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Domestic Constraints and International Constraint (2025)

Following the re-election of Donald Trump, United States trade policy has taken a dramatic protectionist turn, leading the new administration to impose the highest and most broad-based trade restrictions since the 1930s. Under the Trump administration, the U.S. is in the process of undoing the very international trade regime it was instrumental in creating in the 1940s with the establishment of the General Agreement on Tariffs and Trade (GATT). Given the scope and intensity of recent trade restrictions, the U.S. has done away with any pretense of adhering to international trade rules.

Given President Trump’s propensity to sudden policy shifts, it remains to be seen which of the various protectionist policies introduced will stick and which will be removed in the next few years. It also remains to be seen if and to what extent and Congress or the judiciary will rein in protectionist policies and whether future U.S. administrations will reverse protectionist policies . Regardless, a highly unpredictable and economically damaging trade policy under Trump 2.0 has made the U.S. an unreliable trade partner.

This article will analyze how much less reliable U.S. trade policy has become following the 2024 presidential elections. To contextualize current U.S. policies,[1] I will first provide an account of Trump 2.0 trade policies by embedding them in the broader historical context of U.S. trade policy. Second, I will analyze the role of domestic politics, broadly conceived, in shaping U.S. trade policy with a particular focus on the legal authority enjoyed over trade by the president. Third, I will discuss the economic and geopolitical factors that may yet make U.S. trade policy less protectionist, if not necessarily more reliable over the medium term. Finally, I will attempt to make sense of Trump policies in terms of possible economic and political objectives. 

Trump 2.0 Trade Policies in Historical Context

The GATT of 1947 served as the foundation of the international trade regime until the creation of the World Trade Organization (WTO) in 1995. The most-favored nation (MFN) principle, reciprocity and multilateralism have served as foundational principles, rules and norms of the post-World War international trade regime and have successfully contributed to trade cooperation and liberalization (Irwin et al., 2008; for a more theoretical perspective see Kindleberger, 1981).

Initially the major driving force behind multilateral trade liberalization, the U.S. became progressively more skeptical of free trade. Skepticism increased sharply starting in the early 2000s in the context of widening U.S. trade and especially bilateral trade deficits with China (Irwin, 2017, chapter 10–13). This coincided with the decline of many traditional U.S. manufacturing industries and a concomitant loss of employment, which devastated many areas in the Midwest and elsewhere in the U.S. The so-called “China shock” became a politically powerful narrative, even as most economists regarded technological change as a more important driver of the decline of traditional U.S. manufacturing than free trade (Dorn et al. 2016). 

But it was under the first Trump administration that U.S. trade took a significant protectionist turn in terms of the intensity and the scope of restrictions as well as their disregard for the rules-based international trade regime. Among the major actions taken, Trump 1.0 imposed 1) sectoral tariffs on solar panels and washing machines imports, 2) high tariffs on steel and aluminum imports, and 3) broad-based and high tariffs on imports from China.

This significantly more protectionist trade policy was also reflected in a more aggressive use of established domestic trade instruments (for more detail, see below). To provide just one example, since the passage of the 1962 Trade Expansion Act, successive U.S. administrations had launched 30 or so investigations under Section 232, which allows the president to impose trade restrictions based on national security grounds. Trump 1.0 launched a total of eight Section 232 investigations, which represented at the time around one quarter of all Section 232 investigations ever launched. The investigations also led to findings in six out of the eight cases, which at that point represented 40% of all cases (Manak and Kopans-Johnson, 2025).

However, Trump trade policies also provided for a degree of continuity in terms of long-standing concerns about sectors such as steel and autos as well as large bilateral trade deficits. The Trump administration may have effectively immobilized the WTO dispute settlement mechanism by blocking the appointment of judges, but this policy had begun under the Obama administration and was later continued under the Biden administration. There was also a degree of continuity between Trump 1.0 and the Biden administration. Biden did not reverse any of the Trump-era tariffs, even as his administration sought to defuse several transatlantic trade disputes, including by granting limited exemptions to some allies (e.g. steel and aluminum tariffs, Airbus-Boeing, digital taxes). Under Biden, Congress also passed the Inflation Reduction Act, which contained discriminatory consumption and production subsidies and led to renewed trade frictions, particularly with the European Union. Finally, Biden not only maintained Trump-era China tariffs but imposed additional, if narrower tariffs on Chinese imports (e.g. steel, electric vehicles, batteries) (U.S. Department of Commerce, 2024).

Unquestionably, however, the trade policies of the first Trump administration were the most protectionist, least predictable and hence the most unreliable policies that the U.S. had pursued since the 1930s. This applies to both trade policy threats and actual measures taken. As a Congressional Research Service note succinctly put it, comparing Trump trade policies to traditional U.S. trade policy: 

The United States has imposed unilateral, restrictive trade measures in the past, but rarely before attempting to resolve its trade-related concerns through negotiations. The United States, for the most part, engaged with trading partners in bilateral and multilateral fora to manage frictions over such issues and to achieve expanded market for US firms and farmers and their workers (Congressional Research Service, 2019). 

