How Trump’s Tariffs Will Transform Global Trade and Elevate Workers

President Trump initiated a new era in US trade policy on Tuesday, marking a significant shift after years of trade imbalances that have adversely affected American industries and led to unsustainable trade deficits.

Proponents of the previously favored “free trade” model may highlight temporary price hikes, volatility in stock markets, and interruptions in supply chains as dire consequences. However, they often overlook the substantial costs of their prior strategies.

A significant change is necessary to restore America’s wealth, economic stability, and middle class, in order to avert a real crisis in the future.

For the countless American workers and families who have faced job losses and the degradation of their communities due to globalization, the crisis has already unfolded. The availability of inexpensive foreign products cannot compensate for these profound losses.

Since the implementation of NAFTA and WTO agreements, the US trade deficit has ballooned from $28 billion in 1991 to an astounding $918 billion in 2024. This indicates that the United States is consuming nearly a trillion dollars more each year than it generates.

The US has lost not only T-shirt and toy manufacturing jobs. The trade landscape for advanced technology manufacturing has drastically shifted from a $38 billion surplus in 1991 to a $300 billion deficit last year, severely jeopardizing our economic security and enabling China’s dominance in the production of essential modern technologies.

As we move five years past the COVID-19 pandemic, it’s crucial for the United States to confront its supply chain weaknesses.

The current trading system favors countries that undervalue wages, resulting in a global race to the bottom. Consequently, stagnant US wages have persisted for 40 years, leading to a dwindling middle class and a decline in job quality.

Rather than pursuing profits abroad at the detriment of American workers, businesses will now find new incentives to manufacture, train, and invest domestically, harnessing local labor and resources.

Trump’s new tariffs feature a 10% global baseline aimed at rectifying our trade deficit, with increased reciprocal rates intended to provide the U.S. with leverage in negotiations with its trade partners.

These tariff rates are designed to gradually close the US trade deficit, evaluated on a partner-by-partner basis.

Essentially, the administration calculates each country’s trade surplus relative to its total trade volume with the United States to establish a tariff rate, then reduces these rates by half to mitigate immediate impacts.

Rates could be decreased for nations that improve their trade balance with the US, while those that retaliate might see increased rates.

This reciprocity measure provides an effective method to counteract the myriad of factors contributing to ongoing US trade deficits—not just foreign tariffs, but also currency manipulation, subsidies, investment restrictions, discriminatory taxes and regulations, intellectual property theft, wage suppression, among others.

Ultimately, Trump’s 10% global tariff minimum is set to reduce tariff avoidance and diminish the overall national trade deficit.

Trump has also revoked the de minimis exemption for China, addressing a dangerous loophole that allowed China to send millions of packages into the US without tariffs and minimal scrutiny, exposing our market to counterfeit products and fentanyl.

Moreover, the new reciprocal tariffs exempt items compliant with the United States-Mexico-Canada Agreement negotiated during Trump’s first term—signifying the administration’s future trade negotiation strategies with neighboring countries.

As discussions to renew the USMCA commence this year, Trump appears to be working towards establishing a more cohesive trade alliance based on equilibrium, likely contingent on keeping non-market goods from China and others out of North America.

Collectively, these new tariffs could generate over $700 billion annually, contributing to offsetting the expenses of Trump’s proposed tax cut renewals, future investments, and other key priorities. They will also enhance his bargaining power with other nations to reduce their tariffs and trade barriers.

However, the primary advantages of this policy will be to rebalance US trade, reshore industries, and bolster quality middle-class jobs. Already, Trump’s trade approach has motivated leading global companies to commit to trillions in new investments to enhance US production capacity.

The American populace recognizes the necessity for a revised trade strategy. A 2024 survey conducted by American Compass revealed that 47% of American adults feel that globalization has harmed the nation, while just 33% believe it has been beneficial. Moreover, respondents advocated for a stronger manufacturing sector by a margin of 10 to 1.

A trade approach focused on achieving balance is crucial for realizing that objective.

For years, the United States has pursued a flawed trade policy that primarily benefited other nations at the expense of American producers, workers, and families.

To forge a stronger, wealthier, and more resilient nation, we need to adopt a new trade paradigm rooted in balance and reciprocity.

Mark DiPlacido is a policy advisor at American Compass.