and it means investing in infrastructure and industrial policy to create new economic opportunities in the regions that have been hollowed out by decades of trade liberalization.
The resurgence of tariffs in American economic policy is not a repudiation of free trade itself but a consequence of political failure. Trade has enriched the nation, but Congress has neglected to modernize the tax and social policies necessary to distribute its gains equitably. The discontent fueling protectionism is real, but the solution lies not in retreating from global markets but in forging a tax and redistribution system that ensures all Americans, not just the corporate elite, benefit from economic integration. Until that happens, tariffs will remain in vogue—not because they are good policy, but because they are the only tool that seems to be wielded on behalf of those left behind.
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