In March, the Office of the U.S. Trade Representative (USTR) launched Section 301 unfair trade investigations into the “structural excess capacity” of sixteen economies — China, the EU, Japan, Korea, and a dozen others — on what the agency promised would be an “accelerated timeframe.” The hearings are done, the comment dockets are closed, and determinations are coming, though it’s still not clear how soon. But assuming USTR will make some announcements this Summer or Fall, here is what to expect.

Everyone will be found guilty.

“Structural excess capacity” is a term vague enough to capture nearly anyone: USTR’s own framing leans heavily on “large or persistent trade surpluses” as evidence, which means a country running a surplus in a single commodity could plausibly be found guilty of producing more than it can consume. Indeed, this is how U.S. Trade Representative Ambassador Greer has defined the offense in public. By that standard, Saudi Arabia has “excess industrial capacity” in oil, Switzerland in chocolate, and Colombia in coffee.

But the deeper reason everyone will be found guilty is that the outcome was never in doubt. These investigations, like the “forced labor” cases running alongside them, are simply a pretext to reimpose the tariffs the Supreme Court found illegal in February. Amb. Greer, an experienced trade lawyer, has been careful not to say so out loud. But Treasury Secretary Bessent and President Trump have not been careful at all: they’ve made it clear that the goal is to reinstate the IEEPA tariffs by other means. When the verdict precedes the trial, the trial tends to go quickly. Hence the accelerated timeframe.

Even some trade hawks think the theory of “excess industrial capacity” is overbroad. The Information Technology and Innovation Foundation, which is a longtime opponent of Beijing’s industrial policy, told USTR in its comments that the investigation conflates low capacity utilization with genuine excess capacity, and that a manufacturing trade surplus with the United States is not evidence of the offense. ITIF argued that only China actually weaponizes surplus production, and they are right. The other fifteen economies are on the list only because the White House wants to rebuild the arbitrary tariff wall thrown out by the Supreme Court in February.

The proposed tariffs may exceed negotiated caps — at least on paper.

By the time the “excess capacity” tariffs are proposed, it is likely that “forced labor” tariffs will already be in effect. For Europe, Japan, Korea, and the UK, the latter tariffs will be at least 10%, meaning that there is only room for another 5% of “excess capacity” tariffs before exceeding the negotiated tariff caps in bilateral deals with these major trading partners. But don’t be surprised if the “excess capacity” proposed tariffs are HIGHER than 5%, which theoretically could lead to applied rates that exceed the caps, thereby violating the agreements. Indeed, it’s possible USTR could propose a high rate (say, 20-25% for “excess capacity”) but then immediately suspend those tariffs to stay within the 15% caps. This would be a tidy piece of legal engineering. It honors the letter of the agreements while keeping a loaded weapon on the table: if the U.S. decides a major trade partner has fallen short of the purchase commitments or market access pledges in its bilateral deal, tariffs could snap back to a higher rate immediately, with no new Section 301 investigation (or tariff adjustment process) required. This gives USTR leverage in advance.

The stacking rules will look familiar.

The new “excess capacity” tariffs are likely to stack on top of the “forced labor” tariffs but not on top of Section 232 sectoral tariffs. This would largely recreate the tariff architecture in place before the February court ruling. The existing carve-outs (generic pharmaceuticals, civil aircraft, products not grown, mined, or readily available in the United States) will likely carry over as well, even though President Trump recently threatened to impose tariffs on generic drugs starting in 2028. Given that the point of all this is to restore the status quo ante by different statutory means, expect the details to largely match.

Don’t expect a Rose Garden ceremony.

With approval ratings on cost of living in the low 30s and voters blaming tariffs for stubbornly high prices, another “Liberation Day” pageant months before the midterms would be political malpractice. That is not a guarantee it won’t happen — the President has been known to overrule his political advisors, especially on matters of stagecraft — but my money is on a Federal Register notice rather than a big event with tariffs on posterboards.

Watch the tariff differentials.

For many importers, an important thing to watch will be the tariff spread between China and Southeast Asia. Greer and Bessent have signaled that Beijing understands U.S. tariffs will rise from the current 10% back toward Busan-summit levels — roughly 30% (on top of MFN and first-term Section 301 levies). The question is whether alternate suppliers like Vietnam stay at 20%, preserving the differential that has anchored Southeast Asian economies and the “China-plus-one” strategies of countless multinationals. And note that the Philippines was not named in the excess capacity investigations — it may emerge with a meaningfully lower tariff than its neighbors.

The rest of the world falls through the cracks — possibly to its benefit.

Smaller economies in Africa and Latin America that were never targets of the excess capacity cases may fly under the radar of both Section 301 investigations – not on the list of 60 for “forced labor” or the 16 for “excess industrial capacity.” Some of these countries, especially in Africa, produce things not readily found elsewhere: diamonds, cocoa, minerals, apparel, coffee. Importers who rely on these smaller producers may benefit.

The bottom line.

The “excess capacity” tariffs are coming, but they have little or nothing to do with excess capacity. The strategic objectives remain as murky as ever: USTR says it wants leverage to open foreign markets; reshoring, we are told, is still a key objective of tariffs; and the President clearly wants a tool he can use whenever and however he likes. The negotiated deals with Europe, Japan, Korea, and Switzerland will probably hold, albeit with suspended tariffs hanging over them. The major product carve-outs will probably survive, as will duty-free treatment for (most) USMCA-qualifying goods.

There will be lawsuits arguing that the Section 301 cases are a sham designed to circumvent February’s Supreme Court ruling. The plaintiffs will have the better of the facts (administration officials have all but confessed), but Section 301 gives the President wide discretion, and courts may be reluctant to second-guess findings of “unreasonable” foreign practices, however pretextual. But the legal outcome is genuinely uncertain.

What is not uncertain is the politics. Imposing a fresh round of tariffs a few months before the midterms, with cost of living already the President’s worst issue, will deepen the political hole he is in. The investigations will conclude that foreigners “produce too much.” But voters may conclude that tariffs cost too much, and over the long term, that verdict will matter more.

As the world waits to see whether the United States and Iran will reach an agreement to end hostilities and begin nuclear negotiations, the history of recent Trump administration trade deals offers useful clues about what to expect.

In the economic realm, the detail and substance of recent trade agreements have been directly proportional to the degree of relative leverage the United States holds over the other country. For example, the “Agreements on Reciprocal Trade” that the United States negotiated with Malaysia, Guatemala, El Salvador, and Argentina are quite detailed, and the written text has been released. By contrast, US trade and investment “deals“ with Japan, Korea, and Europe are more high-level and vague, and were initially released only as “framework agreements” without clear details or timelines. And with China, which holds significant economic leverage over the United States in the form of rare earth minerals, there is no agreed text at all — only unilateral statements by each side of what it thinks was agreed. These don’t match up, revealing significant differences in interpretation.

So, with relatively smaller countries, the Trump administration is able to bully its way into more detailed agreements, although even these fall short of the substance and rigor of prior US trade deals. But with larger countries that can push back, fuzzy “frameworks” are the norm, and these are subject to wildly different interpretations, unclear prospects of implementation, and doubtful longevity.

All this history suggests that if a framework is announced with Iran in the coming days, it will be of the fuzzy variety. That’s because, like China, Iran retains the leverage to string the White House along. The possible “deal” has been described as a one-page MOU, and I wonder if the text will even be released. We likely will have to contend with competing versions from each side of what was agreed upon. Nuclear issues will be kicked into the tall grass and are unlikely to be resolved any time soon.

The history of the past 17 months of trade talks tells us a great deal about how well the White House negotiates with partners that aren’t pushovers — and suggests that whatever Iran “deal” emerges will be vague, fuzzy, confusing, and probably unenforceable.

Readers of this Substack might remember my decision last year to impose tariffs on myself because of my trade deficit with the grocery store. Shockingly, one year later, my grocery store still has a huge surplus with my household, and is even charging me more for my groceries. In response, I’m considering further increasing the tariffs on myself. That will show them.

Meanwhile, I’m pleased that the Office of the U.S. Trade Representative recently launched an official investigation into “excess capacity” by 16 foreign countries. As USTR Amb. Jamieson Greer said, “Many U.S. trading partners are producing more goods than they can consume domestically.” Scandalous!

Because I emphatically agree with the Trade Representative that exporting is just a sneaky way for other countries to send us affordable goods that consumers want, I decided to testify at USTR’s public hearing investigating these nefarious practices.

Written Testimony of

Christopher Padilla

Founder, Northwoods Kumquats LLC

International Falls, MN

Before the Office of the U.S. Trade Representative

Section 301 Investigations: Acts, Policies, and Practices of Certain Economies Relating to Structural Excess Capacity (91 FR 12887)

Thank you, Madam Chair, for the opportunity to testify today. The United States Trade Representative’s Section 301 process exists to give aggrieved American producers a formal remedy against the unfair, discriminatory, and unreasonable trade practices of foreign governments. I am here to argue that it should also apply to Pasco County, Florida.

Earlier this year, I traveled to Pasco County to conduct what trade lawyers call “on-site verification” of reported overcapacity in a fruit vital to U.S. national security – the kumquat.

What I found in Florida exceeded my worst fears. The community of St. Joseph, FL, openly and brazenly claims the title of “Kumquat Capital of the World” — a remarkable admission, hiding in plain sight, that the region produces far more kumquats than any population of normal, rational consumers could possibly absorb. This is the definitional signature of state-supported overproduction.

The depth of the problem became fully apparent when I attended the Annual Kumquat Festival in downtown Dade City, where I documented, in exhibits that I am submitting for the record, the following kumquat-infused products available for public sale: kumquat salsa, kumquat jelly, kumquat vinaigrette, kumquat ice cream, and — I want to pause here to let the gravity of this sink in — kumquat beer, produced by no fewer than two local craft breweries. This is not a market in equilibrium. This is proof of a market in crisis! Clearly, they produce far more kumquats than they need, so they create these extremely suspicious kumquat derivative products to absorb the excess capacity.

Most damning of all is the official designation of Kumquat Pie as the Official Pie of Pasco County, Florida. This is not the act of a free market. An official pie is a clear act of government industrial policy. One does not simply declare a pie “official” without the full faith and credit of the county government standing behind it.

Madam Chair, I am a kumquat grower in International Falls, Minnesota. I have been attempting to compete in the global kumquat market for going on three seasons now, and the results have been, frankly, catastrophic — not because of any deficiency on my part, but because of precisely the kind of distortions I have described above.

International Falls enjoys approximately three weeks per year during which, in principle, outdoor kumquat cultivation is theoretically possible, meteorological conditions permitting. That I have not yet produced a single commercially viable kumquat in this window is not due to the climate or soil composition. It is a reflection of the profoundly unfair competitive environment manufactured by the kumquat-industrial complex of west-central Florida.

When I raised my concerns with the U.S. Department of Agriculture, an official there — I will not name him, but he was wearing glasses, which is very shady — asked whether I had ever encountered the concept of “comparative advantage,” and whether I had considered the possibility that Pasco County’s soil, climate, and growing season made it particularly well-suited to citrus cultivation.

I replied that comparative advantage sounded like the product of a Woke Mind Virus, designed to discourage patriotic Americans from growing whatever they want wherever they want to grow it. The official paused for a really long time and then said, “No, actually. It’s just a product of high school economics class.”

Clearly, the Deep State has taken over the Department of Agriculture, so I’m coming to USTR for relief. Madam Chair, my losses have been incalculable, but the integrity of the Minnesota kumquat grower cannot be sacrificed at the altar of comparative advantage, whatever the heck that is.

The appropriate remedy is an internal kumquat tariff of ten thousand percent (10,000%). Somebody told me that internal tariffs aren’t allowed by the Constitution, but I’m sure a minority of the Supreme Court will agree with me that the President can declare an emergency and do whatever he wants.

I respectfully urge the USTR to act immediately.

The witness is a resident of International Falls, Minnesota, and the founder of Northwoods Kumquat LLC, which has not yet produced any kumquats.

In a few weeks, Donald Trump will touch down in Beijing for what he has called a “Monumental Event.” The summit meeting between President Trump and Chinese President Xi Jinping comes in the midst of a U.S.-Israeli military campaign against Iran that eliminated much of the country’s senior leadership, significantly degraded its nuclear and missile infrastructure, and expended an extraordinary volume of American precision munitions. From Washington’s perspective, the United States arrives at the negotiating table having demonstrated military strength that must serve as a sober reminder to China of American power.

From Beijing’s perspective, the past two months look rather different. Xi Jinping likely feels he is the one negotiating from a position of relative strength. Beijing sees an America once again enmeshed in a Middle Eastern conflict with no easy exit. The conflict has depleted American weapons stockpiles that would be needed to deter Chinese adventurism in the Pacific, and caused the U.S. to redeploy missile batteries, naval assets, and ground forces from bases in Asia to the Arabian Sea. While the closure of the Strait of Hormuz has caused economic hardship for America’s Asian allies, China has (so far) been relatively insulated from the economic consequences. Beijing’s near-monopoly on rare-earth processing has brought it a tariff truce and a freeze on new U.S. export-control measures. There are even hopes that a distracted Trump might weaken U.S. support for Taiwan. A summit that sends the Americans home with some purchasing agreements and a new “board of trade” will be seen by Beijing as a small price to pay for these long-term strategic benefits.

