Trump’s Most Enduring Legacy Isn’t What You Think

Trade experts often dwell in a separate reality. We discovered this in the quarter-century after the Cold War, when so many trade economists assured us—in one of the great economic misjudgments of modern times—that China and other newly emergent developing nations wouldn’t harm American prosperity or cause serious social and political divisions.

Robert Lighthizer fits this otherworldly description as well, but for different reasons. At a time when nearly every former senior member of Donald Trump’s administration—including his vice president, attorney general, chief of staff, secretary of state, U.N. ambassador, national security advisor(s), and an assortment of once-loyal lawyers appalled by Trump’s Jan. 6 coup attempt—have indicated the 45th president is a danger to the republic and should never be reelected, Lighthizer holds to another set of criteria. Trump, Lighthizer writes in his new book, No Trade Is Free, will go down as “a great president, truly one of the greatest.”

Lighthizer was Trump’s trade representative and was largely responsible for what he describes as a “fundamental shift in American trade policy: a shift that was long overdue and in the interest of all working Americans.” The evidence for this, Lighthizer argues, is that “[i]n the ensuing years, the Biden administration—with a few important exceptions—has continued along the path President Trump and I laid out.”

There is some misrepresentation here—particularly when it comes to U.S. President Joe Biden’s embrace of industrial policy, which Trump mostly ignored. But there is also considerable truth in this statement. Much of the mainstream media is now focused on the ugly horse race underway between Trump as he bids for reelection in 2024 and prosecutors bidding to put him behind bars, or at least take him out of action. But whether or not Trump ever sees the inside of the Oval Office again—as opposed to a prison cell—his most enduring legacy may well lie not in the success of his demagogic insurgency but in trade policy.

Trump turned international trade on its head, administering the final blow to the neoliberal (that is, free trade) consensus of the post-Cold War period and ushering in a new era of neo-protectionism and economic nationalism. And Lighthizer, a professional trade negotiator with experience dating back to the Reagan administration, deserves credit not only for making much of this happen but for building a coalition from within the Republican Party that extends to trade skeptics on the progressive left who now see him as their champion. The leaders of the Democratic Party—starting with Biden—ignore Lighthizer at their peril.

“The thing to understand about Lighthizer is that he’s been a well-informed critic of the mercantilism of other countries for 45 years,” Robert Kuttner, a leading progressive writer on economics, said in a phone interview. “He really knows chapter and verse. Secondly, he’s from the Midwest and is genuinely concerned about workers.” In his book, the Ohio-born Lighthizer makes a point of thanking labor leaders and acknowledging Lori Wallach—perhaps the most respected trade expert in the progressive movement—as “a longtime friend and co-conspirator who was a constant advisor and liaison with many on the [Capitol] Hill.”

Lighthizer delivers a compelling case—which even seminal pro-trade economists like David Ricardo understood—when he argues that fully open trade works to everyone’s benefit only when it is balanced, when participating nations observe the rules, and labor and capital operate together. Trump, he writes, became the first president to fully acknowledge that China manifestly was not doing this. On the contrary, Beijing’s long-term plan was to enrich and empower itself by systemically breaking nearly every promise, adopting mercantilist practices that include largely closed markets, subsidies to state-owned enterprises, industrial espionage, investment controls, currency manipulation, and relentless intellectual property theft.

A classic example, Lighthizer writes, was what happened to Westinghouse, which partnered with China’s largest nuclear state-owned enterprise in the early 2000s and handed over the technology for its state-of-the-art AP1000 plants, only to find itself cut out of the market later. “In one fell swoop, China got the details of decades of U.S. nuclear power research” and stole the rest, he writes. Another U.S company, Magnequench, once had a near-monopoly on magnets that are integral to missile guidance systems, but in 1995 it was purchased by a consortium of an American firm and two Chinese companies, soon afterward moving its production to China. By 2006, it had shut down its last U.S. operation in Valparaiso, Indiana, and moved it to Tianjin. “The jobs and the technology were gone,” Lighthizer writes. So it went with many U.S. technological advances that had “dual-use” potential for military expansion. “It is no exaggeration to say that the biggest navy and the biggest army in the world has been built with U.S. dollars and it is not in America.”

