Habib Badawi, Mohamed Hani, Ouahiba Louahab
Introduction
The return of Donald Trump to the presidency in 2024 marks a pivotal moment in the evolution of U.S. trade policy and global economic governance. Far from representing a mere continuation of his first term’s approach, Trump’s second administration has catalyzed a profound transformation in America’s engagement with the international trading system—accelerating the shift from multilateral reciprocity to unilateral retaliation as the fundamental organizing principle of U.S. trade strategy. This transformation reflects not only the personal preferences of a singular political figure but also deeper structural tensions within the liberal international economic order that have been building for decades (Drezner, 2019).
As Drezner (2019) observed during Trump’s first term, his approach to economic statecraft reflected a fundamental departure from postwar American trade orthodoxy. Where previous administrations had generally pursued trade liberalization within multilateral frameworks based on reciprocal concessions, Trump’s vision emphasized bilateral transactionalism, zero-sum competition, and the strategic deployment of economic coercion. This vision has only crystallized further in his second administration, with institutional innovations and policy initiatives that may permanently alter the landscape of global trade governance.
This study examines this accelerating transformation through an integrated theoretical framework that captures its multidimensional nature. By combining insights from neo-mercantilist political economy, institutional power analysis, network theory, and the economics of policy uncertainty, we develop a comprehensive analytical lens for understanding both the mechanisms driving this shift and its consequences for domestic and international political economy. This approach enables us to move beyond simplistic characterizations of Trump’s trade policy as merely protectionist or nationalist, instead recognizing it as a coherent—if controversial—response to perceived failures of the post-Cold War global economic order.
Through detailed case studies of executive trade actions, particularly the expanded use of Section 232 and Section 301 authorities, we document the procedural innovations that have concentrated unprecedented discretionary power in the executive branch. Our quantitative analysis of policy uncertainty effects reveals the economic costs of volatility and unpredictability in trade relations. Comparative institutional analysis situates American developments within broader global patterns, while network analysis illuminates the strategic logic of interdependence weaponization by both the U.S. and its trading partners.
The study addresses several critical research questions: How has Trump’s second term intensified the transformation of U.S. trade policy? What institutional mechanisms have enabled this shift? How have other major economic powers responded to American unilateralism? What are the distributional consequences within the U.S. domestic economy? And perhaps most importantly, what are the long-term implications for global economic governance in an increasingly fragmented international order?
By engaging these questions through rigorous empirical analysis and theoretical innovation, this study contributes to scholarly understanding while offering practical insights for policymakers navigating an increasingly complex landscape of international economic relations. The findings suggest that the Trump Doctrine in trade policy represents not merely a temporary deviation but a structural realignment with profound implications for the future of global economic governance.
Theoretical Framework
Neo-mercantilist Political Economy
The intellectual foundations of the Trump administration’s trade approach are deeply rooted in neo-mercantilist thinking, which challenges liberal assumptions about trade as a positive-sum endeavor. As Irwin (2021) explains in his intellectual history of free trade, mercantilist thought originated in 16th-18th century Europe, prioritizing trade surpluses and viewing international commerce as fundamentally competitive rather than cooperative. While classical economists like Adam Smith systematically dismantled mercantilism’s theoretical underpinnings, its essential insights about economic sovereignty and strategic industry protection have periodically resurfaced in times of geopolitical tension and economic dislocation.
The contemporary revival of neo-mercantilist thought draws particularly on Friedrich List’s (1841) “national system” concept, which rejected abstract free trade theory in favor of developmental approaches tailored to national circumstances. List argued that “the power of producing wealth is infinitely more important than wealth itself” (as cited in Levi-Faur, 1997), emphasizing the strategic importance of maintaining manufacturing capabilities even when short-term efficiency might dictate specialization in other sectors. This perspective strongly informs the Trump administration’s focus on reshoring manufacturing and rebuilding industrial capacity, even at significant economic cost.