In the case of China as well as steel and aluminum tariffs, Trump trade policy was much more aggressive and unilateral than previous administrations, even if on other occasions Trump 1.0 opted to suspend tariffs or withdraw protectionist threats to engage in trade negotiations (e.g. Japan, Korea, EU). The first Trump administration also showed scarce regard for international rules by stretching (and overstretching) the interpretation of WTO-compatible safeguards, especially the national security exceptions, which was invoked in the case of steel and autos (WTO 2025a; 2025b). 

Trade policy under the second Trump administration has become even more dramatically protectionist and less reliable than under the first. It remains to be seen to what extent the protectionist measures thus far announced and implemented will prove permanent and to what extent they may be used as bargaining chips to nudge other countries to make economic and political concessions by way of what may be termed coercive protectionism. The often preliminary and vague bilateral “trade agreements” reached thus far (e.g. UK, EU, Japan) suggest that the Trump administration has, broadly speaking, opted for a combination of higher import restrictions (though lower than originally threatened) and concessions made by other countries in terms of lower tariffs on imports from the U.S., increased purchases of U.S. goods and pledges to increase investment in the U.S. However, just because some trade measures may be reversed does not mean that U.S. trade policy will simply cease to be unreliable. After all, leveraging asymmetric dependence in such a blatant way violates international trade rules that were partly designed to limit the coercive power of larger economies. And just because the U.S. may withdraw protectionist measures does not mean that it will not resort to rules-violating protectionist policies in the future.

Since coming to office, the administration has taken a flurry of protectionist measures. It did so at an unprecedented speed and scale (see Tab. 1). In February 2025, it announced and then quickly suspended for one month 25% tariffs on United States-Mexico-Canada-Agreement (USMCA) members, Canada and Mexico, and the administration then granted exemptions on USMCA-compliant goods following the expiry of the initial suspension. It announced additional tariffs worth 20% on China, which, following retaliation and counterretaliation, were lifted to 145%, before being scaled back again, pending negotiations of a bilateral trade deal (Peterson Institute for International Economics, 2025b). By removing various exemptions, it reimposed steel and aluminum tariffs of 25% and raised aluminum tariffs from 10% to 25% and later to 50%. It imposed sectoral tariffs on auto imports worth 25%, and it imposed secondary tariffs on Venezuela, which threaten to impose 25% tariffs on third countries that import oil from Venezuela. The president also threatened to impose an across-the-board tariff on Colombia for refusing to accept U.S. deportation flights, and he mused about imposing tariffs on Denmark in view of ambitions to take control over Greenland (Swanson and Rappeport, 2025a). The administration also launched further Section 232 investigations into copper, lumber and timber, semiconductor, pharmaceutical, trucks, autos, commercial aircraft and jet engines, processed critical minerals, drones, among others. The Trump administration has furthermore threatened to impose secondary trade sanctions on countries buying oil from Iran. It also imposed tariffs on Brazil and India in the context of political disagreements.

Most significantly, the measures announced in the context of the so-called Fair and Reciprocal Tariff plan threatened to bring about in one fell swoop the most restrictive tariffs since the 1930s. In the context of the Fair and Reciprocal Trade plan, Washington imposed tariffs, which consist of a 10% baseline tariff on virtually all trade partners and additional, varying “reciprocal” tariffs on countries that run bilateral trade surpluses with the U.S. In the eyes of the Trump administration, the “reciprocal” tariffs were meant to reflect the totality of restrictions that bilateral trading partners imposed on the U.S., including tariffs, non-tariff barriers, taxes, exchange rate misalignment and “any other unfair practices”. In practice, the “reciprocal” tariffs were calculated based on the size of U.S. bilateral deficits (White House, 2025a). Certain sectors, including chips, copper, minerals (not found in the U.S.), lumber, pharmaceuticals, bullion, energy and minerals, and autos were exempted. Many of these sectors were already subject to Section 232 tariffs or were under Section 232 investigation. As the reciprocal tariffs were going into effect on April 9, the administration suspended them for 90 days, officially to allow for bilateral negotiations with 75 trading partners. Subsequently, the Trump administration reached a number of ‘political’ though not yet legally binding bilateral trade agreements with a variety of countries, often leading to lower U.S. import tariffs than originally threatened in exchange for significant trade and other economic concessions. 

Major trade policy decisions under the second Trump administrations

February 1 - Announces and two days later suspends 25% tariffs on Canada and Mexico to allow for negotiations over border and fentanyl issues; on March 6 imports that satisfy USMCA rules are exempted from 25% tariffs

February 4 - Imposes tariffs of 10% on all imports from China; ends (and one day later suspends) duty-free import of low value packages from China; later ends de minimis rule for Chinese packages again

February 10 - Announces reimposition of 25% steel and aluminum tariffs (went into effect March 12); removes various exemptions previously granted by Trump 1.0 and Biden (went into effect March 12) (under previous Section 232)

February 21 - Instructs United States Trade Representative (USTR) to re-examine treatment of U.S. digital companies by France, Austria, Italy, Spain, Turkey and UK and to consider United States – Mexico – Canada Agreement (USMC) dispute against Canada over digital services tax

February 25 - Launches Section 232 investigation into copper imports

March 1 - Launches Section 232 investigations into timber and lumber imports

March 4 - Imposes additional 10% tariff on imports from China

March 25 - Imposes secondary tariffs (went into effect on April 2) worth 25% on third countries importing oil from Venezuela

