Tariffs, Trade and Trump

Mr. Dorn, U. S. Treasury Secretary Scott Bessent cited your studies in the Wall Street Journal as justification for higher tariffs and a departure from free trade. Was that your intention, or did he simplify your research for political purposes?
He quotes research selectively. In fact, my studies have shown that import competition from China in particular has led to significant job losses and social upheaval in the U. S. However, in another research paper, I also demonstrate that the tariffs imposed during Donald Trump’s first term in office did not lead to the promised job gains. Tariffs cannot simply be used to revive industries that are no longer competitive on the international market.

Trump argues that the U. S. followed the rules, while other countries – especially China – took advantage of the system. Is that true?
No. The U. S. played a leading role in establishing the WTO rules. Nevertheless, not only China but also the U. S. subsequently violated the rules particularly frequently. There is justified criticism of China’s trade practices – for example, because of subsidies, currency manipulation, or the lack of protection for intellectual property. However, it is a distortion of the facts to say that the Americans are the “good guys” and everyone else is the “bad guys.”

But American industry – from automobiles to textiles to electronics – has indeed suffered dramatically. What was the reason for this, if not China’s tricks?
The big shift began in the 1990s, when countries that had previously used a communist planned economy system started opening up to global trade. China, a huge country, quickly became competitive. This put pressure on many industries in the U. S. While countries such as Switzerland
and Germany tapped into new export markets in China, the U. S. mainly felt the impact of import competition and hardly benefited from exports. This is also due to the fact that American companies
traditionally focus strongly on the large domestic market.

The U. S. is not only relying on tariffs but also on government subsidies and direct intervention in the economy. How do you assess this development?
The subsidies are part of a fundamental shift in American economic policy. President Biden has already invested heavily in certain industries, such as semiconductors and green technologies. Under Trump, this is going even further: the state is taking stakes in companies or attempting to
intervene in the decisions of individual companies. This is a form of state capitalism that contradicts the traditional Republican line. Ronald Reagan wanted the state to stay out of the economy. Under Donald Trump, the opposite is happening: there is state intervention down to the smallest detail,
a real micromanagement.

Where does this course change come from?
One motivation is China. There, a strongly state-controlled economic system has led to impressive successes, especially in key technologies. In the U. S., the thinking is: if China can do it, we have to try it too. But in the U. S., it is much less coordinated. While China clearly communicates which industries
and technologies are strategically important, the U. S. government acts without any clear objectives. For example, it is cutting research funding for all university departments instead of concentrating resources in important research fields, as the Chinese do. And it is not specifically promoting
future industries, but rather spreading tariffs and subsidies widely – which is inefficient and often contradictory.

What is the risk associated with this development?
The main problem is the threat of favoritism.This was already evident during Trump’s first term in office, when more and more companies were granted individual exemptions from tariffs – depending on how good their contacts in Washington were. This undermines efficiency and creates incentives for companies to invest in lobbying rather than innovation. If governments also hold shares in companies, there is a risk of a major conflict of interest: following the U. S. investment in chip manufacturer Intel, who can guarantee that this company will not receive preferential treatment
from the government, even if it performs poorly? Competition is shifting. It is no longer the best products that matter, but the best connections to the White House.

But aren’t there legitimate reasons for such interventions, such as national security?
Of course, that’s an important argument. If a key technology such as semiconductors is crucial to defense, the state can intervene. The problem, however, is that the U. S. government uses this argument excessively. Trump’s tariffs on steel and aluminum in 2018 were justified on the grounds of security interests – even loyal allies such as Canada were targeted. This dilutes the argument. Instead of specifically protecting security-relevant sectors, tariffs are even being imposed on T-shirts. But T-shirts contribute little to national security.

Republicans boast that tariffs will generate new government revenue.
In the short term: yes. Every new tariff initially generates revenue. But in the longer term, it slows down economic growth. And when economic growth slows, tax revenues also rise more slowly. It is therefore by no means certain that tariffs will improve public finances in the long term. What is true, however, is that tariffs are politically easier to sell than new taxes. The U. S. government can tell its voters: “Foreign countries will pay for this” – even if, in reality, domestic consumers will bear the burden. In truth, Donald Trump’s tariffs are disguised taxes.

Does that mean that customs duties are unlikely to disappear again?
I assume so. Biden’s administration has not withdrawn the tariffs imposed during Trump’s first term in office. Politically, it is almost impossible to simply abolish tariffs given the current anti-globalization sentiment in the U. S. That is why the country will retain many of them – even if they are economically questionable.

Could the tariffs be dropped due to court rulings?
An American appeals court has ruled that the comprehensive tariffs cannot be justified on the basis of a national emergency law. However, the Supreme Court can still overturn this decision and has interpreted government powers very broadly in other areas. If the ruling should stand, the U. S.
government will likely reintroduce some of the tariffs on other legal grounds.

This interview by Jürg Meier and Lorenz Honegger was originally published in NZZ on September 8, 2025, in German. It has been translated and shortened for layout purposes. Full article here.