This essay is a part of The Right Way Forward, Restoring America’s new think tank debate series in which leading conservative institutions argue the defining questions of the post-Trump era. Read about the series here.
President Donald Trump’s tariffs are controversial among conservatives, just as they were for Ronald Reagan in the 1980s.
Free-traders argue tariffs are a drag on the economy and a tax on consumers that reduces global specialization and growth. The other extreme argues tariffs are essential as permanent economic tools to stop globalization, which they blame for gutting American blue-collar workers.
Similar to Reagan, Trump has walked a middle line, acknowledging the tariff impact on consumers — and especially farmers — while arguing tariffs are necessary to achieve two strategic goals. First, to pressure trade partners to remove their own barriers against U.S. goods. Second, to encourage companies to reshore production to the United States instead of China, paired with tax and regulatory reform to make it happen as a carrot to the tariff stick.
This stance aligns Trump with Reagan, a free-market advocate who saw tariffs as a temporary but necessary evil to achieve specific objectives, as opposed to a permanent policy crutch.
And it complicates the simple juxtaposition of tariffs vs. free markets. Because if tariffs are reducing other countries’ trade barriers, they actually promote more international trade — and more productivity-enhancing specialization.
Reshoring is even more impactful. Not only because critical military inputs require domestic production, but because successful reshoring requires tax relief and regulatory relief to make the domestic environment attractive enough to move production. This relief then goes on to benefit the 90% of the economy that is not producing for export.
For example, Trump has focused on corporate tax and accelerated depreciation specifically to entice investment, but these measures also affect the other nine-tenths of the economy, from home-based businesses to restaurants and retail.
The key policy questions then become: Are Trump’s tariffs achieving these strategic objectives? Are foreign barriers coming down, and is reshoring and near-shoring driving an improved domestic manufacturing environment and critical supply chain resilience?
So far, the answer is a resounding yes.
At least 15 major partners have slashed barriers onto American goods. The European Union and Switzerland removed tariffs on industrial goods. Canada, Argentina, Ecuador, and Brazil cut a wide range of tariffs, while Taiwan and Indonesia promised to eliminate 99% of tariffs.
Korea opened auto imports, Japan loosened restrictions on beef and American software. India, Malaysia, Vietnam, the Philippines, and Cambodia slashed their own tariffs while loosening regulatory barriers.
Canada eased quotas on American milk — a high-profile issue in Canada. Mexico loosened access for U.S. energy companies. China reduced auto tariffs, expanded access for American financials, and increased purchases of U.S. agricultural goods.
Fewer of these would have happened without the big stick of tariffs.
Even more dramatic has been reshoring: foreign companies investing in U.S. factories and U.S. jobs. Trump has touted more than $4 trillion of incoming investment, much of it strong-armed in tariff negotiations, using tariffs as a stick to win investment concessions to create American jobs.
For perspective, $4 trillion would double annual investment in the U.S. economy. And a rough rule of thumb is for every trillion invested, it creates 1 million jobs. So, 4 million jobs.
But more importantly, Trump has pushed — and the GOP Congress has gone along with — tax cuts and regulatory relief that encourage not only reshoring but the much larger domestic economy.
Examples include tax relief in the One Big, Beautiful Bill Act — especially accelerated depreciation that is rocket fuel for investment. There’s also regulatory relief the Office of Management and Budget pegged at 646 deregulatory actions last year — the most in history. With annual savings of $212 billion, the GDP of South Carolina.
So Trump’s tariffs are doing exactly what Reagan’s tariffs did: reducing foreign barriers in conjunction with reduced tax and regulatory burdens for all American businesses and entrepreneurs.
Still, that leaves the broader question of whether high tariffs should be a permanent policy separate from these specific objectives. This will be topical next time Democrats gain power, since they also love tariffs — Biden kept nearly all of Trump’s first-term tariffs — but are unlikely to promote tax and regulatory improvements in the domestic business environment.
In that scenario, tariffs would indeed revert to a tax on consumers and growth. The world is littered with failed tariffs, from Africa to Brazil, where there’s been little effort to improve the business environment. If that happens here, we would be shooting ourselves in the foot, then attacking China for selling us crutches.
Tariffs in isolation are anti-market and anti-consumer. But Trump has used them strategically for ends that paradoxically increase economic freedom. As long as this continues, free-market conservatives should remain on board.
Peter St. Onge, Ph.D., is the senior economist at the Heritage Foundation.