The Energy Fortress Holds

When Iran closed the Strait of Hormuz in early March, governments across Asia scrambled. Japan released oil from its national reserves, and South Korea imposed a fuel cap. But China has weathered the crisis so far, benefiting from a “great wall of reserves” that it has spent years building.

Current estimates put China's strategic oil reserve at nearly 1.4 billion barrels, an amount that dwarfs the reserves of other Asian economies. China continued building these reserves right up to the eve of the conflict.

To be sure, China is not immune to the closure of the Strait of Hormuz and has expressed concern about the situation. In a rare statement, Xi Jinping called for the Strait to be reopened. China gets about half of its oil imports from the Persian Gulf, and Beijing has ordered a halt to exports of diesel and other fuels to protect itself from domestic shortages.

But China has multiple fallbacks that its neighbors lack: it can draw down massive oil reserves, redirect supplies toward domestic coal, ramp up imports via Russian pipelines (Russia has been China’s top oil supplier since 2022), and tap the roughly 38 million barrels of Iranian crude floating offshore. There are reports that some limited amounts of Iranian oil on Chinese-flagged vessels continue to get through the U.S. blockade. Overall, Beijing describes itself as roughly 85 percent self-sufficient in meeting its energy needs.

By contrast, China’s Asian neighbors are more dependent on Gulf oil and have fewer backup options. Japan depends on the Gulf for roughly 95 percent of its crude imports; South Korea for about 80 percent. Both are drawing down strategic reserves rapidly and face the prospect of severe economic damage if disruptions persist.

Alliance Strains in the Indo-Pacific

One of the less-discussed consequences of the Iran war is its effect on U.S. alliances in the very theater where American strategic attention is most focused: the Indo-Pacific.

Japan, South Korea, and Southeast Asian nations, such as the Philippines, are absorbing substantial economic costs from the conflict. Some are imposing emergency fuel restrictions; all are facing economic slowdowns. South Korea has already launched a 100 trillion won ($68 billion) market stabilization program.

Washington has publicly criticized Tokyo, Seoul, and Canberra for declining to join military operations against Iran, though not as harshly as the vitriol President Trump directed toward NATO allies. The U.S. moved Patriot missile defense systems and THAAD batteries from South Korea to the Middle East, a redeployment that Seoul noted with concern, given the persistent threat from North Korea. India and other South Asian nations are deeply concerned about the shortage of agricultural fertilizer and propane cooking gas caused by the closure of the Strait, which is reverberating through their large populations.

The strategic irony must not be lost on strategists in Beijing: the countries the United States most needs for any future Indo-Pacific strategy are the ones bearing the heaviest economic burden from the Gulf conflict, while China — America’s long-term strategic competitor — is comparatively insulated. China appears to some governments in Asia as a steadier presence than the United States.

The Munitions Question

Another consequence of the Iran war for the strategic balance in the Pacific is the significant depletion of America’s precision munitions stockpile.

The figures, documented by the Center for Strategic and International Studies (CSIS), are notable. In roughly seven weeks of combat operations, the United States expended at least 45 percent of its Precision Strike Missile stockpile, more than half of its THAAD interceptor inventory, and nearly 50 percent of its Patriot air defense interceptors. More than 1,000 Tomahawk cruise missiles were fired. CSIS estimates that for four of the seven key munitions systems, the U.S. may have expended more than half of its prewar inventory. The CSIS report concludes that “even before the Iran war, stockpiles were deemed insufficient for a peer competitor fight. That shortfall is now even more acute.”

Rebuilding to pre-war levels will take one to four years; reaching levels adequate for a high-intensity Western Pacific conflict will take longer still. The Pentagon’s FY2027 budget request includes roughly $70 billion for munitions procurement (a nearly threefold increase), but manufacturing bottlenecks cannot be resolved by funding alone — and mitigation plans to address the structural supply-chain vulnerabilities below will not close the gap in time.

Here is the kicker: replenishing advanced munitions requires the very rare-earth elements over which China currently has a global chokehold. The guidance systems, electric motors, and radar components of virtually every precision weapon in the U.S. arsenal require some rare-earth minerals or magnets to operate. Today, most of them come from China.

While mining of rare earths is expanding in the U.S., Australia, and other countries, China’s real dominance — and the source of its strategic leverage — is in the chemical processing and high-end component manufacturing stages. Roughly 85 to 90 percent of the world’s chemical separation for rare earths still occurs within Chinese borders. And China has a virtual monopoly on Heavy Rare Earth Elements (HREE), which are particularly critical for defense. For example, elements like Dysprosium are the only current way to ensure magnets remain effective in high-heat environments such as missile guidance or jet turbines.

This means that each precision munition expended in the Iran campaign incrementally increases U.S. dependence on Chinese supply chains, at least for now. This is a structural dynamic that Beijing understands well.

The Trade Ledger

The Iran war has unfolded against the backdrop of a trade relationship that itself illustrates how much leverage China has accumulated, and how willing it has been to use it.

A year ago, the United States escalated tariffs on Chinese goods to 145 percent, part of an aggressive pressure campaign that the White House expected would force concessions. Beijing responded strategically, quietly suspending exports of rare earth minerals and the high-strength permanent magnets derived from them. The message was clear: Western manufacturing operations that depend on these materials were at risk. Washington backed off, negotiating a series of tariff “ceasefire” agreements in meetings held in various European capitals. The tariff truce was formalized at the Trump-Xi meeting in Busan, Korea, last October, where the two sides agreed to roll back most of the tariff escalation.

But the Busan agreement contained something that received less attention and may prove more consequential: a freeze on U.S. export controls on artificial intelligence and related technologies sold to China, and a pause on several pending restrictions targeting Chinese companies. For Beijing, a temporary freeze in U.S. export controls represented a major achievement. It bought Beijing continued access to AI chips, tools, and know-how. Just as importantly, it established the precedent that U.S. export controls are a bargaining chip rather than an unconditional instrument of national security policy.

Congress has noticed, with concern. The House Foreign Affairs Committee recently passed more than a dozen hawkish China-related export control measures with bipartisan support, reflecting a growing worry on Capitol Hill that transactional diplomacy with China may have gone too far. While it seems unlikely these measures will become law in a closely divided Congress, China hawks will be watching closely for any further relaxation of technology transfer restrictions.

The Board of (Talking About) Trade

What will the United States bring home from Beijing? The headline deliverable will almost certainly be a set of Chinese purchasing commitments (aircraft, agricultural products, energy) packaged under a newly announced “Board of Trade” as a structure for managing commerce between the two countries. A large aggregate number will be attached, and the announcement will be presented as a historic achievement.

Students of the first Trump term will recognize the template. The Phase One trade deal signed in January 2020 included Chinese commitments to purchase an additional $200 billion in American goods over two years. Those commitments went largely unfulfilled; China bought roughly 60 percent of the promised amounts.

China will treat the Board of Trade as a diplomatic instrument: an institutionalized way to keep difficult issues in permanent discussion while avoiding damaging economic conflict. The result is an asymmetry that characterizes much of what will happen in Beijing on the economic front: the United States will likely come home with purchasing promises and a new bilateral trade forum; China will likely come home with a continuation of the technology transfer pause and perhaps further de-escalation of the tariff pressure that was, just a year ago, the administration’s primary economic tool for constraining Chinese ambition.

The Taiwan Question

Beyond the trade discussions, there is a deeper objective that Beijing will bring to the May summit — one that China’s leadership regards as more important than any purchasing agreement or tariff dispute: Taiwan.

China’s principal goal at the Beijing summit will be to move the needle, however incrementally, on American commitment to the island’s security. It does not need a dramatic concession to achieve something meaningful. The language of cross-strait diplomacy is extraordinarily precise. As I learned while dealing with China issues at the State Department, decades of careful formulation have produced a framework in which specific words carry enormous weight. A small departure from established phrasing is seen as significant.

What Xi will be looking for is not a formal reversal of American Taiwan policy. Rather, Beijing will be alert to any formulation that suggests ambiguity where there was previously clarity: a softening of language around arms sales, a reframing of the “one China policy” in ways that tilt toward Beijing’s interpretation, or an expression of sympathy for China’s position that could be cited in future diplomatic exchanges as evidence of American accommodation. A single offhand comment at a press availability, or a Truth Social post dashed off in the afterglow of a posh state banquet, could hand Beijing a rhetorical tool it would use to its advantage.

This is the highest-risk dimension of the Beijing summit — more important than the trade numbers that will dominate the headlines. An unfulfilled purchasing agreement costs the United States some money and credibility. But a meaningful erosion of the American commitment to Taiwan would alter the strategic calculations of every government in the Indo-Pacific, and those of Beijing itself.

Two Views of the Same Summit

Trump wants to “do a deal” with Xi Jinping as a transaction between equals. But China will believe that an increasingly unpopular Trump needs the summit to succeed, and it will leverage that to its advantage.

When Air Force One lands in Beijing, the two sides will view the same meeting through very different lenses. The American delegation will arrive on the back of significant military achievements: a destroyed Iranian military, a degraded Iranian nuclear program, and a renewed demonstration of the awesome prowess of the U.S. military. They will arrive convinced that America is stronger than ever, and will leave touting commercial agreements worth billions.

Beijing, however, will see a United States with significantly depleted precision munitions stockpiles, strained alliances in the Indo-Pacific, and dependence on Chinese supply chains to rearm. It will assess that its own economy, while not unscathed by the oil shock, has weathered the crisis better than most. It will calculate that the continued closure of the Strait of Hormuz will hurt Trump more than it hurts Xi. Meanwhile, it will see that some of America’s most important Pacific allies are economically strained and, increasingly, politically estranged.

The Iran war will eventually end. The structural advantages it has quietly handed to Beijing — in energy resilience, in alliance dynamics, in the munitions balance, in supply chain leverage, and in the trade and technology concessions being consolidated at the summit table — are likely to prove more durable.

A headline in today’s Wall Street Journal about Iran’s economy descending into a “death spiral” caught my eye — not because it was surprising, but because we’ve heard this story before.

Cast your mind back to the spring of 2022. Russia had just invaded Ukraine, and the United States, along with its European allies, unleashed what were described as the most sweeping economic sanctions in modern history. The way the Russia sanctions were described by Biden administration officials reflected the same hubris of the Trump White House’s claims about the naval blockade of Iranian ports.

In March 2022, President Biden declared that “the ruble was almost immediately reduced to rubble” and that “the Russian economy is on track to be cut in half in the coming years.” Treasury Secretary Janet Yellen, not to be outdone, confidently predicted the following month that “Russia will be forced to choose between propping up its economy and funding the continuation of Putin’s brutal war.” I recall a briefing with Deputy National Security Adviser Daleep Singh, who framed the goal in stark terms: “Our goal is to deny Putin the resources he needs to wage war... to make this a strategic failure for Russia.”

It was a compelling theory of victory from a new kind of total economic warfare. It was also wrong.

What Actually Happened to Russia

Rather than collapsing, Russia’s economy proved far more adaptable than Western officials had anticipated. Moscow rapidly pivoted its oil and gas exports — to China, India, and buyers across the Global South — blunting the impact of Western embargoes. The Russian central bank hiked interest rates aggressively to defend the ruble and prevent a currency collapse. And the Kremlin poured massive fiscal stimulus into military-industrial spending, which paradoxically generated economic activity even as civilian consumption suffered.

The result was that in the two years following the imposition of sanctions, Russia’s economy grew faster than several major European economies. The IMF, which had initially forecast a sharp contraction in Russia, repeatedly revised its projections upward. By early 2026, Russia’s economy had finally begun to shrink — but that was four years after sanctions were first imposed, and long after the window in which economic pressure might have influenced the trajectory of the war.

More importantly, the mechanism Biden officials originally described — growing economic costs forcing a strategic military retreat — never materialized. Putin did not pull back from Ukraine because his economy was suffering. The economic pain, such as it was, fell most heavily on ordinary Russians, not on the decision-makers directing the war.

This is not a novel finding. Academic research on the effectiveness of economic sanctions stretches back decades, and the conclusions are sobering. In a landmark study by my friends at the Peterson Institute for International Economics, economists Gary Hufbauer, Jeffrey Schott, and Kimberly Ann Elliott found that sanctions achieve their stated political objectives only around 30 percent of the time — and that success rate drops further when the target country is authoritarian, has alternative trading partners, or has strategic interests that override economic costs1. In 2022, Russia checked all three boxes. So does Iran in 2026.

The Blockade Gamble

Wary of landing U.S. ground troops on Iranian soil, the Trump administration has placed a substantial strategic bet on a naval blockade of Iran. The goals are ambitious: reopen the Strait of Hormuz, extract nuclear concessions from Tehran, and perhaps destabilize what Washington believes to be a fractured and divided regime. That is a long list of objectives to hang on a single economic instrument.

