It was Polonius, the king’s adviser, in Shakespeare’s Hamlet, who said, “Though this be madness, there is method in it”. One can well wonder if this adage can be applied to Donald Trump’s dalliance with tariffs. After the so-called “Liberation Day, April 2, when he imposed a range of tariffs across the world, the stock market in the United States went into a swift downward spiral. On April 10, he reversed the decision and paused the tariffs for 90 days for all countries, barring the People’s Republic of China (PRC). In the meantime, various White House spokespersons have asserted that a host of countries have agreed to start negotiations with his administration to avoid punitive tariffs after the grace period ends.
Given his abrupt backtracking and the 90-day pause minus China, it is worth asking if some strategic imperative is driving these tariffs. Or are they merely based on personal whims and vagaries? The answer probably lies somewhere in between. Trump has long been obsessed with tariffs as a tool of economic statecraft. Even in his first term, he had imposed a series of tariffs, especially on the PRC. The Joe Biden administration kept a number of these in place.
In his second term, apart from his obsession with illegal immigration, another of his personal bugbears, he has returned to the use of tariffs with a vengeance. According to him and a view that many of his key trade advisers (most notably Peter Navarro) share, the vast majority of countries that trade with the US have deliberately blocked access to their markets. Simultaneously, he and his aides argue that these countries exploited the relative openness of American markets. Finally, they contend that the dispute resolution mechanism of the World Trade Organisation is mostly broken and ill-serves the interests of the US. Even if there is a shred of truth to these allegations, the way he and his aides have gone about redressing matters defies economic logic. More to the point, it risks wrecking a global trading system that the US initiated and supported since the end of World War II.
Previous presidents, most notably Richard Nixon, had undermined elements of this economic order. For example, in August 1971, he took the US off the gold standard and imposed a 10 per cent tariff across the board. At home, he had also instituted wage and price controls. Nixon had undertaken these sweeping actions mostly to tackle persistent stagflation at home. These unilateral choices had, no doubt, caught both friends and allies by surprise. However, those actions, though bold and sweeping, pale in insignificance when compared to the drastic actions that Trump has taken barely a 100 days into office.
What are the ostensible goals that Trump is pursuing while bringing a wrecking ball to the global trading order? According to him, these tariffs will produce an equitable playing field for the US in the global trading system. Beyond that stated objective, he has also asserted that these tariffs will have a two-fold effect. First, it will lead American firms who have invested abroad to “re-shore” their production facilities and, in the process, regenerate the country’s existing industrial capacity. Simultaneously, he has claimed that this will, in turn, produce a range of well-paying industrial jobs.
Second, he also believes that the tariffs will force a host of foreign firms to invest in the US and generate employment. Third, he asserts that the tariffs will eventually lower prices. Fourth, he believes that they will also generate significant revenue for the government. According to most conventional economists, including those of a conservative political disposition, none of these claims are tenable. The initial domestic reactions have hardly been salutary.
Left unstated, however, is his singular focus on the PRC. By April 11, he had increased the tariffs on the country to 145 per cent (the PRC, in turn, has imposed reciprocal tariffs up to 125 per cent). His decision to specifically target the PRC requires a bit of discussion. He has, of course, made some careless, occasional statements about his willingness to arrive at a grand bargain with Xi Jinping. However, he and, more importantly, some of his key foreign policy aides, most notably National Security Adviser Mike Waltz and Secretary of State Marco Rubio, have long seen the PRC as the principal strategic competitor to the US. Finally, another high-level political appointee to the Pentagon, Elbridge Colby, whom the Senate just confirmed, is widely seen as a China hawk. Consequently, it is not entirely surprising that the PRC has become the centrepiece of Trump’s tariff war.
How will these policies play out? As argued here, the initial results are far from exemplary. However, given Trump’s mercurial disposition, as he has already demonstrated, he may well shift gears and alter his policies. This is especially likely to be the case if the domestic economic costs start to affect his electoral base adversely. Already, some prominent Republicans, concerned about those effects, have started to express their reservations about the wanton use of tariffs. Regardless of how this policy evolves in the foreseeable future, both the US and much of the world are headed for a bumpy ride.
The writer is a senior fellow and the director of the Huntington Programme on Strengthening US-India Relations at the Hoover Institution, Stanford University
Trump earlier said that he has signed 12 letters to be sent out likely on Monday. (File photo) 
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