The neo-mercantilist framework also draws from Gilpin’s (1987) work on political economy, which emphasized how economic policies are invariably shaped by political imperatives and power considerations rather than purely efficiency concerns. As Gilpin argued, “The market, by its very nature, tends to erode and possibly to destroy its own political foundations” (1987), requiring periodic state intervention to realign economic arrangements with political realities. The Trump administration’s rejection of “hyper-globalization” in favor of economic sovereignty reflects this recognition of tensions between market efficiency and political sustainability.
Luttwak’s (1990) prescient analysis of the shift from geopolitics to “geo-economics” provides another crucial theoretical pillar for understanding contemporary trade policy. He predicted a post-Cold War era where “the methods of commerce are displacing military methods” (1990) in interstate competition—precisely the pattern now evident in intensifying U.S.-China commercial rivalry. The strategic deployment of tariffs, export controls, and investment restrictions in this relationship exemplifies what Luttwak termed “the logic of conflict in the grammar of commerce” (1990).
Institutional Power Asymmetry
The Trump administration’s ability to implement sweeping trade policy changes without significant legislative constraints reflects long-term institutional developments in American governance. Drawing on Lowi’s (1979) concept of “juridical democracy” and Mettler’s (2011) analysis of the “submerged state,” this theoretical framework examines how institutional arrangements have enabled the progressive concentration of trade authority in the executive branch.
As Irwin (2017) documents in his history of U.S. trade policy, the constitutional assignment of trade authority to Congress (Article I, Section 8) began shifting to the executive branch with the Reciprocal Trade Agreements Act of 1934, which first authorized the president to negotiate tariff reductions. This delegation reflected both practical needs for negotiating flexibility, and the institutional advantages presidents possess in foreign policy. Subsequent legislation—including the Trade Expansion Act of 1962 (introducing Section 232 “national security” provisions) and the Trade Act of 1974 (establishing Section 301 authority regarding “unfair” trade practices)—progressively expanded presidential discretion in trade policy implementation.
Silverstein’s (2009) analysis of how “law shapes, constrains, saves, and kills politics” provides insight into the constitutional implications of this institutional evolution. The progressive delegation of statutory authority has created what Posner and Vermeule (2010) term the “executive unbound”—a system where presidential administrations can implement far-reaching economic policies with minimal legislative input or oversight. This institutional perspective helps explain how procedural and legal mechanisms facilitated Trump’s unilateral trade measures despite traditional legislative prerogatives in this domain.
The concentration of trade authority aligns with broader trends in what Silverstein (2009) calls the “administrative presidency,” wherein statutory implementation provides opportunities for unilateral executive policymaking beyond direct congressional control. The Trump administration’s innovative interpretations of existing statutory authorities—particularly the expansive application of national security justifications under Section 232—illustrate how institutional arrangements have enabled a fundamental reorientation of trade policy without requiring new legislation.
Network Power Theory
The strategic logic of contemporary trade conflicts becomes clearer through the lens of what Farrell and Newman (2019) term “weaponized interdependence.” This theoretical framework analyzes how global economic networks create asymmetric power relations that can be leveraged for strategic advantage. By controlling key nodes in trade, financial, and technological networks, states can exercise both surveillance (“panopticon”) and denial (“chokepoint”) capabilities against competitors.
Farrell and Newman argue that “globalization has not erased state power but rather created new channels through which it can be exercised” (2019). This insight explains why economic integration, contrary to liberal expectations, has not necessarily reduced geopolitical competition but instead transformed how it operates. The Trump administration’s strategic use of America’s central position in global financial networks, technological supply chains, and standard-setting institutions exemplifies this pattern.
The weaponized interdependence framework helps illuminate strategic calculations behind seemingly contradictory policies. For instance, the simultaneous pursuit of both decoupling from China in sensitive technologies and coercive leverage through existing economic linkages reflects a sophisticated understanding of network power dynamics. As Drezner et al. (2021) observe in their expanded application of this framework, “interdependence can simultaneously be a source of vulnerability and a source of influence” (2021).