Supporters of the blockade argue (not unreasonably) that Iran in 2026 is more vulnerable than Russia was in 2022. Russia had vast energy revenues, deep foreign currency reserves, and a large domestic economy to cushion the blow. Iran, by contrast, has lived under successive rounds of U.S. and international sanctions for the better part of five decades and has a much smaller buffer.

But that history cuts both ways. Iran has also spent those fifty years building institutional resilience specifically designed to survive economic pressure. The Islamic Revolutionary Guard Corps (IRGC), now even more firmly in control of the country following attacks on religious and political leadership, has developed extensive independent revenue streams — through smuggling networks, front companies, and control of significant portions of the domestic economy — that insulate the regime’s core from the privations facing ordinary Iranians. The IRGC is structurally indifferent to civilian economic suffering.

Some analysts estimate that over a million barrels of Iranian oil per day are still reaching markets, the bulk of it flowing to China, whose appetite for discounted Iranian crude has proven durable despite the threat of U.S. secondary sanctions. Tehran’s ability to route around the blockade is more limited than Moscow’s was, but it is not zero.

The Hostage Trump Didn’t Anticipate

Here is where Iran’s strategic position diverges most sharply from Russia’s, and where the stakes of miscalculation become more alarming.

Iran controls, or can threaten, something Russia never could: the Strait of Hormuz, through which roughly 20 percent of the world’s traded oil passes, along with substantial flows of liquefied natural gas, agricultural fertilizers, and helium critical to semiconductor manufacturing. The dual blockades now in effect have effectively transformed this conflict into what can only be described as economic trench warfare. Both sides are absorbing increasing pain and testing the other’s willingness to endure it for very long.

The global economic consequences of a prolonged Strait closure are not theoretical and are already being felt. Energy markets are pricing in risk premiums. There are shortages of jet fuel in Europe, bunker fuel for shipping in East Asia, and fertilizer and cooking gas in South and Southeast Asia. Countries in Asia that depend heavily on Gulf LNG imports for their electrical grids are watching with mounting alarm. While the U.S. economy has been more insulated from shortages, it has not been immune to price increases in gasoline, diesel, and fertilizer. The Iran conflict has, in other words, handed Tehran a form of leverage that Moscow didn’t have: the ability to impose economic costs not just on the United States but on the entire global trading system.

A Lesson Worth Studying

None of this suggests that the Iranian regime is invulnerable or that economic pressure is without effect. The blockade will cause genuine, severe suffering for ordinary Iranians. Inflation, unemployment, and shortages of medicine and basic goods are real and worsening. There are credible reports of internal tensions within the Iranian leadership about how to respond.

But “causing economic pain” and “producing strategic concessions” are not the same thing, and the history of sanctions suggests the gap between them is wide. Regimes that have survived for decades under economic siege tend to have developed sophisticated mechanisms for concentrating costs on civilian populations while protecting the interests of the security and political elite. The Iranian government is a case study in exactly that.

The officials around President Trump who are confident that the blockade will open the Strait, force Iran to the nuclear negotiating table, and weaken the regime’s grip on power might usefully revisit the briefings their predecessors gave four years ago about Russia halting its military campaign in response to unprecedented economic warfare. Their takeaway should be that economic sanctions are a powerful tool for demonstrating resolve and imposing costs. But they are not a magic wand that will bring an isolated, determined, and authoritarian adversary to its knees.

A little more than a year ago, the Trump administration announced sweeping “Liberation Day” tariffs with considerable fanfare, promising to rebalance global trade, revive American manufacturing, and restore economic sovereignty. The tariffs were framed as a bold corrective, a long-overdue reckoning with decades of unfair trade practices by U.S. trading partners.

Twelve months later, the history and the economic data tell a more complicated story. U.S. trade policy became a melodrama of haphazard implementation, arbitrary exceptions, frequent walk-backs, and pervasive uncertainty for American businesses, farmers, and consumers.

Chaos has a cost. It overtook the administration’s policy objectives, depressed manufacturing investment, and needlessly antagonized allies. While tariff leverage was used constructively to win new market access in some countries, the tariffs also contributed to slower economic growth and sticky (though so far not alarming) price inflation.

From the beginning, the Liberation Day tariffs were a hot mess. Only one week after being unveiled, they were suspended; four months later, they were imposed at lower levels; seven months after that, they were struck down by the Supreme Court; and finally, they were replaced with a temporary stopgap levy meant to buy time for pretextual trade “investigations” whose sole purpose is to impose the tariffs once again. In the meantime, the U.S. Treasury owes approximately $166 billion in refunds, plus interest, to more than 300,000 importers.

What the administration described as a decisive turning point has instead produced volatility without transformation. On the four stated objectives—reducing the trade deficit, reshoring manufacturing, opening foreign markets, and raising revenue—the results range from modest to outright counterproductive.

One can argue that U.S. trade policy needed reform, or that tariffs could be a useful element in a strategy of industrial revitalization. But when chaos substitutes for strategy, the most important question is whether this particular approach achieved what it set out to do.

A Brief and Chaotic Lifespan

The Liberation Day tariffs announced on April 2, 2025, were supposed to represent a historic turning point, but they lived a short and tumultuous life. Meant to be comprehensive and permanent, they were anything but: suspended, renegotiated, carved up with exceptions, and finally ruled illegal — a policy that managed to generate maximum disruption with minimum durability.

They largely did not affect commerce with America’s two largest trading partners: goods imported under the USMCA from Mexico and Canada remained duty-free. Some of the more clumsy and illogical levies—on coffee, bananas, cocoa, and at least one South Pacific island inhabited only by penguins—were quietly abandoned, though not until late in the year. Realizing too late that across-the-board tariffs would harm the economy and consumers, the administration announced after-the-fact product exceptions throughout the year, covering everything from iPhones and aircraft engines to aspirin and fertilizer.

Liberation Day quickly escalated into tariffs of 145% on Chinese imports, triggering retaliatory restrictions by China on rare-earth exports and exposing Western supply-chain vulnerabilities. This forced a U.S. climb-down through a series of tariff “ceasefire” agreements negotiated in picturesque European cities. China-specific tariffs settled at around 30% through most of 2025 and now stand at 10%, and there is little prospect of changing troublesome structural Chinese trade practices. Having burned its hand on the hot stove of Chinese rare earths retaliation, the White House now seems content to “manage” trade through bilateral purchasing agreements.

Meanwhile, the sectoral tariffs imposed under Section 232 “national security” authority—covering steel, aluminum, autos, copper, and other products—proved more durable, and more damaging. Unlike the headline-grabbing Liberation Day levies, these were global in scope and had fewer carve-outs. Their main impact was not to expand U.S. jobs or investment, but to drive up input costs for U.S. manufacturers, making it far more expensive to build things in America.

After a feverish start, few new tariffs have taken effect since late September 2025, largely because of mounting political concern about consumer affordability. Inflation remains stubbornly above the Federal Reserve’s 2% target rate, and U.S. economic growth has slowed. While Trump officials argue that short-term pain will be worth the long-term gain, voters are not convinced: roughly 60% of them disapprove of the tariffs, according to recent Pew Research Center and Fox News polling.

After all this chaos, the anniversary of Liberation Day offers a chance to pause and assess the success of the tariffs against the multiple objectives set out by the Trump administration.

Objective 1: Reduce the Trade Deficit — Not Achieved

The most visible stated goal of the Liberation Day tariffs was to shrink the U.S. goods trade deficit. One year in, the deficit has grown.

The annual goods trade deficit reached $1.24 trillion in 2025—the largest on record, up from $1.22 trillion in 2024. The deficit has now grown in four of the past five years. Rather than reversing a structural trend, the tariff regime appears to have accelerated front-loading of imports as businesses raced to bring in goods before new levies took effect. (There is some evidence that this trend is repeating itself in 2026: following the Supreme Court ruling, importers can enter goods at a relatively low 10% until late July.)

On a monthly basis, the picture is equally discouraging.

The monthly deficit swung wildly—peaking at $102.8 billion in July 2025 and dipping to $59.1 billion in October before rebounding to $99.3 billion in December and $81.8 billion in January 2026. The January 2026 figure is nearly identical to the April 2025 figure of $87.4 billion. After a year of policy turbulence, the monthly deficit is roughly where it was when Liberation Day was announced.

Objective 2: Reshore Manufacturing — Not Achieved

The administration argued that higher import costs would force companies to move production back to the United States, reversing decades of offshoring. While it is still early, the 2025 manufacturing data does not support that outcome.

Manufacturing employment declined.

Manufacturing payrolls fell from approximately 12,670,000 in early 2025 to roughly 12,575,000 by February 2026—a loss of approximately 95,000 jobs over the year. The line trends consistently downward, with no inflection point indicating a reshoring effect.

Manufacturing construction fell sharply.

Total construction spending on manufacturing facilities dropped from approximately $229 billion (annualized) to roughly $196 billion over the course of 2025—a decline of about 14%. If tariffs were spurring investment in domestic productive capacity, this is the metric that would show it. It does not.

Private fixed investment in manufacturing structures also declined.

Real private fixed investment in manufacturing structures fell from approximately $148 billion (chained 2017 dollars) to around $127 billion by Q4 2025—a drop of roughly 14% in inflation-adjusted terms. Investment decisions require policy certainty. The on-again, off-again character of the tariff regime appears to have deterred capital commitment rather than encouraged it.

The combined picture—falling employment, falling construction, falling investment, and negligible production growth—is not consistent with a manufacturing revival.

Objective 3: Open Foreign Markets — Partially Achieved

This is the one area where the tariff strategy produced tangible results. The threat of sustained tariffs gave the administration genuine leverage in negotiations, and USTR used that leverage to secure a series of trade framework agreements with major partners, including the European Union, the United Kingdom, Japan, and South Korea. More detailed Agreements on Reciprocal Trade (ARTs) were concluded with smaller trading partners, including Malaysia, Cambodia, Indonesia, Argentina, Bangladesh, Ecuador, El Salvador, Guatemala, and Taiwan.

The concessions obtained include elimination of EU industrial tariffs on U.S. goods, beef and ethanol market access in the UK, an expanded U.S. rice quota in Japan, and removal of numerous tariff and non-tariff barriers in Southeast Asia. The administration also leveraged the threat of pharmaceutical tariffs under Section 232 to secure lower U.S. prices for selected drugs from more than a dozen manufacturers.

These are real gains, and represent market access outcomes that U.S. negotiators have sought for years. There remain questions as to their durability. Framework agreements and ARTs are not congressionally-approved trade agreements with the force of U.S. law. They lack enforcement or dispute settlement mechanisms. Several of the concessions obtained are similar to commitments trading partners have made—and walked back—in previous negotiating rounds. The agreements can be considered an initial success, but whether they will produce lasting market access beyond Mr. Trump’s term in office remains to be seen.

Objective 4: Raise Revenue — Largely Reversed

Approximately $270 billion in tariff revenue was collected in 2025, below initial estimates largely because USMCA-eligible goods from Mexico and Canada were excluded, and other large import categories, such as consumer electronics, were exempt.

Yet the $270 billion figure, often cited by the administration as a fiscal success, comes with a significant caveat: roughly 60% of it will have to be refunded, with interest, after the Supreme Court's IEEPA ruling.

The Treasury Secretary has argued that “nearly all” the lost tariff revenue can be replaced by new tariffs set to be imposed later this summer under different legal authorities. This assumes that new legal challenges will not succeed. It also assumes that comparable tariffs will be quickly imposed, only months before the midterm elections, in an uncertain economic environment. Whatever happens, the net tariff revenue from the Liberation Day regime will be substantially lower than the initial projections because of the chaotic, haphazard way in which they were implemented.

By contrast, the sectoral 232 tariffs do continue to generate revenue. But they also continue to raise input costs for U.S. manufacturers. Whether that represents a net fiscal benefit depends heavily on how one accounts for the economic drag those tariffs impose on the manufacturing sector.

Where Things Stand

One year after Liberation Day, U.S. trade policy looks less like a strategic transformation and more like a soap opera. The headline tariffs that defined the day were suspended, eventually imposed in watered-down form, litigated, and then struck down. The goods trade deficit has grown. The manufacturing sector shed jobs and investment rather than gaining them. Some meaningful market access was achieved through negotiations, but the tariff revenue intended to offset fiscal costs will largely be refunded to importers who paid it. Throughout the year, and even into last week, the President tossed out random tariff threats like confetti, though most were never imposed.

The universal stopgap tariff of 10% that remains in place is itself the subject of an ongoing legal challenge. The administration retains the rhetorical posture of an aggressive tariff policy, but substantial new levies have not taken effect in over six months, aside from pharmaceutical levies that will mostly affect smaller biotech firms. Uncertainty about the future direction of tariff policy remains the defining condition for businesses making sourcing and investment decisions.

Some officials, particularly U.S. Trade Representative Jamieson Greer, have made a reasoned argument that U.S. trade relationships needed to be restructured. Those arguments deserve serious debate and engagement. But the manner in which the policy has been implemented—sweeping tariffs imposed by executive decree, without strategic forethought, clear sequencing, legal grounding, or stable implementation—produced “chaos costs” in market confidence, consumer prices, and manufacturing investment that are plainly evident.

