I’m watching the stock market plunge, and the expectations for recession and stagflation rise, along with everyone else. I’m aware of the innumeracy of the Trump administration, apparently using a shortcut AI formula to reset global trade imbalances and trying to bullshit their way through the criticism.
But I think we give too much credit to Donald Trump and his lieutenants when we suggest that they’re pursuing a misguided trade policy, or that they aren’t pairing tariffs with the necessary steps to boost domestic manufacturing. Those things are true, of course: U.S. trade policy has been deeply inequitable for decades, favoring multinationals over workers and the environment, giving benefits to those corporations in free-trade agreements that they could never get through normal legislative channels, and handing over economic decisions to Wall Street. But these careful explanations, however correct, have nothing to do with what we saw on display in the Rose Garden yesterday.
Because these aren’t really tariffs at all.
Sure, in some functional sense, Trump announced a set of levies to be collected on imports upon their entry into the country. But a tariff policy would consider whether Americans have the wherewithal to make that good domestically, whether component parts that go into U.S. manufacturing should be targeted at the same rate as finished goods, and whether government policy has incentivized a transition to domestic production to encourage the investment. Even the Gilded Age era that Trump looks at longingly did not feature across-the-board tariffs; the famed McKinley Tariff of 1890 cut tariffs on sugar, the biggest revenue-raiser of the era.
What Trump is doing is a sanction policy, only he’s doing it against the whole world, all at once, for the assumed harm of “ripping off” the United States for decades. Sanctions have become a dangerously large component of American geopolitical strategy, an instrument of economic war felt disproportionately by the world’s poorest citizens. The stated reason that Russia and North Korea and other rogue states aren’t on the tariff lists is because sanctions have destroyed their ability to have a trading relationship with the U.S. Trump is applying those punitive measures to the rest of the world.
It is not at all surprising that Trump sees the appeal in sanctions. It is no different from a mob boss moving into town and sending his thugs to every business on Main Street, roughing up the proprietors and asking for protection money so they don’t get pushed out of business. Trump believes that the U.S. is indispensable enough that it can intimidate every country on Earth by, well, asking for protection money, which would take many forms: curbing migration, taking in more U.S. farm exports or weapons systems, reducing industrial capacity in China and forcing more consumption, buying long-dated U.S. debt on the cheap, siding with a war strategy against Iran, literally anything the White House wants. Trump now has a tool by which he can achieve whatever goals he conjures up, or simply have his leg-breakers beat the global economy to a pulp. It’s a mentality fit for someone repeatedly linked to organized crime.
I laid this out nearly six months ago, after Scott Bessent was named Treasury secretary. He sketched out this entire policy last year in an interview explaining his “green-yellow-red” theory. Essentially, Bessent would put every country in a box with one of those three colors. “This is how you get in the green box, this is how you stay in the green box. If you’re India, you want to have 20% tariffs, you want to buy sanctioned Russian oil, you’re in the yellow box, and by the way, if you keep buying that oil, you’re moving toward the red box.”
Check out this statement from the Transatlantic Consumer Dialogue, a coalition of U.S. and European Union consumer and digital rights organizations, highlighting that the U.S. National Trade Estimate lists EU laws on privacy, competition, food safety, and climate as “trade barriers.” Regardless of the ridiculous way the administration calculated its tariffs, it’s clear that the proposed remedy for removing them is for the EU to change its laws.
Trump believes that every relationship is zero-sum and transactional. There are no win-win arrangements with allies. They have to suffer for us to win. And if a deal is made, it must be made from a position of strength. From Trump’s perspective, he just gained leverage on every country in the world, even the ones only inhabited by penguins.
The problem with this “logic” is that America is not indispensable and other countries have just as much ability to retaliate, forcing the whole world into recession and making it very clear who started it.
But countries are not alone in the boxes; corporations and industry sectors are as well. The phalanxes of lawyers and lobbyists who try to ease sanctions through their contacts at the highest levels of power now have a new target. Companies have been lawyering up for months in anticipation, while enlisting friendly politicians for the task. The White House has fielded hundreds of letters from businesses pleading their case. And it’s already working.
Here’s the head of the American Petroleum Institute with a slobbering note: “We welcome President Trump’s decision to exclude oil and natural gas from new tariffs, underscoring the complexity of integrated global energy markets and the importance of America’s role as a net energy exporter.” We already know there has been some resistance from the oil and gas industry over Trump’s demand to increase production, which would lower prices below the break-even rate that makes exploration viable. Let’s watch for any changes in those decisions in the weeks ahead. Or maybe the industry will make good on the billion dollars in campaign cash Trump wanted.
I’ve really only seen Sen. Chris Murphy (D-CT) understand this, that this is just a loyalty test for virtually every business in the nation, a universal attempt to gather protection money. It’s no different than using the leverage of government funding to force universities and law firms into submission. These economic sanctions force businesses to supplicate. “One by one, every industry or company will need to pledge loyalty to Trump in order to get sanctions relief,” Murphy writes. That’s correct, and it could come in the form of campaign support, corporate governance changes, or just raw cash. Anything is possible.
So this policy is an open invitation for corruption, yes. Where you sit in relationship to Trump, what donations you gave and what endorsements you’ve made, will dictate your level of success. America is now a country where proximity to the king matters above any other business strategy. As Tim Wu writes, companies so dependent on government treatment don’t innovate because they don’t have to. Their government relations departments rise well beyond their research and development departments. And as there are only so many favors to dish out, they trend the country toward oligarchy.
Most of all, I think the attempts to overlay coherence in trade policy on this set of actions really misses the point. There is no effort here to rewrite the rules of trade or reverse deindustrialization. It’s actually more like a funhouse-mirror version of the neoliberal era: using trade as a bargaining chip to win other policies. In that era, the attraction of duty-free treatment was used to get countries in line; now, it’s the stick of tariff sanctions.