Undoubtedly, there has never been an era of true free trade. International trade has always been only partially and unevenly free and, in most cases, regulated. Most so-called neoliberal advocates have never consistently promoted free trade regardless of circumstances, but only when it seemed to serve their national and corporate interests — for example, through unequal exchange.
Trump’s tariffs aim to revive manufacturing jobs that the United States has lost because of cheaper imports. But the jobs lost to automation will be almost impossible to recover. Worse still, his tariffs will regressively tax American consumers.
Free trade does not encourage selective investment or technological promotion. Trump’s predecessor, Joe Biden, sought to promote new industries — often at high cost — through his Inflation Reduction Act, the Chips and Science Act, and other industrial policy measures.
However, these initiatives have been undermined by Trump’s insistence on repudiating the initiatives of previous administrations and cutting non-military public spending, even when such measures serve his alleged strategic goals.
With tariffs as his main political weapon in his intimidating, transactional approach to exclusively bilateral negotiations, Trump’s re-industrialisation ambitions can only achieve partial success.
His refusal to negotiate collectively reinforces the United States’ advantage in such asymmetrical dealings. Others, eager to gain his favour, have already made excessive concessions — even beyond Washington’s expectations! Thus, the fate of the most disadvantaged only worsens, generating widespread resentment and antagonism. But it is unlikely that the weakest will obtain any tangible gains, except for some mining concessions.

The End of Bretton Woods

In the 1960s, then-French President Charles de Gaulle complained that the 1944 Bretton Woods Agreement (BWA) had granted the United States an “exorbitant privilege.” The price of an ounce of gold was fixed at 35 dollars.
This parity allowed the United States to obtain cheap credit from those who needed dollars. The sale of U.S. Treasury bonds to the rest of the world enabled it to cover both its current account (trade) deficit and its fiscal deficit.
Pressure on the dollar increased throughout the 1960s, particularly with the sharp rise in spending on the Vietnam War. France then led other countries to demand gold instead of holding dollars.
In August 1971, President Richard Nixon unilaterally repudiated the U.S. obligation under the BWA to redeem gold at the promised price in dollars. But this did not end America’s “exorbitant privilege.”
The United States allowed OPEC, led by Saudi Arabia, to raise the price of oil provided that payments were made in dollars. The oil price hike also dealt a setback to its emerging industrial rivals in Europe and Japan.
Since 1971, acceptance of the U.S. dollar has been based on faith that it will remain the international reserve currency. Thus, the “exorbitant privilege” has become a matter of belief.
Ironically, while Eurodollars undermined the BWA, petrodollars saved the dollar’s status as the world’s reserve currency and preserved its exorbitant privilege, turning oil into the “new gold.”

The Myths of Neoliberal Trade

Half a century of neoliberal trade rhetoric has claimed that “trade liberalisation” benefits everyone — this is its core myth. Even though this has not been true in the Global North, it has not stopped economic policy experts from promoting free trade agreements with the United States as a solution to Trump’s tariffs.
Yet even the “mahaguru” (great master) of trade, Indian-American economist Jagdish Bhagwati, insists that only a fair multilateral trade agreement can benefit all. He denounces bilateral, regional, and other plurilateral agreements as “termites” that undermine the system.
The most popular trade simulations based on the Computable General Equilibrium (CGE) model assume full employment, unchanged trade, and fiscal balances.
These estimates of free-trade gains are misleading, since their methodologies often ignore the significant adverse effects of trade liberalisation, such as loss of output and employment and growing trade and fiscal imbalances.
Unsurprisingly, cost-benefit studies conducted by the World Bank and other bodies projected net losses for most of the Global South from the 2001 Doha Round of the World Trade Organization (WTO).

False Narratives

Trump’s “shock and awe” Liberation Day announcement on April 2 stunned much of the world in one stroke. As the president boasted, dozens of governments rushed to “kiss his ass.”
However, Trump’s priorities — especially his proposed tax cuts, the shifting global political economy, and the diverse nature of U.S. interests — will erode public support for his agenda.
Trump’s political narrative is blatantly incoherent and self-contradictory. The Financial Times noted: “The U.S. president wants to protect domestic industry and keep the dollar as the world’s reserve currency.”
Self-servingly dismissing conventional wisdom, his patriotic rhetoric and self-satisfied style manage to attract his loyal followers with selective evidence and half-truths.
Even if Trump’s tariffs fail by their own standards, he will still be able to claim that he tried to make America great again. He will continue to blame internal and external opposition to secure the support of his patriotic base — those rallying around the MAGA movement: Make America Great Again.

See, Trump desmonta los mitos comerciales de sus rivales (y los propios)

Ilustración: Cortesía de ElNuevoSistemaMundo

*Jomo Kwame Sundaram was a professor of economics, United Nations Assistant Secretary-General for Economic Development, and an award-winning thinker on borderless economic thought.