A year of data is not a final verdict. But it is a useful reality check, and has produced a one-year administration report card that few would want to hang proudly on the refrigerator.

Twenty-one days. That’s how much time until oil executives and industry experts estimate the economic and market fallout from the war will sharply escalate if the Strait of Hormuz isn’t reopened.

At last week’s CERAWeek energy conference in Houston, CEOs explained that energy market disruptions from the Iran War are spreading worldwide, from South Asia to East Asia and, soon, the U.S. and Europe. While the world is focused on the “paper price” of oil, generally represented by the futures price of Brent North Sea crude, many industry veterans noted that the “physical price” for the actual delivery of oil is higher, especially in Asian markets where supplies are already pinched.

Stopgap measures, such as releases from strategic reserves and eased sanctions on some Russian and Iranian oil, have buffered markets to a degree. But by mid-April, analysts warn there will be little the U.S. or other governments can do to keep energy prices from spiraling rapidly. Smaller Asian nations are already rationing fuel.

When people talk about global crises, they usually picture battlefields, sanctions, or diplomatic standoffs. But sometimes the most consequential pressure points are geographic—thin strips of water through which the world’s prosperity quietly flows. The Strait of Hormuz is one of those, and in the wake of the Iran War, it has become the single most important economic chokepoint on the planet.

A Chokepoint Like No Other

Even in a world full of strategic maritime bottlenecks—the Suez Canal, the Strait of Malacca—Hormuz stands apart. In 2023, nearly 21 million barrels per day of crude oil and petroleum liquids moved through this narrow passage. That’s about one‑fifth of global supply, and more than a quarter of seaborne oil.

But Hormuz is a chokepoint for many other vital commodities besides oil. The Strait also carries:

• 21% of global Liquefied Natural Gas (LNG)

• 45% of the world’s sulfur

• 33% of the world's helium supply

• 35% of nitrogen fertilizer

Importantly, these are not niche commodities. They are the building blocks of agriculture, semiconductors, medical devices, and industrial production. When Hormuz closes, the world doesn’t just lose energy but also the inputs that keep modern economies functioning.

Asia in the Crosshairs

No region is more economically exposed than Asia.

Japan, South Korea, Taiwan, India, Vietnam, and China all rely heavily on Persian Gulf oil. For Japan and South Korea, the dependency is extreme, with 80–95% of their crude imports originating in the Gulf. China, like Japan, has stockpiled significant strategic reserves, but it still draws more than half of its imported oil from the region.

Liquefied Natural Gas (LNG) dependence tells a similar story. Taiwan and India are deeply reliant on Gulf LNG, while Japan and Korea, though better diversified, still face meaningful exposure.

Consider, as an example, Taiwan's exposure to the cutoff of LNG supplies from the Gulf. About half of the island’s electrical grid is powered by natural gas, and a full third of its gas imports comes from Qatar.

Taiwan has secured LNG supplies through mid‑May, and is negotiating with the U.S. to make up for lost Gulf shipments. But a prolonged disruption would threaten the island’s electrical grid and, by extension, its vital semiconductor industry, which produces a significant portion of the world’s high-performance AI chips.

Hormuz, Helium, and High-end Semiconductors

Supply chains can be like a row of falling dominoes; LNG shortages affect electricity generation, which in turn affects semiconductor production. And helium, another critical input for chipmaking, is also at risk due to Hormuz’s closure.

In fact, chipmaking is one of the most helium‑intensive industrial processes in the world. Etching nanoscale circuits requires ultra‑pure, ultra‑cold, inert gases, and the Gulf states are among the largest helium exporters on earth. Taiwan sources 69% of its helium from Gulf countries, while South Korea, another critical semiconductor producer, sources 55%.

TSMC and Samsung maintain strategic reserves, but those buffers are finite. There are alternative suppliers, including the United States, Russia, Algeria, and others. But if the Iran War drags on and the Strait remains closed, the world’s most advanced semiconductor fabs half a world away could face production constraints.

Fertilizer Fallout on the Farm

The Persian Gulf serves as the world’s primary nitrogen hub, supplying nearly 46% of global urea exports and roughly a third of the internationally traded fertilizer market. The closure of the Strait has sent prices for essentials like urea and ammonia into a spiral just as the Northern Hemisphere enters the critical spring planting window.

This supply-side shock is already creating a "physical availability crisis," where the lack of accessible nutrients threatens to cut global crop yields. As farmers grapple with these higher costs, the downstream effect could be a tightening of the global food supply and a rise in food inflation, turning a maritime bottleneck into a widespread challenge for global food prices and food security.

The U.S. Is Insulated, But Not Immune

President Trump has said “we don’t use” the Strait, and urged other countries to send ships to reopen it. He has leveled sharp criticism at NATO allies, even though the Gulf accounts for only 13% of Europe’s oil supply, just marginally higher than the 7% of America’s oil that comes from the Gulf.

It’s true that the United States imports relatively little oil or LNG from the Gulf. In terms of physical supply, America and Europe are far less exposed than Asia. But price exposure is another story entirely.

Even if American refineries are well supplied, global markets are not, and commodity prices reflect global scarcity. That’s why U.S. fuel prices have climbed sharply, with regular gasoline rising more than a dollar a gallon in a month, to an average of just under $4 per gallon on March 28. Diesel fuel, which is produced from heavier grades of oil like those from the Gulf, is now $5.40 per gallon in the U.S.

The Strait is Narrow, and so are the Options to Reopen It.

The Hormuz crisis once again reveals how deeply interconnected the global supply chain is. This is not a single‑commodity crisis, but a multi‑sector supply shock radiating outward from a single geographic point.

By closing the Strait, Iran has changed the war's strategic calculus. The conflict was started by the U.S. and Israel to disarm and dislodge the Iranian regime, but reopening the Strait of Hormuz has become the most urgent U.S. war aim. Time is not on America’s side. Every week the Strait remains shut, the economic damage compounds. For President Trump, who famously likes to keep his options open, the range of viable exits is shrinking:

1. “Make a deal” to reopen the Strait while leaving the Iranian regime intact.

2. Escalate militarily, such as by seizing the Kharg Island oil terminal, in an attempt to break Iran’s economic back and force the Strait open.

3. Use military force to reopen the Strait and provide ongoing naval escorts to commercial shipping.

The latter two options, which may proceed in parallel, imply American ground troops invading and holding Iranian territory. The irony is stark: for a President who ran against foreign wars and views leverage as the ultimate currency, he now finds himself on the wrong side of the ledger. Whether he chooses a compromise peace or a high-stakes ground offensive, the window of options is closing fast.

The world has been here before. Staring at a narrow stretch of water whose closure threatens global stability, the world’s greatest power struggles with how to reopen a strategic strait. The temptation to force passage militarily is strong, though the defender holds advantages that may be underestimated.

More than a century ago, in 1915, that place was the Dardanelles, the great power was Britain, and the adversary was the Ottoman Empire. Today, it is the United States that faces the imperative to reopen the Strait of Hormuz, which Iran has closed. One hundred ten years apart, the historical parallels are instructive and haunting.

In 1915, with the Great War stalled in the trenches of northern France and Belgium, Britain turned to an audacious plan championed by Winston Churchill, then First Lord of the Admiralty. If the Royal Navy could break through the Dardanelles Strait, the narrow strip of water linking the Mediterranean to the Black Sea, Constantinople would be exposed and the Ottoman Empire, fighting alongside Germany and the Central Powers, might collapse. Britain’s ally, Russia, could be resupplied by sea. It was a seductive vision that became a military catastrophe.

The campaign began with a naval assault meant to be swift and decisive. British and French warships attempted to fight their way through, but Turkish mines and coastal artillery devastated the fleet, sinking three battleships and halting the advance. When the naval effort failed, the Allies tried to seize the surrounding land. The Gallipoli landings, with Turkish forces holding the high ground, devolved into trench warfare, disease, and stalemate. By January 1916, the Allies had withdrawn after suffering more than 250,000 casualties. Churchill resigned, and the Dardanelles became a cautionary tale about underestimating a determined defender in narrow, fortified waters.

Today, the United States faces a similarly unforgiving geography in the Strait of Hormuz. The narrow channel—barely two miles wide at its tightest point—is flanked by Iranian territory overlooking the entire passage.

A century ago, the Ottomans relied on fixed guns, trenches, and minefields. Iran’s defenses are mobile and adaptive: concealed anti‑ship missiles, drones, swarming fast‑attack craft, and mines laid by vessels that are hard to track. If the Dardanelles was a static fortress, Hormuz is a shifting web.

The U.S. has begun efforts to reopen the strait by using air power to degrade Iranian missiles, drones, and small boats. Once that progresses, U.S. warships may attempt to transit the channel. And in an echo of Gallipoli, there are reports that the White House is considering landing U.S. Marines on the Iranian coast.

The parallels are striking, but history need not repeat itself. The differences in capabilities and circumstances matter. Hormuz will test not just military power, but strategy, patience, and political judgment.

The Economic Imperative: A Strait the World Cannot Afford to Lose

The Dardanelles mattered strategically, shielding the Ottoman capital and blocking supplies to Russia. Hormuz matters because it is an economic chokepoint of global consequence.

Roughly one‑fifth of the world’s oil and natural gas transits the strait. The International Energy Agency has called its closure the largest supply disruption in the history of global oil markets. East Asian economies such as Japan, Korea, and Taiwan are particularly exposed due to limited strategic reserves of natural gas.

But energy is only part of the story. About a fifth of the world’s fertilizer supply also moves through Hormuz, much of it nitrogen‑based products from Qatar and Saudi Arabia. And Qatar alone provides roughly a third of global helium, an irreplaceable coolant for semiconductors, MRI machines, and advanced research.

President Trump says that “we don’t use” the Strait, but global commodity pricing ensures that the U.S. economy feels the shock, as $4 gasoline is making clear. Iran has found a way to threaten not just the world’s energy economy, but its food and technology ecosystems as well.

The United States may have started the war to disarm and remove a hostile regime, but reopening the Strait of Hormuz has quickly become the most urgent imperative.

The Temptation to “Force” a Strait

In 1915, Allied leaders believed that a decisive naval thrust could quickly break through the Dardanelles. They underestimated the defender, overestimated the shock value of naval power, and assumed the operation would be politically straightforward. The same temptation exists today. President Trump called reopening Hormuz “a simple military maneuver” and criticized allies for not deploying warships to help, even though the U.S. Navy is also avoiding the strait because missiles, mines, and fast‑attack craft still pose real dangers.

Modern naval forces are vastly more capable than those of 1915, but the logic of chokepoints endures. Mines slow operations to a crawl. Narrow waters compress maneuver. Land‑based missiles and drones can reach ships in seconds. Reopening Hormuz will not be a single action but a campaign involving air, naval, and possibly ground forces. Even after a ceasefire, clearing mines and restoring commercial shipping could take months.

What History Suggests About the Path Ahead

The Dardanelles offers several lessons that resonate today. Geography favors the defender in narrow waters. Underestimating that defender can lead to strategic failure. Forcing a strait requires sustained, combined‑arms effort and patience; overwhelming naval power alone cannot guarantee success. Reports of U.S. troops and amphibious ships heading to the region suggest the White House understands this.

Faced with these obstacles, the administration might hope to declare victory and withdraw. But as long as Hormuz remains closed, it is hard to see how the United States can simply walk away. Either Mr. Trump makes a deal that reopens Hormuz while leaving the regime in place, or he removes Iran’s leverage by forcing the strait militarily.

The echoes of the Dardanelles are hard to ignore. That does not mean they will be repeated at Hormuz. America’s military planners are certainly aware of the history, and its lessons have likely shaped their strategy. But can the Commander-in-Chief say the same?

“There is no strategy.” This is my response when businesspeople and journalists ask me what the Trump administration’s tariff strategy is. Some, particularly non‑Americans, are surprised by my answer. They laugh nervously, assuming I must be joking. An American president, they say, could not possibly make momentous economic decisions without a plan. But looking at the record, the most straightforward conclusion is that, in most cases, the White House has no strategy.

What most observers miss is that “Let’s see what happens” is not just something the President often says—it is the best summary of his governing doctrine. It is the through‑line that connects a history of threats, escalations, reversals, and sudden shifts in both economic and military posture. It is not a slogan, or an accident; it is the operating system. Time after time, the pattern is the same: act first by using a tool of American power (tariffs, sanctions, law enforcement, military force), wait to see what happens, and then adjust. A strategic goal is announced later, if at all, and it frequently changes.

This should not be surprising. The president has long favored a transactional style, both in business and in public life, believing that flexibility and unpredictability create leverage. His approach to governance is instinctive rather than strategic. When asked on FOX News when the Iran war might end, Trump replied, “When I feel it, OK?… [when I] feel it in my bones.” That is not the language of a leader executing a long‑term plan. It is the language of someone who trusts impulse over strategy and sees flexibility as a cardinal virtue.

