Trump’s Long Game: The Big Picture on Tariffs and Strategic Decoupling from China as US Manufacturing Center

Trump’s tariffs are part of a move to build the post-globalist West. If he gets it right, and does not back down, the U.S. will be fine long term. If not, tariffs will never again be used as leverage.

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Apr 04, 2025

Trump’s tariffs are part of a broader move to build a post-globalist West. If he gets it right—and doesn’t back down—the U.S. will be just fine in the long run. If he fumbles, tariffs will never again be viewed as leverage, let alone as a reliable revenue source.

I want to make a few key points about Trump’s tariff policy, differently from what I wrote in Compact Magazine this week. I do so as someone who works for an organization the Trump White House once relied on—and which was sanctioned by the Chinese Communist Party on Friday, April 4.

There are two layers to Trump’s tariff framework. One is negotiable. The other is not—and should never be.

The first is a 10% ad valorem duty (call it a baseline tariff) on all imported goods, globally. Think of this as like our new Most Favored Nation rate for WTO members, instead of 3.4%.

The U.S.-Mexico-Canada Agreement (USMCA) might be an exception here, but I’m not certain. The second layer is the so-called “reciprocal tariff,” a number that seems to be arbitrarily assigned—sometimes based on the goods trade deficit with a given country. A writer at The Atlantic who suffers from terminal TDS claimed he found the formula: dividing their export value by the tariff rate they impose on U.S. goods. Maybe. Doesn’t matter. Those reciprocal tariffs are negotiable. The 10% global tariff is not and should not be.

“This is transformational for the American economy, the American worker, and the new Republican alignment. Some of the old ideas were put away.” — Scott Bessent, Treasury Secretary, on the Tucker Carlson Show, April 4, 2025

Why? Because markets and businesses hate uncertainty. You can’t tell them on Monday that a product is subject to a 10% tariff, only to walk it back to 3.4% on Friday. That’s a terrible strategy if your goal is to encourage companies—domestic or foreign—to invest in large-scale manufacturing or greenfield projects. And forget using tariffs as a revenue source if you're going to ping-pong like that.

Reciprocal tariffs can (and often should) be negotiated downward. But the 10% baseline tariff cannot be compromised—or the whole strategy collapses.

If the U.S. went to a 10% tariff globally, including on Mexico and Canada, the IRS would collect around $325 billion, based on 2024 import values. This would help with extending the Tax Cuts and Jobs Act, which expires next year. If the U.S. is forced to raise taxes on corporations, the multinationals will outsource to cut local overhead costs and Trump (and Biden’s) reshoring efforts will be defeated.

So tariffs are not going to zero. If Vietnam and Argentina want to go to zero, the U.S. will not match, or should not. That is a de facto free trade agreement, and with a strong dollar, it would increase imports from those countries while not doing much to increase exports.

Tariffs will have to be part of a broader strategy that makes it interesting to invest in productive capacity at home. This means investing in greenfield or existing plants that are not a capacity, or are idle.

This strategy also includes deregulation, lowering electricity costs, and stable to lower taxes. It also requires government incentives on strategic sectors of the economy (CHIPS Act, for example) and strategic tariffs like we have done with Section 232 tariffs on steel and aluminum, the Section 201 solar tariffs, and the global automotive tariffs. Pharmaceuticals are exempt from the IEPPA Reciprocal Tariff action, but may be faced with a global sectoral tariff, coupled with legislation, to increase domestic capacity for critical generic drugs. We are massively import dependent there.

Eventually, the reciprocal tariffs will be cut down to focus on strategic sectors.

However, I would not be surprised if those reciprocal tariffs remain high in some Asian nations, due to their outsized advantage against the U.S. because of their labor pool, undervalued currencies, and of course applying some geopolitical pressure in an area of the world that will increasingly be governed by China whether we like it or not.

That said, we may see high tariffs on things like kitchen cabinets and furniture from Southeast Asia, for example, even though most Americans would not see that as a strategic sector like automotive or energy.

Tariffs are part of a geopolitical strategy. The U.S., under Trump, is led by foreign policy realists. Under Trump, the U.S. is no longer interested in the unipolar world funded and protected by the U.S. It has become too expensive and too risky. Everytime an imperial minded presidency takes over, there is war and destruction around the world. The U.S. does not have the manufacturing capacity left to build weapons, let alone keep funding the war machine as our interest payments are now greater than the entirety of the Defense Department’s budget.

The U.S. will focus more on the homeland and, perhaps, on its own hemisphere, which is why the USMCA has largely been left in tact as opposed to the Korea-U.S. Free Trade Agreement which is effectively dead.

The countries that are screaming the most – China and those in Europe – are accustomed to the unipolar U.S. Even though China hates the unipolar structure of the West, it benefited greatly from U.S. corporates importing from China.

Europe is different. Their anger comes from the fact that we prop up much of their industrial base as a buyer of things like capital goods (robotics and large machines used to bend metals, to keep it simple) and we are telling them they have to fend for themselves now. Wait til the Chinese start dumping excess capacity in Europe. They’ll understand our plight.

The stock market will fall and may have no near-term bottom. But as stocks rotate into government bonds, yields will fall, too. As oil prices fall, gasoline prices fall.

Sorry, but if you were counting on the Dow 1 million, you are going to have to wait.

Dow 1 Million On Pause. Or: Look Out Below!

“Tariffs worked back a hundred years ago whene the dollar was backed by gold and taxes were zero. Now we are kind of in a bit of a transitional mess. We are in unchartered waters” says Vlad Signorelli, head of Bretton Woods Research. “The dollar weakening, which might be good if you want less imports. I have faith that the Trump team gets this right. Even Rob Lighthizer (Trump’s USTR in first term) said on Tucker Carlson last month tht it would be a process and not smooth like butter.”

Critics love to argue that tariffs will crush small- to mid-sized companies that rely on imports. That may happen to some. It won’t be easy and I can sympathize.

Entire business models were built on the “designed in the U.S., made in China” model. I own a few pairs of Xero Shoes. I love them. They’re all made in China. Those prices will double, and the company may have to reduce its product line—or move production to Mexico. (A huge problem for China, by the way.)

Then there’s the “cheap goods” argument: tariffs hurt consumers. But how cheap is cheap? My Xero shoes cost over $100. More importantly, consumers don’t really have a choice. It’s not individual Americans choosing imports—it’s Ford, Boeing, Siemens, and the other big OEMs. They source from U.S. suppliers who’ve been decimated by import competition. The real buyers aren’t you or me. They’re corporate giants. When Ford imports parts for a car, the consumer didn’t choose those imports—Ford did.

Yes, countries will retaliate. That’s what creates trade war scenarios.

U.S. tariffs aren’t meant to provoke a trade war—they’re meant to end one. For decades, the U.S. tolerated trade policies that gutted its industrial base. The goal now isn’t confrontation; it’s reindustrialization.

Retaliatory tariffs don’t fix trade imbalances for the countries imposing them. They’re designed to target politically sensitive industries in the U.S. to activate domestic lobbying against the President. That’s not retaliation—it’s intervention in American sovereign trade policy and an effort to preserve a global status quo that no longer works for the homeland in the post-globalist West.