Lighthizer also argues that Trump—contrary to the popular notion that he makes everything up as he goes along for the sole purpose of gratifying his ego and his “America First” base—has been consistent on this point for decades. The former trade representative, who himself became one of the nation’s most prominent skeptics on open trade back during the Reagan administration, says he first grew aware of Trump’s views in 1987, when the then-New York real estate magnate took out a full-page newspaper ad that sounded what later became his favorite foreign-policy grievance as president: how American goodwill is exploited by other nations that enjoy the benefits of the U.S. defense umbrella without paying the costs.

“The world is laughing at American politicians as we protect ships we don’t own, carrying oil we don’t need, destined for allies that won’t help,” the ad read. For Trump, the chief beneficiary then was Japan; now it is China. “I believe very strongly in tariffs,” Trump told an interviewer the following year. And when he became president three decades later, he declared in a 2018 tweet: “Trade wars are good, and easy to win.”

In truth they’re not, as subsequent events would bear out. Soon afterward, in a series of moves orchestrated mainly by Lighthizer, Trump imposed steep tariffs on many Chinese goods, as well as tariffs on steel and aluminum from the European Union, Canada, and Mexico, in hopes of gaining market concessions, which didn’t happen. Biden appointed a U.S. trade representative— Katherine Tai—who views overseas trade, especially with China, much as Lighthizer does, and the current president has continued to levy nearly all of the tariffs on some $350 billion in Chinese goods that Trump imposed, even as he has come to a partial  understanding with Europe in reducing tariffs. Lighthizer’s other major diplomatic initiative—the United States-Mexico-Canada Agreement, or USMCA, which replaced NAFTA—did manage to improve labor protections somewhat and closed loopholes that allowed companies to evade restrictions on foreign sourcing. (For example, requiring 75 percent of an auto’s parts to be made in one of the three countries, up from the current 62.5 percent.) This, too, won plaudits from progressive Democrats, with then-House Speaker Nancy Pelosi saying that “there is no question” USMCA is better than NAFTA.

Still, some pundits and economists argue that Trump shouldn’t get too much credit for a broad shift that was likely to happen anyway. His election to the presidency as an insurgent populist in 2016 was more a symptom of the failure of both political parties, Republican and Democratic, to understand how seriously globalized markets and the surge of technological innovation were going to devastate America’s working class. This inevitably created anger and resentment over the crushingly unequal society the United States has become, making the country ripe for populism and nationalism.

How did that happen in the first place? Starting under President Ronald Reagan, Republicans became devout free-traders. After the collapse of the Soviet Union exposed the fallacies of a “command economy,” the Democrats under Bill Clinton also shifted rightward, unleashing capital flows around the world (which disadvantaged labor) and deregulating Wall Street. Most mainstream Democrats became deficit-slashing “Eisenhower Republicans,” in Clinton’s ironic phrase, and bought into trickle-down economics in action if not word, allowing unfair tax policies that favored Wall Street and capital gains earners. Barack Obama mostly followed suit, even after the 2008 financial disaster. Indeed, it’s noteworthy that in a sort of distorted mirror image to Trump’s insurgency, the once-obscure socialist Sen. Bernie Sanders nearly defeated Hillary Clinton in the 2016 Democratic primaries on the strength of his own populist agenda.

As Harvard University economist Dani Rodrik told me before Trump’s election, these trends prefigured the current gulf in American politics between the very wealthy and everyone else.

“The sense that we’re all in this together as one nation, a common society and a common policy, has been disrupted by globalization. Now, there is a greater realization that the benefits of globalization accrued disproportionately to the professional classes, the higher skilled, the ones who had the mobility and access to capital,” said Rodrik, who issued one of the earliest warnings about the effect these policies might have on the working class in his 1997 book Has Globalization Gone Too Far?