The president’s business career reflected a similar pattern: bold opening moves, rapid shifts in position, and a willingness to walk away or escalate depending on how counterparts responded. The Art of the Deal is a book about negotiating tactics, not long‑term business strategy.

It didn’t always work, as six bankruptcies and other failed business ventures demonstrate. But other times it worked quite well, delivering both wealth and fame. The President clearly believes it’s the right approach to politics, and so do tens of millions of Americans who delivered Mr. Trump two election victories, knowing fairly well his operating style. In office, this instinct has shaped the administration’s use of the greatest tools of American economic and military power. Whatever one thinks of the approach, one thing should be clear: it’s not going to change.

Analysts in government, business, and academia have tried to reverse‑engineer a grand strategy from this pattern: it’s all about eliminating trade deficits, or countering China, or building a sphere of influence in the Western Hemisphere. They’re missing the point. There is no clear strategy behind the President’s actions, and trying to divine one is counterproductive to understanding what’s really happening.

A Record of Haphazard and Reversible Tariffs

The clearest evidence of the President’s governing style lies in one of his signature policies: tariffs. They have been announced with great fanfare, only to be revised, narrowed, or abandoned.

• Liberation Day reciprocal tariffs were imposed, rolled back when markets reacted
  badly, partially reinstated after early trade deals, and then invalidated by
  the Supreme Court—requiring more than $160 billion in refunds. The President
  immediately announced he would reimpose them under different legal authorities.

• Threats to dismantle USMCA by imposing 25–35% tariffs on Canada and Mexico were floated shortly after the second term began, then quickly shelved once the economic consequences became clear. Most North American trade remains duty‑free.

• The China confrontation escalated rapidly, with tariff after tariff, bringing the situation to the brink of a trade embargo. There was financial market turmoil, and China retaliated with restrictions on rare-earth exports vital to Western economies. The administration then abruptly shifted to tariff standstill agreements and declared victory.

• A long list of unimplemented threats—tariffs on Europe over Greenland, on foreign films, on Canada over a TV advertisement, on BRICS countries for perceived slights, and on all buyers of Russian, Venezuelan, and Iranian oil—illustrates the same cycle: announce, observe, adjust, or drop.

These episodes do not reflect a long-term plan. They reflect a method: apply pressure, watch the reaction, and then recalibrate.

Embrace the Chaos: It’s a Feature, Not a Bug

The administration has articulated multiple “strategic” goals for its tariffs that do not align: lowering the trade deficit, reshoring manufacturing, using tariffs as leverage to open foreign markets, and raising revenue for the Treasury.

Each objective is plausible on its own, but the success of one contradicts the success of another. Trading tariffs away for market access reduces revenue and limits reshoring. Keeping tariffs high to encourage reshoring reduces imports and, therefore, revenue, and makes market‑access deals with trading partners harder to achieve.

The result is a policy environment where stated objectives vary by audience and moment. Observers searching for a single unifying theory behind the tariffs find themselves trying to reconcile trade goals that are contradictory. They’re trying to put a logical framework on a policy approach that is — very deliberately — ad hoc, haphazard, and chaotic.

The Same Pattern in Hard Power

The risks of an instinctive, improvisational approach are much higher in government than in business, and much higher in military matters than in economic ones. Nonetheless, the President’s method is the same.

Consider the administration’s use of military force. Elected on a promise to avoid foreign wars, President Trump has so far launched military attacks in seven nations. In each case, force was used when a tactical opportunity presented itself, not because an overarching strategy dictated action.

In the current conflict with Iran, for example, it appears an opportunity suddenly arose to attack the gathered leadership of a hostile Iranian regime, and the President (with a prod from Israel) took it. For what strategic goal? Two weeks into the conflict, at least five different goals have been articulated: halting the nuclear program, destroying missile capabilities, supporting protesters, forcing regime change, and achieving “unconditional surrender.” Some of these aims overlap; others diverge. Yet the sequence—act instinctively, see what happens, and then adjust—mirrors the pattern seen in economic policy.

When will the war end? Within the space of a week, the President said it would end “soon,” said it could go on “forever,” and then said, “when I feel it in my bones.” In one sense, this is quite deliberate, because the President believes unpredictability and flexibility keep adversaries off balance and produce leverage. It illustrates starkly that the war’s end will be more of a tactical adjustment than a strategic accomplishment. Many are frustrated by this. Clearly, the President is not.

The Real Trump Doctrine

The impulse to search for a hidden strategic rationale in President Trump’s decision-making is understandable. It makes people feel less anxious amid constant chaos. But the evidence points in one direction: a governing style rooted in tactical improvisation, transactional bargaining, and a belief that flexibility enhances leverage. It is guided by a willingness, even an eagerness, to resort quickly to formidable tools of American power—tariffs, sanctions, military force—and then simply see what happens. Goals are not fixed, but flexible.

The President’s supporters argue that his approach to governance keeps adversaries off‑balance and creates negotiating opportunities. Critics contend that it introduces costs and uncertainty, blinds him to potentially negative consequences, and makes long‑term planning impossible for allies, businesses, and the government itself.

Regardless of one’s view, recognizing the pattern is more useful than trying to impose coherence where none exists. “Let’s see what happens” is not a slogan—it is the real Trump Doctrine.

The signs were everywhere. Prices were soaring on everyday goods—clothing, tools, household essentials. Businesses were “marking up almost everything that people wear, eat, or keep house with,” as newspapers reported. Farmers were getting squeezed by higher costs at home while losing export markets abroad. The tariff policy, sold as a patriotic shield for American industry, was becoming a lightning rod for public anger.

Political cartoons showed wealthy industrialists celebrating while ordinary families struggled with rising prices. Critics charged that the tariffs favored elites and big corporations at the expense of small businesses and working Americans. The policy was designed to fortify the nation against foreign competition and usher in a new era of prosperity. Instead, it was about to detonate politically.

Sound familiar? Perhaps you assumed this is a description of America in 2025. If so, you’re off by 135 years, because this was the United States in 1890.

In a fit of economic nationalism, the nation had raised tariffs to unprecedented levels. Prices went up, the economy slowed, and small businesses and farmers suffered. Not surprisingly, the public blamed tariffs for the malaise. And when voters went to the polls that fall, they delivered Republicans the largest House midterm defeat of any party in U.S. history.

Modern events are not a carbon copy of Gilded Age history, but the political echoes are hard to ignore. Donald Trump has repeatedly invoked William McKinley as a model, praising him as a “big tariff guy” and celebrating the 1890s as a period when America was “very rich through tariffs.” The McKinley Tariff of 1890 (named for the future 25th president who was then chairman of the House Ways and Means Committee) raised average U.S. duties to nearly 50 percent, lighting a stick of political dynamite that exploded that fall in a political catastrophe for Republicans and, two years later, a White House victory for Grover Cleveland, a Democrat who pledged to lower tariffs.

What does this history tell us about today? The events of the 1890s remind us that when tariffs hit the kitchen table, they hit the ballot box.

When Tariffs Hit Household Budgets

In 1890, the impact of the McKinley Tariff was immediate. Prices rose on anything touched by imported materials. Woolen goods, clothing, and tools saw steep price increases, prompting widespread complaints from farmers and working families. The price of tinplate, used in the pre-plastic era for everything from canned food to household containers, nearly doubled, prompting outcry from merchants and consumers. The backlash was swift because the pain was personal.

Fast‑forward to today, and the kitchen‑table dynamic is just as potent. Macro inflation numbers may not fully reveal it, but Americans are grappling with tariff-fueled price increases across many key household expenses:

• Groceries: Food‑at‑home prices have climbed significantly in recent years, with staples like coffee, meats, poultry, fish, and some fruits and vegetables rising faster than overall inflation.

• Cars: In September 2025, the average new-car price rose above $50,000 for the first time ever. The Trump administration raised tariffs on autos, auto parts, and the steel and aluminum used to make them.

• Housing: Nearly everything that goes into home construction has been hit by higher tariffs: lumber, furniture, cabinets and vanities, appliances, HVAC equipment, sinks, and plumbing fixtures saw price hikes in 2025.

• Clothing: Tariffs on apparel and footwear were already high before President Trump “stacked” new tariffs on imports from Asia, raising duties on some items to nearly triple-digit levels.

When tariffs land on everyday goods purchased by consumers, they don’t feel like abstract policy—they feel like a direct hit to the family budget. And just like in 1890, voters tend to notice. Recent surveys reflect this dynamic: a recent Pew Research Center survey found that 60% disapprove of the administration’s tariff increases, including 39% who strongly disapprove. Notably, almost 30% of Republicans disapprove of higher tariffs. Similarly, a Fox News poll (Jan. 23–26, 2026) reports that 63% of registered voters disapprove of President Trump’s handling of tariffs, making tariffs one of his weakest‑rated policy areas.

The Squeeze on Farmers

In the 1890s, farmers were hammered by the unintended consequences of the McKinley tariff. Higher prices for manufactured goods and fertilizers squeezed them at home. Europe imposed tariffs and “sanitary” barriers on American pork, beef, and grain. Cotton exports fell. Rural anger surged, and the Farmers Alliance (later the Populist Party) emerged as a political force, winning several seats in Congress in 1890 across Nebraska, Kansas, and Minnesota.

Modern tariff policy has produced similar tensions. Export‑dependent sectors—especially agriculture—are highly exposed to retaliatory actions. When trading partners respond with tariffs or boycotts, farmers often feel the brunt of the blow first.

For example, when the U.S. escalated tariffs on China to triple digits in April 2025, China retaliated by completely halting purchases of American soybeans. An agreement struck later in the year at a Trump-Xi meeting restored some purchases, but even if China fulfilled its full commitment to buy 12 million metric tons of U.S. soybeans in late 2025 (and there are many indications it did not), total annual purchases last year would have reached roughly 18 million tons, a 32% decline from the 26.8 million metric tons China bought in 2024.

These hits to the farm economy come at a difficult time. The American Farm Bureau Federation reports that farm bankruptcies rose 46% in 2025, due to higher input costs, declining sales and exports, and heavier reliance on operating loans. Not all of this is due to trade, but, as with multiple factors driving higher grocery prices, tariffs are a readily identifiable and politically unpopular culprit.

Tariffs, Elites, and the Politics of Perception

One of the most damaging critiques of the McKinley Tariff was that it favored industrialists and trusts. The tariff became a symbol of elite privilege.

The modern debate has produced its own high‑profile cases that echo the Gilded Age. On January 16, 2026, the family of Matthew Moroun donated $1 million to a Trump-aligned PAC. Moroun, an American billionaire businessman, is best known as the owner of the Ambassador Bridge, the privately owned span connecting Detroit, Michigan, and Windsor, Ontario.

A few weeks after this donation, Moroun met with Commerce Secretary Howard Lutnick in Washington, and later that same day, President Trump threatened to block the opening of the Gordie Howe Bridge, a long-planned competitor to Moroun’s bridge monopoly over the Detroit River. The Canadian-financed bridge, partly owned by the State of Michigan, was built with American steel and labor and is intended to modernize and expand cross‑border trade capacity. Yet the interests of a billionaire contributor whose family owns an aging, overcrowded bridge seem to come first.

Episodes like this strengthen the impression that monied interests can still shape policy, echoing the dynamics of the Gilded Age. Indeed, one of the classical criticisms of tariffs is that a few inefficient or monopolistic companies benefit at the expense of millions of workers and consumers.

The Politics of Tariff Backlash

The most dramatic lesson from 1890 is political. The public backlash against the McKinley Tariff produced a 93‑seat loss for Republicans in the House—the largest midterm defeat in American history. Tariffs weren’t the only issue, but they were the dominant one. Voters saw the tariff as raising prices, hurting farmers, and benefiting elites, and they responded with overwhelming force.

A few years later, when the consequences of Gilded Age excesses fully materialized, they were devastating — the Panic of 1893 unleashed one of the worst economic downturns in U.S. history. It stemmed from a collapse of overbuilt railroads, a wave of bank failures, and a run on U.S. gold reserves triggered by falling confidence in the nation’s currency. The McKinley Tariff did not cause the Panic, but contributed to it through higher prices at a time of falling incomes.

Some observers might see parallels in today’s economic crosscurrents: a frenzied investment surge in AI that raises fears of overheating, mounting strain in private credit markets, and a weakening dollar, all unfolding alongside tariff‑driven price increases that hit lower‑income households the hardest.

The lesson isn’t that history will repeat itself. Rather, the tariff backlash of 1890 is instructive because it shows how quickly kitchen‑table economic anxiety can harden into political revolt. When trade policies reach into everyday prices and household budgets, the public response can be swift, sharp, and profound.

Every once in a while, American politics produces a moment of pure, accidental opportunity — a chance for a president to correct course without admitting error, to pivot without paying a political price. The Supreme Court last week handed President Trump exactly that kind of opening on trade. But if history is any guide, he’s unlikely to take it.

The Court’s recent decision overturning tariffs imposed under the International Emergency Economic Powers Act (IEEPA) nearly wiped the slate clean on the administration’s sprawling, unpopular tariff regime. According to Bloomberg Government, about 75% of the $2 trillion in trade affected by President Trump’s tariffs were imposed under IEEPA, with the remainder under other laws (mainly Section 232 “sectoral” levies).

