Trump’s tariff wall is a break with the past

Donald Trump’s return to the White House has ushered in a new era of American trade policy, one that represents a fundamental break from the past – including his own first term. The so-called “tariff wall” that Trump intends to build around the United States is not just a more aggressive version of his transactional first-term policies. Rather, it represents a far more ambitious effort to reshape the global economic order and America’s place in it, driven by a president significantly less deterred by consequences than last time.

The first bricks of this tariff wall were laid on March 4 with the imposition of 25 percent tariffs on imports from Canada and Mexico that had been initially threatened in early February and delayed at the last minute. The US also doubled the 10 percent tariffs on Chinese goods it had imposed a month prior, bringing the cumulative rate on Chinese imports above 30 percent. Canada and Mexico immediately announced retaliatory measures targeting politically sensitive US industries and states.

After two days of furious lobbying and market turmoil (which Trump blamed “globalists” for), cars from Mexico and Canada and products compliant with the US-Mexico-Canada Agreement (USMCA) had been granted a month-long reprieve from the duties.

But these temporary exemptions should not be taken as a sign that the president is backing off tariffs on America’s closest trading partners. Trump has vowed to levy 25 percent tariffs on steel and aluminum imports by March 12, which will hit Canada especially hard. In addition, he intends to impose tariffs on global auto imports on April 2, a move that would be felt not only in Japan, South Korea and Germany but also in Mexico and Canada, where US carmakers have built complex supply chains.

Early April is also when the administration is set to unveil worldwide “reciprocal” tariffs designed to match the tariffs that other countries place on the US. These measures will consider non-tariff practices such as taxes, subsidies, currency manipulation and regulation that the Trump administration believes are “unfair” to America. Countries with the highest tariff regimes, such as India, Argentina, South Korea and Brazil, could face the stiffest measures.

Just weeks into his second presidency, Trump’s willingness to use tariffs goes well beyond anything we saw during his first term. But the difference is not just a matter of degree: Trump no longer views tariffs principally as leverage to be bargained away in negotiations. That’s why the tariffs on Mexico and Canada were predicated on fentanyl and irregular migration; it’s also why the president didn’t even hear counteroffers before imposing the tariffs on March 4.

What, then, are tariffs for now? The administration’s 2025 Trade Policy Agenda frames them as critical tools to reshore supply chains, revitalize the US manufacturing base and offset tax revenue. No longer is this about addressing bilateral trade deficits or punishing unfair practices, as was largely the focus of Trump’s first-term trade policy. Now, tariffs are about “protecting the soul of our country” and making sure US market access commands the premium it is worth. Negotiating them away in deals like Trump usually did last time around would mean sacrificing these core policy objectives.

What drives this shift is Trump’s conviction that the post-war liberal economic order was not the foundation of American prosperity but its undoing. In this view, the United States surrendered its economic sovereignty after World War II by reducing tariffs and allowing unrestricted capital outflows. Trump’s first term began to challenge the bipartisan consensus of market liberalization and global integration, but his second term is taking it to a new level. His solution is to leverage America’s economic, military and technological dominance to reshape global trade flows to its advantage and correct decades of misguided policy.

That’s what the “reciprocal” tariffs are intended to do: not to create negotiating leverage on what could potentially be hundreds of countries, but to restructure these trading relationships.

At its core, however, the tariff wall strategy has an audience of one: China. As indifferent as the president was to negotiating offramps with Canada and Mexico, he has shown even less interest in engaging with Beijing. The two rounds of 10 percent tariffs were not preceded by a set of demands to avoid imposition “or else,” nor were they followed by attempts to bargain them away. Retaliation has been measured thus far, but the average US tariff rate on all Chinese imports is rapidly approaching the danger zone where China’s leaders start to feel like more significant pushback is warranted, lest they look weak domestically.

While some in the Trump administration may see room for compromise with Beijing, the preference is for containment and even confrontation. As it starts building its tariff wall, Washington will also force allies to make a stark choice: purge Chinese components and capital from their supply chains, at least in the growing number of sectors deemed critical to national security (such as semiconductors, critical minerals, steel and aluminum), or be shut out of US markets altogether. The risk of a new cold war is real, and the potential for escalation is high. A breakdown in US-China relations would have catastrophic consequences, not just for the world’s two largest economies but for the global economy as a whole.

But the longer-term and more consequential impact of Trump’s trade policy will be on the global economic architecture itself. There is no grand bargain in the works with China or anyone else. Instead, we are witnessing a transition from a rules-based system of managed economic integration to one of coerced decoupling, chaotic fragmentation and economic self-reliance.

The US president is likely to stay the course even in the face of severe economic dislocation. Of course, the administration is hoping that American consumers and businesses will feel the benefits of its strategy sooner rather than later. But Trump has embraced the idea that tariffs might cause “a little disturbance” for the US. “Will there be some pain?” he wrote about the tariffs last February. “Maybe (and maybe not!). But we will make America great again, and it will be all worth the price that must be paid.”

Trump’s political support among Republican voters is durable enough to withstand economic fallout, at least for a bit. And unlike during his first term, he faces no restraining voices within his cabinet or in Congress. As a lame-duck president largely concerned about legacy, Trump has a significantly higher tolerance for pain than last time, both politically and in terms of market impact, meaning that his tariff wall is likely to endure.

The world is entering a period of heightened economic uncertainty not because tariffs will cause some inflation or supply chain disruption – though they will – but because the United States is actively dismantling the economic order it once created. Whether this attempt to recreate American hegemony succeeds or fails, it represents the most significant challenge to the global trading system since its inception. And unlike previous challenges, this one comes from the system’s architect itself.