As a result of these profound changes—and the inability of both political parties to see them until too late, leading to Hillary Clinton’s stunning presidential election loss in 2016—“it seems quite likely that Biden would have embarked on a different trajectory in trade regardless of what preceded him,” Rodrik said in an email last week.

Others agree. “I think that if Trump had stumbled and fallen down the stairs at Trump Tower [when he announced his election bid in 2015] and died, we still would have had a similar elite rethinking of globalism, and the Rust Belt would still have been a swing region open to economic nationalist appeals,” said Michael Lind, a University of Texas political scientist who was also one of the first to see the dangers of untrammeled globalization.

Biden himself had been a pent-up populist long before he entered the White House, as Jared Bernstein, chairman of Biden’s Council of Economic Advisers, and other advisors told me for an article titled “The Bidenomics Revolution,” published in the early months of the administration. They say the president realized as far back as the opening of China in the 1980s and the fall of the Berlin Wall that millions of new low-wage workers would soon stream into the global market, outpacing even U.S. productivity gains. “He knew that would put U.S. labor on the back foot,” said a former Senate advisor, Jim Greene. Biden was dismayed when the Clinton administration, and then Obama—under whom he served for eight years as vice president—did little to invest in retraining and upgrading America’s workforce. While productivity and GDP surged, middle-class incomes did not, and to make matters worse, the declining middle class took on a greater burden of taxes.

Today, by pouring hundreds of billions of dollars into a new industrial policy intended to benefit blue-collar workers and outpace China, Biden is “enacting a set of core principles that he’s carried with him forever, at a moment that invites precisely that kind of action,” Bernstein told me in 2021.

This was articulated by National Security Advisor Jake Sullivan in a speech at the Brookings Institution in late April. Sullivan said the administration’s abandonment of “trickle-down” economics in favor of a “foreign policy for the middle class”—code for the neo-protectionism and industrial policy embraced by Biden—was aimed at decades of policies such as “regressive tax cuts, deep cuts to public investment, unchecked corporate concentration, and active measures to undermine the labor movement that initially built the American middle class.” America’s political class, Sullivan said, has awakened to the problems of “oversimplified market efficiency” and its own geopolitical naivete since the Cold War, with “entire supply chains of strategic goods—along with the industries and jobs that made them—moved overseas.”

Even so, Lighthizer is largely correct to say that Trump’s four years in office marked a “fundamental shift” in the U.S. approach to trade and overseas markets. “There’s no question that Trump’s presidency represented a turning point in the Washington consensus on the desirability of unfettered free trade and, more specifically, the economic and geopolitical risks posed by China,” said David Autor, a Massachusetts Institute of Technology economist who was one of the first to document the “China shock.” Although Hillary Clinton began to sense the populist revolt undercutting her candidacy—by opposing the Trans-Pacific Partnership free trade deal she once supported—it’s highly unlikely that she would have imposed steep import tariffs unilaterally as Trump did, or that Biden would have done so on his own.

“Trump’s actions were far more aggressive than we could reasonably have expected of a President Clinton; and the fact that Biden has maintained Trump’s policies indicates that Trump was in part a cause and not just a symptom of our dramatically changed policy stance toward China,” Autor said.

Trump also may have lucked out in picking Lighthizer, who proved to be a rare career pro in the administration at a time when Trump plucked some of his cabinet members out of odd places mainly for what he believed to be their loyalty. Lighthizer knew the weaknesses in the trade system intimately and, for better or worse, proceeded to take it apart—disabling the World Trade Organization (WTO), for example, by refusing to appoint a judge to its appellate court. (Despite promises to restore the WTO, Biden has not done so.)

Three recent historical developments shattered many of Washington’s illusions surrounding neoliberalism. One was the crash of 2008 and the Great Recession that followed. This had the double impact of opening Washington’s eyes to the out-of-control practices on Wall Street and causing a disastrous drop in Americans’ median net worth, according to a 2012 Federal Reserve study. The study found that the net worth of a broad group of Americans loosely defined as the middle class plummeted from a median of $126,400 in 2007 to $77,300 in 2010. According to University of California at Berkeley economist Emmanuel Saez, the wealthiest 1 percent of the country actually made out better, in percentage terms, during Obama’s “recovery” than they did from 2002 to 2007 under tax-cutting Republican President George W. Bush. French economist Thomas Piketty has said that the United States is now suffering the worst income inequality in the developed world, even resembling the doomed socioeconomic stratification of the aristocratic “old Europe” in the pre-World War I period.