Thus, the Court’s ruling vacating those tariffs created a rare reset button: a way to simplify a chaotic system, lower consumer prices, and claim credit for restoring order to a policy area that has become a tangle of exemptions, walk-backs, and just plain silliness — such as tariffs on bananas, and on islands inhabited only by penguins.

The President shows few signs — so far — of pressing the tariff reset button. Indeed, within hours of the court decision, he announced a 10 percent global tariff under Section 122 — and then, in a fit of pique, raised it the next day to 15 percent. Importantly, however, the 15 percent tariff is global in name only. USMCA and CAFTA partners? Exempt. Pharmaceuticals, smartphones, civil aircraft? All spared. True to form, the blustery Trumpian rhetoric outstrips the tariff reality. So perhaps there is still hope for a different approach.

Now the action shifts to the Office of the U.S. Trade Representative (USTR), which appears poised to launch a new wave of Section 301 investigations. Some will target specific countries. Others will go after cross‑border practices, such as pharmaceutical pricing or digital taxation. And this is where the administration’s unexpected opportunity lies.

Because if you squint, you can see the outline of a quiet, technocratic retreat from the most self‑defeating tariffs of the last eight years. The White House doesn’t need to repeal anything. It doesn’t need to negotiate. It doesn’t even need to admit that the old approach was economically costly and politically unpopular. All it has to do is… nothing.

If USTR simply chooses not to initiate 301 cases against certain countries, or opts for narrower, more targeted investigations that don’t cover certain products, then when the 150‑day Section 122 surcharge expires, presto! Those trading partners or product categories automatically revert to normal MFN tariff levels. No fanfare. No headlines. No humiliating climbdown. Just a quiet normalization of trade policy through omission.

It is, in theory, the easiest way to lift a large share of tariffs at once. A stealth unwinding. A bureaucratic reset disguised as continuity.

And yet, this is precisely why it probably won’t happen. The political incentives inside this White House run in the opposite direction. Tariffs have become a symbolic cornerstone of Trump‑era economic nationalism — a visible, visceral expression of toughness, even when the underlying economics (and polling data) are counterproductive.

The President has repeatedly chosen tariffs as a geopolitical tool of leverage: to try to pry Greenland away from Denmark and its EU partners, to get former Brazilian president Bolsonaro released from jail, or to punish Canada for any number of perceived slights. Yet it is these geopolitical tariffs that most clearly violate the Supreme Court’s ruling, which helps explain the President’s especially harsh reaction to the decision.

Nevertheless, the Supreme Court has handed the President a golden opportunity to fix a failing tariff strategy without ever admitting it was failing. As USTR considers which 301 investigations to launch — and NOT to launch — there is a real possibility that the administration could quietly walk back from its extreme rhetoric and clumsy first-year policy without seeming to do so.

But there is one giant obstacle to that strategy: President Trump. He loves tariffs, as he so often says. The Wall Street Journal describes his “obsession” with them. It would not be surprising if the White House stretched the meaning of other laws, such as Section 338 of the 1930 Tariff Act, to replace the now-vanished IEEPA tariffs.

Thanks to the Supreme Court, a tariff reset button is right there. But don’t assume it will be pressed. If the last year has taught us anything, it’s that the President enjoys making tariff threats at 3 am on Truth Social — for geopolitical reasons, as retribution, or just on a whim. It will be a hard habit to break.

In a recent Wall Street Journal op-ed, President Donald Trump again cast himself as Tariff Man, arguing that his trade policies “have created an American economic miracle.” In the President’s telling, tariffs punish foreign “cheaters,” restore American greatness, and cost the United States nothing.

Certainly, 2025 was the year of the tariff. Average effective U.S. tariff rates rose to levels not seen since the 1930s. Yet even these increases were not as high as what the President initially threatened.

Indeed, when you compare what the President says about tariffs to what his administration actually does, two very different pictures emerge. The public performance is one of constant escalation, and the early months of 2026 saw even more tariff brinkmanship over Greenland, Iran, Cuba, and Canada. But when one looks past the bluster, the underlying reality of Trumpian tariff policy is a mix of carve-outs, negotiated settlements, unilateral retreats, and quiet walk-backs.

What Trump Says

On paper — and on social media — Trump’s trade agenda is maximalist.

He has boasted of 25–35% tariffs on Mexico and Canada, presenting them as proof that even our largest and closest partners cannot escape his tariff hammer. He eagerly started an escalating tariff war with China, culminating in a headline-grabbing 145% tariff wall on Chinese imports last April.

Then came the theatrics of the “Liberation Day” tariffs unveiled on April 2, 2025, billed as a historic resetting of global trade. Tariffs were announced on everything, everywhere, all at once — even against imports from uninhabited islands. In the same spirit, his administration announced 100% tariffs on foreign movies in 2025, framed as a strike against foreign “cultural dumping.”

President Trump has also used tariffs as a vehicle for personal and political grievance. He threatened 10% tariffs on Canada over a TV ad that quoted Ronald Reagan critizing tariffs. More recently, he floated 100% tariffs on Canada in response to Prime Minister Carney’s Davos speech and Ottawa’s efforts to ease trade tensions with China.

Europe is not spared in this rhetoric. Mr. Trump threatened 25% tariffs on Europe unless Denmark agreed to hand over Greenland to the United States — a demand that blurred the line between policy and parody.

The pharmaceutical sector has also been in the rhetorical crosshairs, with threats of tariffs as high as 250% on all imported medicines. And there have been tariff threats against “any country” buying oil from Iran or Venezuela, or selling oil to Cuba.

Taken together, the story Trump tells is simple: sweeping tariffs, aggressively enforced, are reshaping the global trading system in America’s favor.

What Trump Actually Does

The reality, however, is more modest — and more complicated.

Start with North America. Despite the dramatic claims of new tariffs on Mexico and Canada, nearly all imports from both countries remain duty‑free under the USMCA. Within 30 days of the initial tariff announcement, the administration created a very broad carve‑out for any goods that “qualify” under USMCA rules of origin, which is the vast majority of trade in the region. The rhetoric signaled rupture; the reality preserved continuity.

The China story is similar. While Trump imposed 145% tariffs in early 2025, they lasted only a few weeks. A series of “ceasefire” deals reached in bilateral meetings later that year sharply reduced the effective tariff burden. Today, those tariffs stand at about 30%, and they are very likely to remain around that level through 2026. The reason is simple: China’s counter‑leverage through export controls on rare earth minerals and other critical materials is too powerful to ignore.

The vaunted “Liberation Day” tariffs? They were suspended within a week after bond and equity markets reacted very negatively. What followed was a series of mostly vague “framework” agreements, sometimes unwritten, with major trading partners to apply far lower tariffs than threatened in April. Recently, however, USTR — which is more grounded in reality than other agencies — has negotiated detailed and substantive agreements with medium-sized trading powers such as Malaysia, Argentina, and Taiwan.

At the same time, the United States has quietly removed tariffs on a wide range of food products and other non-domestically produced goods, including coffee, cocoa, bananas, and more. Another list of goods, including generic pharmaceuticals, civil aircraft parts, and precious stones and gems, has been dangled in front of trading partners to become duty-free upon the conclusion of handshake trade deals. But these moves rarely make it into the president’s public narrative.

Other high‑profile threats have simply fizzled. Little action has been taken on the much‑publicized 100% tariffs on foreign movies. The 10% and 100% tariff threats against Canada were not implemented. The Greenland‑or‑tariffs gambit was abandoned in exchange for a vague framework agreement that was mostly cover for a climb-down.

The pharmaceutical sector, despite talk of 250% tariffs, has seen none imposed. Generic drugs have been broadly exempted over concerns about U.S. drug pricing and supply shortages. Tariffs on branded pharmaceuticals were suspended in return for agreements with manufacturers to offer lower prices on some patented medicines.

Perhaps most telling: no new U.S. tariffs have actually been imposed since late September 2025. The last round of imposed hikes — 50% levies on imported furniture and wood cabinets — was suspended on New Year’s Eve, with barely a whisper from the White House.

The Politics of Too Many Tariff Threats

The pattern is clear. Trump’s tariff rhetoric is loud, maximalist, and constant; his actual policy is narrower, more reversible, and increasingly constrained by markets, push-back from trading partners, the domestic politics of affordability, and possibly soon by the courts.

Tariff threats are often not carried out, or they are quietly forgotten as the President quickly moves on to his next fight. As tariffs have grown more unpopular — and as voters have come to associate them with higher retail prices — the administration is actively seeking ways to pare them back without conceding defeat.

Yet President Trump plainly loves the power to make random, headline‑grabbing threats, usually via social media in the middle of the night. That habit is unlikely to change. What will change is the credibility of those threats, particularly as the divergence between rhetoric and reality widens and the U.S. midterm elections approach. Markets, businesses, and foreign governments are learning to apply a significant discount factor to the bluster.

For companies and trading partners, this means continued uncertainty and episodic chaos. But it also underscores the importance of focusing on what is actually happening — not just what is being shouted from the podium or posted on Truth Social. In the Trump era, tariffs actually collected at the border are far different from tariffs blasted out online.

The stakes have suddenly skyrocketed in the legal battle over the scope of presidential tariff powers. With the Supreme Court poised to issue a ruling any day on the use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs, the decision has taken on a new importance and urgency. Why? Because of President Trump’s new threat to levy tariffs on European nations unless they agree to sell Greenland to the United States.

This Greenland scenario is the textbook definition of the kind of expansive, overbroad executive overreach that the Constitution was designed to prevent. Fresh from fighting a war against the unchecked taxing power of King George III, the framers of the Constitution gave Congress, not the president, sole authority to impose taxes and tariffs. IEEPA was never intended to be a “willy-nilly” tool of leverage for Presidents to impose tariffs for any reason whatsoever. Using economic warfare against allies to force a real estate transaction is precisely the type of abuse that should be ruled unconstitutional.

After this week’s events, the timing of the Court’s decision is even more critical. While the Administration has signaled it has a “Plan B” to reimpose tariffs using other authorities if the Court strikes down the IEEPA's use, those alternatives are significantly different. Ordinarily, trade laws like Sections 122 and 301 of the Trade Act of 1974 are designed to address economic grievances—specifically, trade discrimination or unfair commercial treatment of U.S. firms. In the case of Greenland, there is no such unfair treatment. While the Trump administration would undoubtedly try to stretch the meaning of these laws, using them purely as a tool for foreign policy leverage is legally dubious and likely to be struck down.

During oral arguments, a majority of justices appeared skeptical of the boundless use of IEEPA tariffs. However, there is a risk of a fractured decision. It is possible we could see a split ruling in which a plurality finds that presidents retain some latitude under Article II's foreign policy powers to impose tariffs during a “national emergency.” Or the Court may punt to lower courts the question of which tariffs are permissible and which are not. Ironically, such a ruling might strike down certain reciprocal tariffs (imposed for economic reasons and easily reapplied under other laws) while upholding others rooted in national security justifications—like the fentanyl tariffs. By extension, this could validate the Greenland threat, the “Bolsonaro tariffs” on Brazil, and even tariffs on Canada because of a TV ad that annoyed the President.

There is no way to predict exactly how or when the Court will rule. But the events of this week have made one thing clear: the stakes of the tariff ruling have gone up — way up. The decision will be consequential not just for the separation of powers and the integrity of the Constitution, but also, potentially, for the future of the NATO alliance. The Court’s ruling will tell the world whether U.S. trade policy remains a matter of law, or just a weapon of whim.

President Trump’s new National Security Strategy arrives at a moment when the global system is already straining under geopolitical fragmentation, technological rivalry, and shifting economic alignments. The document presents itself as a reaffirmation of “America First,” but its deeper logic points toward something more specific: a worldview best described as Transactional Isolationism. It is a posture that blends 1930s Republican isolationism with a modern willingness to engage abroad only when a discrete, short‑term benefit is available.

This is not isolationism in the classic sense of avoiding all foreign entanglements, nor is it a coherent alternative to the post-World War II tradition of a globally engaged America. It is a foreign policy stripped of long‑term architecture, one that treats all international relationships as negotiable, reversible, and fundamentally instrumental. Engagement is not ruled out; it is simply recast as a series of bargains rather than a set of enduring obligations.

Alliances Adrift

The most immediate consequence of this shift is the erosion of America’s traditional alliances. Europe, once an anchor of U.S. strategic thinking, is increasingly framed as a burden or competitor rather than a partner. In the Indo‑Pacific, a bipartisan, two‑decade effort to cultivate India as a strategic counterweight to China has been cast aside. And long‑standing allies such as Japan, South Korea, and Australia now find themselves navigating a United States that offers only conditional support that can be withdrawn as quickly as it is extended.

Some countries are well-positioned to thrive under this model. Wealthy Gulf states, accustomed to transactional diplomacy and equipped with the financial resources to make it work, have become some of the clearest beneficiaries. Meanwhile, longstanding allies in Europe, Japan, and South Korea have been told they can buy partnership and trade peace only at the price of investment in the United States. Allies have always been major investors in America, but now cooperation with Washington must be purchased, rather than arising from shared strategic purpose.