March 26 - Announces 25% tariffs on foreign-made autos (went into effect April 3) and automobile parts; grants certain exemptions for USMCA-compliant imports from Canada and Mexico

April 2 - Announces a 10% baseline tariff on all countries (went into effect April 5) and an additional “reciprocal tariff” (to go into effect April 9, but suspended for 90 days on April 10) ranging from 10–50% on countries that run goods trade surpluses with the US; some sectors and products receive exemptions; Canada and Mexico remain exempt from reciprocal tariffs and also 10% baseline tariff if exports are USMCA-compliant

April 5-10 - Imposes an additional tariffs on Chinese imports, on top of the tariffs under Fair and Reciprocal Tariff Plan, following retaliation-counterretaliation; U.S. tariffs on most Chinese imports are increased to 145%

April 14 - Launches Section 232 investigation into semiconductor and pharmaceutical imports

April 15 - Launches investigation into whether import of critical minerals, rare earth elements and processed critical minerals pose a national security threat

April 17 - Imposes fees on Chinese-built ships, foreign vessels transporting cars and imposes restrictions on transporting liquified natural gas

April 23 - Launches investigation into whether imports of trucks represent a national security threat

May 1 - Launches investigation into whether commercial aircraft, engines, and parts imports pose a national security threat

May 12 - Lowers additional tariffs on China from 125% to 10% percent for 90 days (went into effect May 14)

June 3 - Announces increase of steel and aluminum tariffs to 50% (went into effect on June 4)

July 15 - Launches unfair trade investigation of Brazil

July 30 - Imposes additional 40% tariff on Brazil (went into effect September 6)

July 30 - Imposes 50% tariff on imports of copper (went into effect August 1)

July 31 - Increases tariffs on Canada to 35% for USMCA noncompliant goods (went into effect August 1)

July 31 - Adjusts tariffs on nearly all countries with respect to the “reciprocal” tariffs (went into effect August 7)

August 6 - Imposes additional 25% tariffs on India (went into effect August 27)

August 11 - Extends China tariff suspension for another 90 days

In April, all protectionist trade measures taken together were estimated to have increased the U.S. effective tariffs from 2.5% to 28%, excluding “reciprocal” tariffs, but including China tariffs. Had “reciprocal” tariffs not been suspended and post-reciprocal tariff retaliatory tariffs against China been avoided, the average effective tariff rate would nonetheless have exceeded 20%. At the moment, the effective tariff is estimated to be around 17%, meaning The average tariff rate today is only slightly below the levels following the introduction of the notorious Smoot-Hawley tariffs in 1930 (Yale Budge Lab, 2025). 

Most protectionist measures taken so far are of highly questionable legal standing under WTO rules and hence violate established international principles and norms. Various WTO agreements on anti-dumping and subsidies allow measures to protect domestic industries in case of serious injury. The WTO also provides for (narrow) national security exemptions. Trump 2.0 has frequently invoked the national security exemptions to justify sectoral restrictions. In practice, most of them would not hold up in WTO terms. In the case of U.S. tariffs on Canada and Mexico, the justification provided was tied to national security, namely border security, but in practice the goal of the protectionist policies was to gain coercive leverage vis-à-vis the two USMCA partners. The most blatant case of disregarding rules are reciprocal tariffs, which would blow up one of the most fundamental principles of the post-war trade regime, the most-favored nation status. 

Moreover, the Trump administration has resorted to coercive protectionist threats and measures in pursuit of broadly geopolitical goals, as in the case of Columbia over deportation flights or in the case of secondary tariffs on Venezuela as well as in the case of Brazil over its support for the BRIC group and the prosecution of former Brazilian President Jair Bolsonaro and in the case of India over its reluctance to lower trade restrictions on U.S. imports and its purchases of Russian oil. All told, what held for Trump 1.0 is much truer for Trump 2.0 trade policy: “The potential scale and scope of these recent unilateral U.S. tariff increases as well as the objectives pursued are unprecedented in modern times” (Congressional Research Service, 2024a).

Domestic Politics, Public Opinion and Trade Policy

U.S. trade policy has shifted from a free trade stance to more selective liberalization to selective protectionism and under Trump 2.0 to broad-based protectionism. Several domestic political factors have underpinned this shift. 

First and foremost, the domestic political-electoral calculus has created greater incentives for politicians to adopt a more critical stance vis-à-vis free trade. America’s political system is highly polarized and political candidates typically need to win primaries to win the nomination of their party, which makes candidates more receptive to concentrated, organized, special interests, such as trade protectionists as opposed to dispersed consumers. At the presidential level, this dynamic is exacerbated by the fact that candidates are elected based on the number of electoral college votes, not the popular vote. As it happens, several of the critical swing states, such as Pennsylvania, Wisconsin and Michigan, have experienced significant industrial decline. Presidential candidates have therefore adopted an increasingly protectionist rhetoric in the hope of appealing to voters in these critical states. This appears to have applied to both Republican and Democratic presidential candidates in the past few elections.

Meanwhile, U.S. public opinion remains relatively pro-trade, with some caveats. According to a 2024 Chicago Council on Global Affairs poll, 75% of Americans believe that international trade is good for the U.S. economy, and 81% say it is good for consumers and their living standards (Chicago Council on Global Affairs, 2024). In terms of the effect of trade on domestic job creation, however, 52% of Republicans believe trade is bad, while 69% of Democrats believe it is good. 66% of Americans say that U.S. policy should restrict trade to protect jobs, again with a higher share of Republicans taking this view than Democrats.