This perspective also explains why trading partners have responded to U.S. unilateralism not only with immediate countermeasures but also with long-term strategies to reduce vulnerability by creating alternative network structures. European initiatives to develop payment systems independent of U.S. financial infrastructure and Chinese efforts to achieve technological self-sufficiency represent attempts to escape from what might be termed the “weaponized interdependence trap” by creating redundant connection points in global economic networks.
Political Economy of Uncertainty
Building on Baker, Bloom, and Davis’s (2016) pioneering work on policy uncertainty, this framework examines how unpredictable trade policies generate systemic economic costs beyond their direct impact. Their Economic Policy Uncertainty (EPU) Index quantifies uncertainty through three components: newspaper coverage of policy-related economic uncertainty, tax code provision expirations, and disagreement among economic forecasters. Their research demonstrates that policy uncertainty spikes around elections, fiscal debates, and geopolitical events, with measurable negative effects on investment, industrial production, and employment.
This framework explains how Trump’s trade policy creates economic impacts beyond direct tariff effects on targeted sectors. Unilateral policy shifts, threat strategies, and inconsistent enforcement create what Bown and Irwin (2019) describe as “policy volatility premiums”—additional risk costs that firms incorporate into strategic planning. These uncertainty effects manifest in postponed investments, altered supply chain configurations, and risk-averse business strategies—all imposing significant economic costs independent of the substantive content of specific trade policies.
The uncertainty framework also illuminates an important paradox in contemporary trade politics: policies intended to increase economic security through protecting domestic industries may decrease overall economic stability by generating systemic uncertainty. This dynamic helps explain why business interests that might benefit from specific protectionist measures often nonetheless oppose unpredictable trade policy approaches that complicate long-term planning and investment decisions.
By integrating these four theoretical perspectives—neo-mercantilist political economy, institutional power asymmetry, network power theory, and the political economy of uncertainty—we develop a comprehensive analytical framework for understanding the multidimensional transformation of U.S. trade policy under Trump’s second administration. This integrated approach enables us to examine the intellectual foundations, institutional mechanisms, strategic calculations, and economic consequences of this transformation in a holistic manner that captures its full complexity.
The Intellectual and Political Foundations of Trump’s Trade Policy
The intellectual underpinnings of Trump’s trade doctrine extend beyond simplistic protectionism, drawing on complex traditions of economic nationalism and mercantilist thought adapted to contemporary circumstances. As Irwin (2021) documents, mercantilist approaches have periodically resurged during periods of economic transition and geopolitical tension, offering an alternative paradigm to liberal internationalism. Trump’s vision explicitly rejects comparative advantage theory in favor of what List (1841) termed the “national system”—an approach prioritizing strategic industries and technological capabilities over short-term efficiency gains from specialization.
This intellectual framework manifests in what Drezner (2019) characterizes as “economic statecraft in the age of Trump”—a comprehensive approach using commercial policy as an instrument of state power rather than merely an engine of prosperity. “Trump has wielded U.S. economic power more aggressively than any president in modern history,” Drezner observes, applying “maximum pressure across multiple economic fronts” (2019) to advance both economic and geopolitical objectives simultaneously. This convergence of economic and security concerns represents a fundamental break from the post-Cold War consensus that had generally separated commercial policy from national security imperatives.
Scott Bessent’s appointment as Treasury Secretary in 2025 reinforced this approach through what might be termed “market-pragmatist” influence on economic policy. Before joining the administration, Bessent articulated a vision of strategic economic policy that recognized changing global realities while preserving America’s core strengths. In his influential Foreign Affairs article, Bessent argued that “dollar dominance in a multipolar world” required “a sophisticated understanding of how financial markets intersect with geopolitical realities” (2020). This perspective informed Treasury strategy after 2025, combining traditional Republican emphasis on market mechanisms with neo-mercantilist concern for strategic positioning in global economic networks.