Competitors, or Just Counterparties?

Perhaps the most consequential shift in the strategy is the reframing of China and Russia. Rather than treating them as adversaries or strategic competitors, the Trump administration casts both relationships primarily in economic and transactional terms. Long‑term competition—military, technological, ideological—is subordinated to the pursuit of short‑term “deals.”

This creates a strategic asymmetry: Beijing and Moscow are more than willing, indeed thrilled, to engage in transactional diplomacy. For them, it is a convenient way to divert Washington’s attention while they continue to modernize their militaries, expand territorial ambitions, pursue AI leadership, and conduct cyber and economic espionage. What is missing from the strategy document is any long-term plan to counter these threats, to cooperate with allies in resisting them, or to revitalize the U.S. military to deter possible aggression from these nations.

Trading Past America: The New Map of Global Commerce

The economic dimension of the strategy mirrors the geopolitical one. The administration’s trade and immigration posture is driven by a desire to re‑shore manufacturing, reduce exposure to global supply chains, and close immigration pathways even to highly skilled professionals. Yet, this economically isolationist impulse is repeatedly tempered by the pursuit of quick political wins. The result is a series of ad‑hoc trade agreements that lack durability and offer little guidance for long‑term business planning. Companies cannot make decade‑long investment decisions based on deals that may evaporate with the next political cycle, or even the turn of the calendar month.

Interestingly, other countries generally are not responding with economic barriers of their own, partly from a desire to avoid escalation, but even more so out of conviction that tariffs are self-harm. Instead, the rest of the world is deepening its non‑U.S. economic relationships. —EU‑India, EU‑Mercosur, Canada‑Asia, CPTPP, and a growing web of regional supply‑chain partnerships. Meanwhile, China, not the United States, is the top trade partner for a growing number of developing countries. Over time, this quiet realignment will leave the United States more isolated economically, even though it remains a major market. The U.S. accounts for less than 15 percent of global imports of goods, a reminder that the world can—and increasingly does—trade around it.

Deals Over Doctrine: Trump’s Real Foreign Policy Impulse

It is important, however, to distinguish the National Security Strategy document from the president himself. Mr. Trump does not operate from a fixed foreign policy philosophy, nor is he constrained by the more traditional isolationism that more accurately describes figures such as Vice President JD Vance. Trump’s personal instincts are more improvisational — he is far more interested in the transactions than the isolationism. For example, he is quite willing to engage with foreign countries if he can play the role of peacemaker; he speaks frequently about negotiating “ends to wars” — undoubtedly a laudable goal. Yet it seems grounded more in the desire to broker deals than in long-term interests or shared values.

Importantly, President Trump is not a China hawk. He prefers economic bargaining to strategic or ideological confrontation, and would much rather focus on trade than Taiwan. Yet he is surrounded by advisers and legislators who take a far more confrontational view of Beijing. This tension—between a president focused on transactions and an administration focused on competition—may intensify over time.

The Whiplash Diplomacy of a Transactional Superpower

A National Security Strategy built on Transactional Isolationism leaves the United States powerful but unpredictable, engaged but uncommitted, present but not dependable. It signals to allies that long‑standing partnerships are no longer strategic assets but merely negotiable conveniences. It tells adversaries that the U.S. can be distracted by short‑term bargains while they pursue long-term strategic advantage. And it leaves global businesses guessing whether Washington’s deals are the basis for future investment or just ephemeral ceasefires.

President Trump’s personal instincts only amplify this volatility. He is far more interested in deal-making than in the strategic logic that underpins the document bearing his name. That gap—between the strategy’s isolationist architecture and the president’s improvisational impulses—creates a foreign policy that can swing dramatically from disengagement to sudden bursts of activism, from skepticism of alliances to unexpected cooperation.

The result is a United States that remains central to global affairs but increasingly unmoored from the commitments that defined the post‑war order. Allies will hedge. Competitors will probe. And the world will adapt to an America that remains a superpower—but no longer a reliable one.

In remarks earlier this week, U.S. Trade Representative Jamieson Greer said that not only is the rules‑based global trading system “dead,” he questioned whether it ever existed in the first place. Yet the remarkable thing about 2025 is how decisively the rest of the world has proven him wrong. While Washington escalates tariffs and isolates itself from the global economy, global trade is not collapsing. In fact, it’s expanding—and doing so largely on World Trade Organization (WTO) terms.

The Trump trade strategy assumes that America’s market is so large and indispensable that foreign suppliers will “eat the tariffs.” That isn’t happening, because while the United States is indeed a large market, it is not the only market. America accounts for just 13% of global goods imports, meaning that nearly 90% of world trade does not involve the U.S. at all. And that enormous share of global commerce continues to operate under the WTO’s most‑favored‑nation rules, with 72% of goods trade still taking place on nondiscriminatory terms. The multilateral system that some in Washington dismiss as obsolete is, in practice, still the backbone of world commerce.

What’s also striking is how other countries have responded to the Trump administration’s tariff barrage. Most have not rushed to retaliate with tariffs of their own—because they know that doing so would damage their own economies. Instead, they’ve taken a far more strategic path: deepening trade ties with each other rather than with the United States.

Just this year, EU–India free trade negotiations have concluded, and a long-dormant EU-MERCOSUR agreement is moving toward ratification. The CPTPP—the trans-Pacific trade pact the U.S. walked away from—has gained renewed energy and new applicants. Countries across Asia, Latin America, and Europe are stitching together bilateral and regional agreements that deliberately route around the United States.

In other words, the world is not retaliating—it’s reorganizing in a way that does not involve the United States.

That’s why global trade volumes continue to rise. Even with U.S. tariffs in place, the UN now expects global trade in goods and services to reach $35 trillion this year, up 7%. The WTO reports that hundreds of new measures have been implemented to facilitate trade, not restrict it. The system is not only alive—it’s adapting and expanding.

The irony is that the United States, by insisting that the rules‑based system is dead, is increasingly isolating itself from the very network that it once led. Other countries are not waiting for Washington to re-engage. They are building new supply chains, new partnerships, and new trade architectures that will shape the next generation of global commerce—with or without American participation.

Don’t look now, but the hectic drive for ever more U.S. tariffs may have hit a bump in the road. No new tariffs have been imposed since the end of September. That’s more than two months — an epoch in Trump time — without a new round of eye-watering duty increases. After all, we have seen new Trump tariffs announced or threatened nearly every week since January 20. So has the tariff spree peaked — or merely paused?

The sudden quiet is striking: for much of this year, tariffs have been the signature economic instrument of the Trump administration. From steel and autos to consumer electronics and agriculture, Washington’s trade policy has been driven by an instinct to wield tariffs as leverage or, in some cases, as simple retribution for doing things President Trump didn’t like.

But the October and November trade news was mainly about tariff cuts and new trade deals.

A Subtle Shift in Policy?

After a flood of announcements of massive new duties, the last significant tariff increase took effect in late September, on lumber and wood products. Other than a brief threat to impose 100% tariffs (again) on China in mid-October, just before a summit meeting with Xi Jinping, trade news lately has been dominated by tariff removals or reductions:

• The administration unilaterally removed tariffs on hundreds of food and agricultural imports.

• Following the U.S.-China summit meeting in Seoul, not only was the 100% tariff threat abandoned, but levies on imports from China were reduced by 10% after Beijing made commitments on fentanyl interdiction. And an overall ceasefire in the U.S.-China trade war was extended into 2026.

• Tariffs on some Brazilian farm imports were reduced, while a new agreement with Switzerland reduced U.S. levies on most Swiss goods.

• Detailed trade agreements with Malaysia and Cambodia were announced, locking in lower-than-threatened U.S. tariffs for those nations.

• New agreements with Latin American countries locked in tariff reductions or exemptions across multiple sectors.

• Agreements with drug companies — and with the UK — exempted them from possible pharmaceutical tariffs.

There are other “dogs that haven’t barked.” Expected broad tariffs on semiconductors and pharmaceuticals have not yet materialized. Pending Section 232 investigations into medical products and advanced robotics are trundling along, but tariffs do not seem imminent. And while the Commerce Department has said more “steel derivative” tariffs are coming on potentially hundreds of products, nothing has yet been announced.

Political and Legal Headwinds

So has the White House purposely taken its foot off the tariff accelerator? While they might not say so publicly, administration officials surely know that public concern about affordability and the economy is growing. Polls show between 60-65% of voters disapprove of the President’s tariff policies, up from about 52-54% earlier this year. Prices for key goods remain elevated, especially for consumer-facing categories such as groceries, housing, clothing, and autos. Manufacturing employment is down 54,000 this year through September, according to the Federal Reserve, and firms say input costs are making factory investment more expensive. Farmers face steep economic challenges from higher input costs and vanishing export markets; a farm bailout package may be on the way. And a previously silent Congress has cautiously poked its head up, with votes in the Senate to terminate the “economic emergencies” that led to global reciprocal tariffs, as well as those on Canada and Brazil.

At the same time, legal risks are mounting. The Supreme Court is expected to rule soon on the president’s broad use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs. If the Court limits that authority, the administration will be at a crossroads: it could respond aggressively and seek to re-impose many or all tariffs via other legal authorities (including some that are just as legally dubious). Alternatively, the White House could use a court loss as an opportunity for a course correction, moving to a more focused, strategic use of tariffs rather than the blunderbuss, tariffs-on-everything approach we’ve seen so far.

A Turning Point — or Just a Pause?

Despite all this, it’s far too early to declare the tariff era over. Negotiations with Brazil and India have yet to yield progress, with hefty tariffs still in place on imports from both nations. The China tariff truce is fragile, at risk of blowing up over the next routine regulatory update in U.S. export controls. According to the Yale Budget Lab, the overall U.S. average effective tariff stands at 16.8%, a slight decrease from over the summer, but still at century-high levels. Another round of tariffs on steel and aluminum derivative products is in the works, and various other sectoral tariff investigations continue. The Supreme Court may find Trump’s tariffs legally justified under IEEPA. Perhaps most importantly, President Trump has dismissed concerns about affordability as a “Democrat hoax,” and could easily return to wielding his tariff hammer at any time.

In a year filled with tariff uncertainty, whether this moment marks a peak in Trump’s tariff bonanza or merely a lull before the next wave remains… well, uncertain. The coming weeks may give us some clues — with a possible Supreme Court ruling, updates on derivative tariffs, insights into the USMCA review process, and new trade investigation outcomes. Anxious businesses and irritated trading partners will be waiting to see whether the United States is experiencing true tariff fatigue or simply catching its breath before the next big push.

Why aren’t President Trump’s tariffs delivering manufacturing jobs? As Bloomberg’s Shawn Donnan points out in this great story, part of the answer is tariffs applied on the very goods needed to build domestic factories: machinery, components, and raw materials. But while the situation has gotten worse in 2025, this has been a problem for almost a decade now.

Suppose policymakers wanted an effective tariff strategy to support domestic manufacturing. In that case, they might impose tariffs on finished goods in a limited number of strategic sectors, while lowering or eliminating tariffs for imported parts and components used in domestic factories.

Trump’s strategy, starting with the China 301 tariffs in 2018, was the opposite. These levies were deliberately targeted (per Kevin Hassett’s advice) at intermediate goods, on the theory that consumers would notice such tariffs less because their cost would be absorbed mainly by the domestic industry.

During the Biden administration, many businesses argued for a targeted tariff-reduction strategy on intermediate goods from China used in U.S. manufacturing and unavailable elsewhere. But although exclusions from 301 tariffs were supposed to be made for such products, relatively few were granted by Biden’s hyper-cautious USTR. Then, in the midst of the 2024 election, Biden made the problem worse by imposing new tariffs on intermediate goods such as steel, batteries, and semiconductors.

In Trump 2.0, the approach has been even more blunderbuss: tariffs on finished goods, tariffs on parts and components, AND tariffs on the raw materials used to make such parts and components.

Some companies have announced plans for new U.S. factories, which senior Trump officials frequently discuss. But those very same companies are finding out that making things in America is far more expensive than it needs to be, because we are raising the cost of inputs via tariffs-on-everything, and restricting the supply of skilled labor through visa crackdowns (H-1B, plant raids, etc.)

Little wonder, then, that U.S. manufacturing jobs have continued to fall. Will 2026 be the blockbuster year for factory jobs that Sec. Bessent and Mr. Hassett have promised? For the sake of American workers, let’s hope so, but it would be despite the administration’s tariff policies, not because of them.

I listened to nearly three hours of oral arguments in the Supreme Court’s case on IEEPA tariffs today. With the big caveat that I am not a lawyer, and the other big caveat that it is dangerous to read too much into the views of the justices based on their questions, here are a few thoughts:

• The bulk of the argument and questioning was on the textual aspects of the case, specifically whether “regulate importation” includes the power to levy tariffs.

• Several justices (Thomas, Gorsuch, others) asked about the major questions and non-delegation doctrines, but most of the questions were about interpreting the meaning of the text of the statute.