Similarly, a 2024 Pew poll found that 59% of Americans believe that the U.S. has lost more than it has gained through trade, while 37% believe the opposite. However, 73% of Republicans believe that the U.S. has lost more than it has gained, while only 47% of Democrats do so, and 50% of Democrats believe it has gained more (Gracia, 2024). Overall, attitudes towards free trade seem to have turned slightly, but not dramatically so, more negative in recent years without decisively turning protectionist. In a previous survey in 2021, only 56% of Americans thought that the U.S. had lost more than gained, while 41% took the opposite view. 

Important partisan differences exist. Traditionally pro-free trade Republicans have made significant electoral gains among traditionally Democratic-leaning blue-collar workers (without college degree) in recent years, while the Democratic party has seen its electoral base shift from workers to white-collar employees (college degrees). To the extent that free trade and technological change have benefited highly educated Americans, while negatively impacting Americans working in import-competing, labor-intensive sectors, the greater skepticism of parts of the Republican base toward free trade makes sense. The narrative of economic decline and the nefarious effect of free trade finds, to some extent justifiably so given its distributional consequences, a receptive audience among Republican voters. Protectionist rhetoric also chimes more readily with unilateralist, isolationist-leaning MAGA rhetoric of the Republican party, compared to the more internationalist discourse in the Democratic party (Donelly, 2024).

It is of course difficult to directly tie public attitudes towards free trade to the broader shift in official trade policy. The data suggests a more protectionist trade policy is not completely out of line with public opinion. Support for protectionism is greater among Republicans than Democrats, which would be consistent with the divergence of trade policy between recent Republican and Democratic administrations. It is even more difficult to firmly link the sharp turn toward protectionist policies of the Trump administration. After all, nothing forces a successful presidential candidate to pursue the protectionist policies promised on the campaign trail once elected, and the sharp as opposed to a more moderate swing toward a more protectionist trade policy under Trump goes way beyond what even many Republicans support. Public opinion is therefore best seen as a sort of enabling, mildly causative factor behind recent U.S. trade policies, including Trump 2.0.

Presidential Power and Trade Policy

Trade policy is largely formulated by the president and his administration. Domestic legislation enables and constrains presidential trade policymaking. Article I, Section 8 of the U.S. Constitution confers the power to collect taxes and duties and to regulate commerce to Congress. However, starting in the 1930s, Congress began to delegate some of its trade-related prerogatives to the executive. Congress maintains control over some aspects of trade policy, such as the granting of trade promotion authority, without which it is practically impossible to negotiate and win congressional approval for trade agreements.

Overall, the president benefits from extensive, if legally not unlimited powers to conduct trade policy, particularly in terms of trade-restrictive measures. Under Section 201 of the 1974 Trade Act, the president can impose trade restrictions if imports are found to cause serious injury. Procedurally, a domestic industry, trade association or union needs to petition the U.S. International Trade Commission (USITC) (the ITC can also self-initiate), to conduct an investigation to determine within 120 days if serious injury has taken place and, if so, make recommendations about safeguard measures, such as tariffs, quotas or other restrictions. Trade restrictions under Section 201 are time-limited, typically lasting 4–8 years, as well as product- or sector-specific. 

Under Section 301 of the 1974 Trade Act, the president can also impose restrictions in case a foreign government is found to be violating an existing trade agreement or discriminates against U.S. companies. If the USTR finds that to be the case, it can impose trade restrictions and other trade measures. This process typically takes 12–18 months. Trade restrictions under Section 301 can be very broad targeting all imports from another country and restrictions can remain in place for as long as the targeted country continues to violate trade agreements or discriminates against the U.S. commercial interests. The legislation states that trade retaliation should be “equivalent in value to the burden or restriction being imposed” by another country (Congressional Research Service, 2024b).

Under Section 232 of the 1962 Trade Expansion Act, the president can impose trade restrictions on national security grounds. Following a request by the president, government departments or agencies, the commerce secretary has 270 days to investigate and make recommendations to the president to determine whether national security is at risk and what actions to take (Congressional Research Service, 2021). Section 232 measures are not time-limited, and restrictions are product- or sector-specific.

The International Emergency Economic Powers Act [MJ4] (IEEPA) allows the president to impose wide-ranging economic restrictions on another country or countries. The IEEPA gives the president powers to restrict economic transactions with other countries, companies or individuals as long as the national emergency remains in effect. Trump 2.0 invoked the IEEPA to impose 25% tariffs on Canada and Mexico by declaring a national emergency related to immigration, drug smuggling and border security. The act was also invoked to justify the “reciprocal” across-the-board tariffs on all U.S. trade partners, declaring trade deficits a national emergency. Whether in fact the president was within authority to invoke the IEEPA to do so will soon be decided by the Supreme Court (see below).

Other relevant trade legislation exists but unlike Section 201, 232 and 301, measures under these laws have never been taken. Section 122 of the 1974 Trade Act allows the president to impose 15% tariffs on the imports of another country of up to 150 days in the event of persistent and large balance-of-payments imbalances. Section 338 of the Tariff Act of 1930 authorizes the president to impose 50% tariffs in case U.S. commerce is found to be discriminated against by another country. Finally, Section 891 of the Internal Revenue Code of 1934, an obscure tax law, allows the president to double domestic taxes on companies and individuals from countries that have been found to be discriminating against U.S. companies in terms of their domestic taxation regimes, without requiring approval from Congress.