The second phenomenon was the growing realization by both U.S. political parties that, under autocratic President Xi Jinping, China had no intention of succumbing to a U.S.-dominated international order, and there was little pressure that Washington could apply to alter Beijing’s policies.

The final blow was the global pandemic, which revealed how vulnerable globalized supply chains had become to disruption, triggering severe slowdowns in many sectors as parts and materials grew scarce. “The pandemic supply-side interruptions were enormous, and people realized the overall gains [from the global supply chain] had hidden a lot of downside risks,” said Nobel-winning economist Joseph Stiglitz. Beyond that, he said, “the economic gains from globalization were always exaggerated and the distribution costs [in other words, the effect on the middle class] were underestimated.”

Although Stiglitz—like most economists across the political spectrum—worries about excessive protectionism and the retreat from global cooperation, he suspects that the economic downside will be less than the neoliberal advocates of trade say. “The structure of trade will change, but there will still be a lot of it,” he said in a phone interview.

It’s far too soon to assess the overall economic impact of this shift. But most economists agree that Trump’s tariff-and-tax-cut approach—an odd, ungainly blend of protectionism and trickle-down—did little to fulfill his campaign promise of bringing back manufacturing jobs. The Biden administration has done much better. While some of the surge in new manufacturing investment at home is a result of the post-pandemic recovery, it is also true that Biden’s Infrastructure Investment and Jobs Act, Inflation Reduction Act, and CHIPS and Science Act did a lot to bring back what the president’s administration claims are more than 800,000 manufacturing jobs. Trump’s policies fell way short by comparison.

“There is an important difference with Biden,” Rodrik said. “His trade policies are in support of a coherent domestic economic strategy. Trump didn’t have a coherent domestic economic strategy, and his trade policies were scattershot, ad hoc, and ineffective.”

Others disagree somewhat. Lind noted that the Inflation Reduction Act—a dramatically reduced version of Biden’s original “Build Back Better” plan—is largely focused on “green” energy development. “That’s not industrial policy, it’s energy policy, and a stupid energy policy at that,” Lind wrote in an email. “The idea that we can win the global competition to sell windmill rotors and batteries and solar panels against subsidized Chinese competition would make a cow laugh.”

The risk in the long term is that the backlash against open trade will go too far in the other direction. Lighthizer calls for a “strategic decoupling” between the world’s two largest economies, the United States and China, but this is not only economically foolish (and possibly unfeasible), but it will likely result in a long-term deepening of the cold war atmosphere between Beijing and Washington. (Biden, by contrast, is for “de-risking and diversifying, not decoupling,” as Sullivan put it.) Lighthizer certainly exaggerates when he calls China “the greatest threat that the American nation and its system of Western liberal democratic government has faced since the American Revolution.” Even if China is as militaristic, autocratic, and anti-American as he says, it also owes its great wealth and power to the American-orchestrated international system in a way that the Soviet Union, Nazi Germany, and militarized Japan never did.

What is clear is that Biden, like Lighthizer, is looking to create nothing less than a new world order—or at least a “new Washington consensus,” as Sullivan put it. For now, the new system remains not only inchoate but utterly chaotic. “The international order that emerged after the end of the Second World War and then the Cold War were not built overnight,” said Sullivan. “Neither will this one.” What will success look like? “The world needs an international economic system that works for our wage-earners, works for our industries, works for our climate, works for our national security, and works for the world’s poorest and most vulnerable countries,” Sullivan said.

That will be a very difficult circle to square—especially since much of the cost to U.S. manufacturing has come from the competition by many of those very countries.

Lighthizer says it more plainly. He writes: “Trade is good. More trade is better. Fair trade is essential. But balanced trade is imperative.”