• The Solicitor General, making the government’s case, relied very strongly on the argument that the IEEPA tariffs are “regulatory tariffs” and not “revenue-raising tariffs.” He repeated this at least half a dozen times, and it had me laughing out loud. The notion that the collection of billions of dollars by the government is merely incidental to the “real” purpose of the tariffs is belied by the President’s own statements, and by the language of the government’s own brief.

• Chief Justice Roberts asked SG Sauer, “Who pays the tariffs?” and got a convoluted reply suggesting that somehow the collection of tens of billions of dollars is not affecting American citizens. I don’t think the justices are going to buy this argument; several expressed skepticism.

• Justices Gorsuch and Barrett, who are key swing votes, both seemed troubled by the government’s arguments. Gorsuch, in particular, seemed concerned that the tariff power claimed by the President under IEEPA is entirely unlimited and unbounded, and could never be reclaimed by Congress absent a veto-proof majority.

• Barrett, on the other hand, drilled down on the textual meaning of “regulate importation” and asked several questions about the difference between licenses, which IEEPA clearly authorizes, and tariffs, which are not mentioned. Lawyers for the private parties took a while to make the point that while licenses may be authorized, charging revenue-raising fees for such licenses is not.

• Justice Kavanaugh inquired multiple times about the precedent of President Nixon’s 1971 global 10% tariff. He said, “this is important to me.” He was probing whether this precedent saves the Trump tariffs, because Nixon used TWEA, a predecessor statute to IEEPA, to justify them. I'm not sure Mr. Katyal’s response to this issue was entirely on point, and it felt like Justice Kavanaugh was looking for a way to save the IEEPA tariffs under the Nixon precedent.

• Justices Sotomayor (in particular), Kagan, and Jackson asked probing questions, seeming to challenge the government’s interpretation of “regulate importation” and why Congress did not specifically authorize tariffs, as well as why no other President has used IEEPA to impose them.

• Justice Thomas asked questions that seemed to be fishing for reasons why the major questions and non-delegation doctrines don’t apply to this case.

• Justice Alito had a fascinating line of questions in which he pointed out (correctly) that President Trump may use Section 338 to re-impose most, if not all, of the IEEPA tariffs. He’s right, but his argument was a curious one for a conservative jurist, as he seemed to be saying that since most of the tariffs will be re-imposed under a different law, we should just leave the IEEPA tariffs in place.

Solicitor General Sauer and Neal Katyal did an excellent job presenting their arguments, and Sauer, for the most part, avoided the hyperbole that we’ve heard from President Trump and his cabinet officials about the “end of the world” if the tariffs are struck down.

Okay, I said it’s foolish to make predictions of how justices will vote based on oral arguments. But I’m going to do it anyway: I think the court will rule either 6-3 or 5-4 against the IEEPA tariffs, with Roberts, Barrett, Sotomayor, Kagan, and Jackson in the majority, possibly joined by Gorsuch in the result or with a separate concurrence. Thomas and Alito will vote to uphold, and I think Kavanaugh will join them (at least on the reciprocal tariffs, maybe not fentanyl) based on the Nixon precedent. Please bookmark this page to see how wrong I am in a few months.

It was a very eventful week in U.S.–Asia trade. Here are three observations about what it means for businesses and investors with interests in Asia.

A(nother) Ceasefire Agreement with China

First, the US‑China agreement should be seen as a ceasefire, not a peace treaty: it dialed down recent punitive tit‑for‑tat trade measures neither side wanted to sustain, but it delivers no new market access for U.S. exporters and does nothing to address China’s state‑directed, export‑driven economic model. It essentially returns things to where they stood in mid-April, after a near-trade embargo was paused in the first of five ceasefire agreements negotiated over the past six months (Geneva, London, Stockholm, Madrid, and now Seoul). Will this one last a full year? Businesses certainly will hope so, but won’t bet on it.

National Security Export Controls: Up for Negotiation

Second, as I said in the New York Times this week, U.S. national‑security export controls have now become a tradable item in the U.S.-China relationship. Washington appears to have stopped short of allowing high‑end AI chip exports, but it did roll back limits placed only weeks earlier on subsidiaries of Chinese parent companies designated security risks. As China has always wanted, U.S. export controls are now part of trade talks. Will this freeze U.S. high tech controls in place for the foreseeable future?

Malaysia and Cambodia: Meaningful New Trade Deals

Finally, less noticed but commercially important were comprehensive trade deals with Malaysia and Cambodia, and an agreement on a trade framework for Korea. The first two deals, in particular, are traditional trade agreements with detailed text and specific commitments on tariffs and non-tariff barriers. Both secure meaningful new market access for U.S. goods, open the services market, and lock in commitments to WTO rules on technical trade barriers, e‑commerce, fisheries subsidies, and IP. The USTR negotiators very effectively used tariff leverage to win these gains, and business and farm groups rightly saluted them for it.

Interestingly, however, neither country won a reprieve from 19% U.S. “reciprocal” tariffs or exceptions on sectoral duties. This is a missed opportunity, but they will still benefit from having a lower average duty rate than China, meaning they remain attractive destinations for manufacturers looking for a sourcing alternative.

As the world’s attention turns to the upcoming APEC summit in late October 2025, all eyes are on the highly anticipated meeting between U.S. President Donald Trump and Chinese President Xi Jinping. With U.S.-China relations having experienced a rollercoaster ride throughout 2025, this face-to-face encounter could prove pivotal in shaping the future of bilateral ties and the global economy.

The agenda for this summit is expansive, covering a wide range of contentious issues that have strained the relationship between the world’s two largest economies. From trade disputes to geopolitical tensions, the Trump-Xi meeting promises to be a high-stakes affair. However, given the complexity and depth of the challenges at hand, observers are tempering their expectations, even as they prepare for some surprises.

Here are some of the key topics likely to dominate the discussions:

1. Fentanyl Crisis: A Glimmer of Hope?

Perhaps the most promising area for a tangible agreement lies in addressing the fentanyl crisis. The United States has long pressed China to take more decisive action in curbing the production and export of fentanyl and its precursors, which have contributed to a devastating opioid epidemic in America.

China has hinted at various commitments but has thus far held back, likely seeing this as a bargaining chip for broader negotiations. For the U.S., cooperation on fentanyl interdiction is viewed as something China should already be doing if it wants to be seen as a responsible global actor. Nevertheless, progress on this front could potentially lead to the removal of the 20% tariff currently imposed on all Chinese imports—a significant economic incentive for Beijing.

2. Tariffs: The Ever-Present Elephant in the Room

The complex web of tariffs between the U.S. and China will undoubtedly be a central topic of discussion. China is eager to address the various layers of tariffs imposed by the U.S., including:

• The 10% reciprocal tariff

• Ever-expanding sectoral tariffs on industries like steel, aluminum, and semiconductors

• Potential 40% “trans-shipment” tariffs on goods containing Chinese inputs from third countries

• Residual tariffs from the first Trump administration and the Biden era

Additionally, the specter of secondary tariffs on China for its purchases of Russian and Venezuelan oil looms large, though Trump has thus far refrained from imposing these in hopes of securing a broader trade deal.

Despite the desire for progress, expectations for breakthroughs on non-fentanyl tariffs should be tempered. The most likely outcome may be an extension of the current “tariff truce” – set to expire on November 10 – for another six months to allow for continued negotiations. This would be a modest but welcome development for businesses on both sides, providing a degree of short-term certainty.

3. Export Controls: A Dangerous Bargaining Chip?

One of the more contentious aspects of recent U.S.-China trade discussions has been President Trump’s willingness to incorporate national security export controls into broader trade negotiations. This approach marks a significant departure from traditional U.S. policy and has raised concerns among security hawks and some within the administration itself.

Earlier this year, the U.S. imposed and then traded away controls on AI chips, aircraft parts, semiconductor design software, and industrial gases. In the latter three cases, these concessions were made in exchange for the resumption of Chinese rare earth magnet exports. Regarding AI chips, the White House was willing to permit the export of restricted goods in exchange for money – specifically, a promise of 15% of the China revenues of AI chip companies.

At APEC, China is likely to push for further loosening of controls on semiconductor manufacturing equipment, advanced AI chips, quantum computing technologies, and other cutting-edge goods. Whether Trump agrees to such concessions—and what he might demand in return—will be closely watched by Congress, industry leaders, and national security experts.

4. Investment: China’s Trillion-Dollar Gambit

Reports suggest that China may dangle the prospect of massive investments in the United States – potentially up to $1 trillion – in exchange for relaxed national security investment reviews via CFIUS (the Committee on Foreign Investment in the United States) and favorable tariff rates on imported manufacturing components for Chinese-owned U.S. factories.

This strategy plays directly to President Trump’s oft-stated goal of attracting foreign investment to America. There are certainly sectors where increased Chinese investment could be mutually beneficial, such as consumer goods, commercial real estate, and certain energy and natural resource processing industries.

However, a broad relaxation of CFIUS reviews could pose significant national security risks and likely face strong opposition in Congress.

Similarly, providing preferential tariff treatment to Chinese investors for manufacturing inputs would be politically challenging, especially given the existing sectoral tariffs that have raised U.S. prices for steel, aluminum, and other materials. A more palatable solution might be a broader reduction in tariffs on manufacturing inputs for all companies producing in the U.S., but this would represent a significant reversal of Trump’s industrial tariff policies to date.

5. Purchases: The Return of “Buyoff Diplomacy”?

During President Trump’s first term, China attempted to ease trade tensions by buying off the United States with promises of massive purchases of U.S. goods and commodities. While the Phase 1 trade deal fell far short of its ambitious targets, large purchase commitments remain an attractive “deliverable” for summit meetings.

Two areas to watch closely are soybeans and commercial aircraft. China has not purchased any U.S. soybeans this year, clearly using this as leverage in negotiations. American farmers are growing increasingly anxious about both the immediate loss of annual sales and the long-term threat of losing market share to competitors like Brazil and Argentina. Any trade deal emerging from the summit, therefore, seems likely to include Chinese commitments on soybean purchases.

Similarly, there are rumors of potential orders for up to 500 Boeing aircraft. Such a deal would provide a much-needed boost to the American aerospace giant and serve as a headline-grabbing outcome for the summit.

6. Resumption of Dialogues

Both sides may agree to resume or establish more regular bilateral dialogues, particularly in areas such as military-to-military communication and economic affairs. While these might not produce immediate tangible results, they could help stabilize the relationship and provide forums for ongoing discussions on thorny issues.

7. Strategic Issues: Taiwan, Russia, Iran, and North Korea

While President Trump appears keen to focus the summit solely on trade and investment, China has made it clear that geopolitical matters – especially Taiwan – must be on the agenda. Reports suggest that Xi Jinping hopes to persuade Trump to soften longstanding U.S. policy on Taiwan, potentially by making a clear statement opposing Taiwanese independence.

Such a shift in U.S. policy would be a massive concession to China with far-reaching strategic implications throughout the Indo-Pacific region. U.S. allies, members of Congress, and military leaders will be scrutinizing any language on Taiwan extremely closely.

It remains to be seen whether Mr. Trump will press China on its support for Russia, Iran, and North Korea. While these issues would typically be high priorities for a U.S.-China summit, Trump has shown little appetite for confronting China on these topics, beyond occasional threats of secondary tariffs that have yet to materialize.

Conclusion: Managing Expectations

As we approach this crucial summit, it’s essential to acknowledge the complexity of the U.S.-China relationship and the limitations of what can be accomplished in a single meeting. The year 2025 has seen U.S. policy toward China swing from a near-total trade embargo in April to a notable softening over the summer. President Trump appears convinced that he can secure a “deal” with Xi Jinping through face-to-face bargaining, banking on his skills as a negotiator.

China, for its part, has demonstrated a sophisticated ability to apply precise economic pressure on the United States, whether by withholding critical products, such as rare earth elements, or suspending purchases of American agricultural commodities.

Given the extensive agenda and the deep-seated differences between the two countries, expectations for the outcome should be modest. A realistic, favorable scenario might include:

1. An agreement on fentanyl cooperation, leading eventually to the removal of the 20% U.S. tariff.

2. Chinese commitments to purchase American soybeans and Boeing aircraft.

3. An extension of the current tariff truce beyond November 10, potentially into the second quarter of 2026.

4. Establishment of new dialogue mechanisms or revival of dormant ones.

While such outcomes would represent progress, they would fall short of a comprehensive, historic trade agreement. More concerning would be any U.S. concessions on matters of national security, such as export controls or investment reviews. Such moves would likely face opposition from Congress, national security hawks, and the defense establishment. The same holds true for any perceived weakening of U.S. policy on Taiwan.

It’s worth noting that while some Cabinet officials, including Treasury Secretary Scott Bessent and USTR Jamieson Greer, have suggested that a modest “status quo” summit would be acceptable to the U.S., it’s unclear whether President Trump shares this view. His penchant for dramatic deals and headline-grabbing announcements adds an element of unpredictability to the summit. For if we have learned anything over the past eight months, it is to expect the unexpected.