Legal Basis of Presidential Trade Authority

Section 122 (Trade Act of 1974) - Allows president to impose quotas and tariffs of up to 15% for up to 150 days on countries that have large balance-of-payments surpluses with the U.S. 

Section 201 (Trade Act of 1974) - Allows president to impose temporary duties and other trade measures if the U.S. International Trade Commission determines that a surge in imports is a substantial cause of threat of serious injury to U.S. industry

Section 301 (Trade Act of 1974) - Allows the USTR, at the direction of the president, to suspend trade agreement concessions or impose imports restrictions if it is determined that an act, policy or practice of a foreign country violates any trade agreement or if a foreign imposes an unjustifiable burden or restricts U.S. commerce

Section 232 (Trade Expansion Act of 1962)- Allows the president to take action to adjust imports if the U.S. Commerce Department finds certain imports in such quantities as to threaten to impair national security 

International Emergency Economic Powers Act of (1977) -  Empowers president to block transactions and freeze or confiscate assets in case of “unusual and extraordinary” threat to national security, foreign policy or the economy 

Section 338 (Tariff Act of 1930) - Authorizes president to impose tariffs on countries that discriminate against U.S. commerce, allowing for the imposition of up to 50%

Section 891 (Internal Revenue Code of 1934) - Allows president to double income tax rates on companies and individuals from countries found to have in place tax policies discriminating against U.S. companies (without requiring approval from Congress)

The instruments differ in terms of the trade-restricting measures that a president can impose under domestic legislation. IEEPA gives the president maximum flexibility in terms of measures without having to undergo time-consuming investigations or face restrictions in terms of proportionality, duration or sector-specific focus. The president can simply declare a national emergency and take a wide array of economic measures restricting cross-border exchange.[2][RZ5] Similarly, Section 338 provides significant leeway to impose tariffs, namely where foreign tariffs are higher than America’s, or the administration finds that U.S. economic interests suffer from discrimination. 

By comparison, Section 201, Section 232 and Section 301 tariffs typically require time-consuming prior investigations before measures can be taken. Section 201 only provides for time-bound, product-specific or sectoral safeguards. Measures taken under Section 232 are not time-limited, but they only apply to specific sectors or goods. Meanwhile, Section 301 can be – or at least has been – used to impose blanket import tariffs on another country, namely China under Trump 1.0. But in principle retaliatory measures under Section 201 and 301 need to be proportional to the harm caused, and separate investigations are required for each country. 

Section 338 allows the president to impose what effectively are prohibitive tariffs of up to 50% on any country that applies higher tariff rates on U.S. imports than the U.S. does. This gives the president significant leeway to impose tariffs. As one observer put it, the law allows the president “to impose whatever tariffs it likes for whatever reason it can make up on a highly flexible, legal basis” (Financial Times, 2025a). The same is true of the IEEPA that appears to impose no such restrictions on the president once a national emergency has been declared.[3] However, both the U.S. Court of International Trade and a U.S. Court of Appeals found that the Trump administrations’ decision to impose tariffs under IEEPA exceeded the president’s authority. The case will now be decided by the Supreme Court (Financial Times, 2025b).

If Congress fails to challenge the president’s authority and the courts fail to rein in the administration in cases where it stretches the meaning of existing laws beyond their limit, the administration has virtually unlimited scope to set whatever tariff rates it. By invoking the IEEPA, the Trump administration was able to impose whatever trade restrictions it wanted. The Fair and Reciprocal Tariff Plan imposed an across-the-board tariff of 10% in addition to country-specific tariffs to reflect, according to the Trump administration, all “trade barriers”, including non-tariff barriers, exchange rate policies, domestic taxes and other practices considered discriminatory. If neither Congress nor the courts challenge the Trump administration forcefully, future presidents will have virtually unlimited powers to impose whatever trade restrictions they want for virtually whatever reason they want. For now, all this is giving the Trump and future administrations enormous latitude to pursue aggressively protectionist, coercive trade and highly unpredictable and unreliable trade policies. If, on the other hand, the Supreme Court were to side with the lower courts and declare the IEEPA tariffs illegal, this would impose greater constraints on presidential trade policy. However, the president has other trade policy instruments at disposal that would continue to give him significant leeway, unless the courts were to impose restrictions on their application, too.

Economics and Geopolitics as Medium-Term Constraints on Trade Policy

Beyond domestic politics as a partially enabling factor (public opinion and electoral system) and domestic legislation as a factor partially constraining and enabling presidential trade policy, economics and geopolitics may put constraints on an aggressively protectionist U.S. trade policy, at least in the medium term.

Economics may act as a guardrail. Broad-based U.S. tariffs have, will have and have already had negative economic consequences. An aggressive trade policy increases uncertainty, raises prices, and lowers investment, consumer confidence and economic growth. The magnitude of these losses depends on the severity of the trade restrictions introduced and the retaliatory measures taken by trading partners. While the economic consequences of Trump 2.0 trade policies will take some time to be felt in their entirety, economic uncertainty has already increased significantly, boding ill for medium-term economic growth. The recent “reciprocal” tariffs announced in April also led to significant financial volatility and substantial stock market losses, spooking the administration and leading it to temporarily suspend reciprocal tariffs on 75 countries for 90 days (excluding China) to seek negotiations in the face of mounting financial market instability. This suggests that Trump trade policy is responsive to market and economic pressure. Whether this will lead the administration to pursue a significantly less protectionist agenda nevertheless remains to be seen.

Congress, including Republicans, may over time also become more vocal in their position to hyper-protectionist policies, particularly once they begin to hurt their constituents. Republicans in “red” districts may be less vocal in their criticism given the risk they face of being primaried by the president. But Republicans in “purple” states will need to balance the risk of being primaried against the risk of losing the election. Democrats are already broadly opposed to Trump trade policies. Moreover, if Trump’s popularity declines and as he enters the second half of his second term, he may become a “lame duck” president, limiting his control over Republicans. This is unlikely to lead Congress to force Trump to reverse protectionist measures, but over time it may lead Congress to reassert its constitutionally granted trade authority (Peterson Institute for International Economics, 2025c). Opposition among congressional Republicans in both the House and the Senate is gradually emerging with Republicans sponsoring or co-sponsoring bills aimed at curtailing presidential trade authority (e.g. Trade Review Act of 2025) (Politico, 2025).

Geopolitical imperatives may also act as guardrails around U.S. trade policy. The administration remains focused on China as a geopolitical and geo-economic competitor (U.S. Commerce Department, 2025; White House, 2025b). The U.S. will continue to pursue a hawkish geo-economic policy towards China in terms of export controls, financial sanctions and technology access, even if somewhat tempered by China’s ability to impose restrictions on the export of critical rare earths. America does have significant leverage in terms of market access, control of key technologies and the dominance of the dollar. But secondary economic measures that force third countries to align with anti-China policies will be more costly to enforce in case they fail to win support (Congressional Research Service, 2020). To make geo-economic measures targeting China more effective and less costly, Washington may yet “trade way” some of the protectionist measures, if not necessarily lead to a broader rethink of U.S. trade policy under the present administration. In particular, it may be inclined to adjust some of the sectoral, national-security-focused trade restrictions to the benefit of allies, but not adversaries. 

As long as Washington continues to view China as a potential peer competitor, it will have an interest in receiving support for its geo-economic policies vis-à-vis China from its major trading partners. This may sound far-fetched in the context of the current unilateral “America First” policy, coercive protectionism and at least the president’s rhetoric questioning the value of long-standing alliances. But America is likely to remain strongly focused on China, especially over the medium term, and this creates incentives for Washington to ease up on some of its protectionist policies, lest they lead to a partial or broader economic alignment of some traditional U.S. allies and partners with China.

The Possible Goals of Trump 2.0 Trade Policies

Recent U.S. trade policy may have been unreliable, but is it unpredictable? U.S. trade measures may have broken long-established rules and reneged on international commitments made. But if it were possible to understand what drives Trump trade policy, it might at least be possible to compensate for the lack of reliability by way of greater predictability. Has there been a broader plan or strategy behind U.S. trade policy informed by a discernable, rational means-ends relationship? As a first step, it is necessary to understand what the potential goals of protectionist trade policies might be.

First, protectionist trade policy may be a way to confer benefits to specific interest groups or please the political-electoral base. Trade protection provides economic benefits to import-competing industries and imposes dispersed costs on the rest of economy. The political-electoral rationale may help explain some sectoral tariffs, such as on steel and autos, but fails to explain the more extensive protectionist measures, such as “reciprocal” tariffs or high tariffs on major trading partners (China) given their dramatically higher economic costs in terms of inflation, lower growth and aggregate welfare losses, and the effects on presidential popularity, compared to sectoral tariffs.[4]

Second, whatever its economic feasibility, trade policy may aim to reduce the trade deficit. The “reciprocal” tariffs have clearly taken aim at countries with whom the U.S. has large bilateral trade deficits (see Fig. 3). Whether across-the-board tariffs reduce trade deficits and at what economic cost depends on how other macro-variables, such as the exchange rate and economic growth, evolve. Economically, bilateral tariffs may help reduce bilateral trade deficits, but for the overall trade deficit to narrow, tariffs need to change the savings-investment balance. It is far from clear that tariffs can achieve this on their own, particularly if trade partners retaliate (Gagnon, 2025a; 2025b; Obstfeld, 2024; 2025). But none of the economic arguments mean that the reduction of the trade deficit is not the intended goal of Trump’s trade policy. “Reciprocal” tariffs, in particular, do seem to squarely aim at reducing U.S. trade deficits. 

Relatedly, tariffs also create coercive leverage to force other countries to make trade-related concessions through negotiations. Such concessions may also aim at reducing U.S. deficits by lowering trade barriers, by extracting concessions with respect to trade-relevant policies, such as non-tariff barriers, exchange rate policy or taxes, or by getting other countries to agree to voluntary export restrictions or voluntary import expansion. In the context of asymmetric trade bargains, the goal is mercantilist in that it seeks to increase U.S. exports, growth and employment. The bilateral “deals” reached thus far following the suspension of “reciprocal” tariffs suggest that such coercive protectionism does inform Trump 2.0 decisions.

Third, tariff policy may seek to impose permanent trade barriers in pursuit of broader economic ends, such as attracting foreign investment to help revitalize domestic manufacturing, increase manufacturing employment, or raise government revenue. In this case, trade restrictions are meant to create incentives for foreign companies to relocate or reshore production to the U.S. Leaving aside the welfare costs of tariffs, mainstream economics is rightly skeptical, to put it mildly, that this will lead to a significant increase in investment in manufacturing, let alone employment-intensive manufacturing. If this is the goal, then the capriciousness of Trump 2.0 trade is counterproductive, as the related uncertainty will make companies hesitate to make large investments (Financial Times, 2025c). 

Tariffs may also be meant to raise additional government revenue to finance tax cuts (Jaeger, 2024). Economically, again, this makes little sense after accounting for broader welfare losses of such a policy due to lower economic growth, investment, employment as well as higher inflation and lower real wage increases (McKibbin, 2025). It may make sense in political-economic terms, however. The Congressional Budget Office (CBO) estimates that the higher tariffs (adjusted for secondary effects) will raise government revenue by U.S. $ 3.3 trillion over the next ten years, not accounting for another U.S. $ 0.7 trillion in lower interest expenses (Congressional Budget Office 2025a). The CBO also estimates that the so-called One Big Beautiful Bill, which effectively extends tax cuts of the 2017 Trump’s Tax Cuts and Jobs Act (TCJA), will translate into a net increase of the fiscal deficit of U.S. $ 3.4 trillion in the next ten years (Congressional Budget Office, 2025b). Leaving aside economic welfare implications, tariff-related revenues will make a tangible contribution to keeping a lid on the fiscal deficit.

Fourth, tariffs can have a more straightforward national security rationale aimed at reducing dependence on certain imports, such as critical minerals, semiconductors or pharmaceuticals. Again, leaving aside the intellectual merit of this policy in terms of risk mitigation and whether such a policy makes sense when applied to autos or timber imports, it is a plausible objective of U.S. trade policy, particularly in the context of a hawkish China policy as well as “America First” policy. Broader U.S. foreign policy towards Greenland, the Ukraine, or Congo also points to a preoccupation with critical minerals, supply chains, and national security, as does the Trump 2.0 policy of encouraging the domestic mining and processing of minerals and their stockpiling (White House, 2025c). It is also consistent with attempts to revive the domestic shipbuilding industry and protectionist measures targeting Chinese shipping (White House, 2025d).

Finally, tariffs (or the threat thereof) can serve not just as leverage in terms of trade-related issues, but also broader foreign policy objectives, whether it is to force other countries to accept deportation flights (Colombia) or, allegedly, negotiations over border security (Canada, Mexico), whether it is meant to signal diplomatic pressure (Greenland, Brazil) or to force a change in another country’s trade policy vis-à-vis third countries (Mexico, India) or to simply threaten third parties not to trade with a target country (Venezuela) (South China Morning Post, 2025). As such, tariff policy is highly fungible and part of a broader diplomatic toolkit, and Trump 2.0 has been applying this tool extensively by way of actual measures and verbal threats.

Protectionist policies are fungible and can be applied in pursuit of a variety of ends, including for different ends vis-à-vis different countries. Is it nonetheless possible to discern a pattern that might allow to generate moderately reliable predictions about future U.S. trade policy? 

At the day-to-day level, the capriciousness of trade policy stands out. Frequently, tariffs are announced and then suspended at the last minute (e.g. Canada/Mexico tariffs) and carve-outs are frequently granted (e.g. iPhones, car parts). This may be attributable to presidential whims, a highly unstructured (or non-existent) inter-agency process or intra-administration disagreement. Either way, it does not suggest that there is an intellectually coherent or policy-wise cohesive plan informing trade policy. Rather, the anecdotal evidence suggests that the policy process is indeed unstructured, chaotic and personality-driven, leading to capricious policies, bereft of any serious cost-benefit assessment and not part of a broader, coherent strategy. [5]

One should not take the administration at its word in terms of the goal of various trade measures. It seems doubtful that the justification provided by the administration for the various measures taken has always been congruent with the actual goal or intent. Taking the administration at its word is problematic because the justification provided may have been needed to justify the activation of a specific trade instrument. In the case of tariff threats against Canada and Mexico, for example, the administration invoked border security as a justification. This was necessary to justify the invocation of a national emergency and the IEEPA, but it is debatable whether border security was the main concern driving tariff policy. After all, invoking IEEPA is easier to do and affords the the president with greater policy flexibility, compared other trade policy instruments.

The Trump administration imposed, suspended, imposed and then increased (Canada) or threatened to increase (Mexico) the initial 25% IEEPA-related tariffs on its two largest trading partners, only to exempt USMCA-compliant imports from tariffs. Initially, U.S. trade policy appeared geared towards decoupling from China, though following the escalation of the bilateral trade conflict, a scaling back of tariffs was agreed to allow for bilateral negotiations. “Reciprocal” tariffs were imposed and then quickly suspended after U.S. financial market volatility spooked the Trump administration, and so on. 

U.S. trade policy under Trump has been characterized by a high degree of unpredictability, including outright reversals. This suggests that there is no grand strategic plan, or if there is one it is intellectually incoherent or poorly implemented. Rather, the Trump administration uses tariffs as an all-purpose instrument to opportunistically pursue a variety of goals, often, though not necessarily always, to gain transactional leverage by way of coercive protectionism. Overall policy seems poorly thought-out and has been forced into retreat on several occasions by actual constraints. Whatever its precise reasons, personal whims, intra-administration disagreement, intellectual incoherence, the outcome is a capricious and unpredictable trade policy. But the evidence that has accumulated thus far also suggests that guardrails constraining U.S. trade policy exist, such as the risk of a financial crisis or the high costs of forceful trade retaliation. But within these bounds, U.S. trade policy can vary widely and turn on a dime, making it virtually impossible to predict with any degree of confidence what future policy will be. By way of conclusion, not only has U.S. policy become completely unreliable, but it has also become dramatically more unpredictable. 

America’s Sharply Diminished Reliability as an International Trade Partner

The multilateral, rules-based international trade regime that emerged after World War II and that turned global after the end of the Cold War helped support trade cooperation and trade liberalization. The regime also helped constrain the political-economic leverage of economically powerful countries and their ability to exploit economically weaker countries in terms of asymmetric bargains by committing all GATT members to the principles of MFN, reciprocity and multilateralism. This never prevented frictions over trade, for cooperation is always characterized by conflict. Trade cooperation is no exception. But conflict over trade issues largely took place within a generally accepted framework of established principles, norms and rules. 

While initially the driving force behind multilateral trade liberalization, U.S. trade policy became less pro-free trade and more protectionist over time. However, the policies of the first and, dramatically more so, the second Trump administration represent a dramatic change by way of its disregard for internationally established rules as well as the extent and scope of protectionist policies. The willingness to instrumentalize trade restrictions in pursuit of broader geopolitical ends, not just narrower trade-related ones, in the guise of coercive protectionism has also been normalized under Trump 2.0. All this is making U.S. trade policy less predictable and dramatically less reliable as well as more protectionist and economically damaging to its trade partners. To address the question raised in this special issue, namely whether the U.S. remains a reliable ally following the U.S. presidential elections, the answer is an unambiguous “no” as far as its role as a trade partner is concerned. 

Trump trade policy has broken long-standing international norms and conventions by stretching WTO safeguards and exemptions beyond their original intent (Financial Times, 2025d). The second Trump administration has also aggressively exploited its domestic trade-related authority to gain maximum flexibility in terms of protectionist policies. America’s liberal international leadership has always in part rested on strategic restraint which was tied to domestic constraints in terms of checks and balances, the rule of law and broadly institutionalized, transparent and predictable international policies (Ikenberry, 2001). The same applied to trade policy.

If domestic democratic-liberal institutions, including a degree of checks and balances and transparency, translate into more predictable, transparent and reliable policies, then the shift towards a dominant and dominating executive will make trade policy more dependent on the personality of the president. But unless Congress reasserts greater authority over trade policy, the president’s legal-institutional leeway can only be restricted by courts. But the courts have historically shown significant deference to the presidency on trade, foreign policy and national security. Whether the Supreme Court sides with the lower courts in declaring the president’s IEEPA-related tariffs illegal will therefore be important, but not all decisive, as the president can resort to other trade-related instruments, unless the courts impose restrictions on them, too. It therefore remains to be seen to what extent Congress or the courts will be willing and able to to constrain the president on trade policy.

Trump 2.0 trade policies may be sui generis, or they may reflect broader shift in trade policy. The next administration may step back from the so-called “America First” policy, characterized by unilateralism and the exploitation of asymmetric vulnerabilities in the context of coercive protectionism. But even if this is the case, a future presidential election may lead to yet another policy shift back toward coercive trade policies and broad-based protectionism, unless the present protectionist policies prove economically so disastrous as to delegitimize them for many years to come. But as long as the president remains legally (courts) and politically (Congress) relatively unconstrained, U.S. trade policy will remain vulnerable to abrupt and dramatic policy changes.

All taken together, America’s reliability as a trade partner has weakened very dramatically under Trump 2.0. The disregard for established international rules and norms, the capriciousness, scope and severity of trade-restricting measures, both announced and implemented, has been dramatic and has greatly diminished America’s predictability and reliability as a trade partner. The Trump administration has provided proof of concept in terms of maximizing domestic presidential authority over trade policy and maximizing leverage vis-à-vis trade partners. The combination of diminished domestic constraint and diminished strategic restraint will cast a long shadow on America’s reputation as a reliable and predictable trade partner well beyond the day Trump leaves office.

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[1] This article is solely concerned with import restrictions, not export control or investment policy.

[2] Some legal scholars question whether this authority extends to imposing tariffs on cross-border goods, or only to financial transactions (Khardori, 2025).

[3] The IEEPA’s predecessor legislation, the Trading with the Enemy Act (TWEA), had been invoked only once before, namely under President Richard Nixon in 1971 to justify the imposition of across-the-board tariffs to force its trading partners to devalue their currencies in the context of breakdown of the Bretton Woods regime.

[4] The administration may believe that higher tariffs do not generate significant costs, perhaps because higher tariffs will force exporters to provide offsetting discounts, as suggested by optimal tariff theory (Cavalla et al., 2021).

[5]“Trump alone is making policy, and they may change without notice.” (Blanchard, 2025); see also Saeedy and Dawsey (2025).