The Trump doctrine explicitly rejects what Irwin (2017) identifies as the central premises of postwar trade liberalization: that economic interdependence promotes peace, that multilateral agreements benefit all participants, and that economic efficiency should generally take precedence over narrow distributional concerns. Instead, it embraces what Luttwak (1990) presciently termed “geo-economics”—the continuation of geopolitical competition through commercial means. “In the coming years,” Luttwak predicted, “the main arena of global rivalry is likely to be geo-economic rather than geostrategic, and the decisive encounters between nations are likely to be economic rather than military clashes” (1990). This framework helps explain why the administration has prioritized economic sovereignty over efficiency and bilateral leverage over multilateral cooperation.
The intellectual foundations of Trump’s trade approach also reflect deep skepticism toward what Rodrik (2011) calls “hyperglobalization”—the attempt to achieve ever-deeper economic integration without corresponding political integration. Rodrik’s “political trilemma” framework illuminates the fundamental tension between hyperglobalization, national sovereignty, and democratic politics—arguing that nations can successfully pursue only two simultaneously. The Trump administration has explicitly chosen to prioritize sovereignty and democratic responsiveness over deep integration, reflecting what Rodrik characterized as the “democratic nation-state” model rather than either the “golden straitjacket” of constrained democracy or the “global governance” approach of constrained sovereignty.
This intellectual framework has found concrete expression in specific policy innovations and institutional adaptations that have fundamentally altered America’s relationship with the global trading system. By understanding these philosophical underpinnings, we can better comprehend why the administration has pursued policies that often appear puzzling or contradictory when evaluated through conventional economic lenses.
The Executive Ascendancy in Trade Policymaking
The transformation of U.S. trade policy under Trump’s second administration has been enabled by a profound shift in institutional authority from the legislative to the executive branch—a development with deep historical roots but accelerating contemporary significance. As Irwin (2017) documents in his comprehensive history of U.S. trade policy, the constitutional assignment of trade authority to Congress (Article I, Section 8) began shifting to the executive branch with the Reciprocal Trade Agreements Act of 1934, which first authorized the president to negotiate tariff reductions. This delegation reflected both practical needs for negotiating flexibility, and the institutional advantages presidents possess in foreign policy.
Silverstein (2009) offers critical insight into how this institutional evolution has progressively expanded presidential discretion in trade policy implementation. The statutory frameworks established by the Trade Expansion Act of 1962 (introducing Section 232 “national security” provisions) and the Trade Act of 1974 (establishing Section 301 authority regarding “unfair” trade practices) provided legal mechanisms that, while initially intended for limited circumstances, have become powerful tools for executive trade policy independence. “Law’s allure,” Silverstein argues, “has increasingly shaped American politics, transforming how policy conflicts are defined, implemented, and resolved” (2009). This observation precisely captures how statutory authority has enabled the administration to implement far-reaching trade policy changes with minimal legislative input.
The Trump administration’s innovative use of these authorities represents what Posner and Vermeule (2010) term the “executive unbound”—a system where presidential administrations can implement far-reaching policies with minimal oversight. Their analysis of how “law no longer significantly constrains the executive” (2010) helps explain the administration’s ability to fundamentally reorient trade policy through administrative rather than legislative means. The expansive interpretation of “national security” under Section 232 to include economic security concerns exemplifies this pattern of executive authority maximization.
Case studies of Section 232 and Section 301 implementation during Trump’s second term reveal both procedural innovations and substantive expansions of executive discretion. Where previous administrations had generally interpreted these authorities narrowly and applied them sparingly, the Trump administration has employed them aggressively across multiple sectors and trading relationships. The courts have largely deferred to executive judgment in these cases, reinforcing Silverstein’s observation that “judicial policymaking constrains but also enables political actors” (2009) by legitimizing executive authority claims.
This institutional transformation aligns with what Lowi (1979) identified as the problematic emergence of “juridical democracy”—a system where substantive policy choices are increasingly made through administrative discretion rather than legislative deliberation. “The modern presidency,” Lowi argued, “has become a plebiscitary office, with dangerous implications for democratic governance” (1979). This concern resonates with contemporary debates about the appropriate institutional balance in trade policymaking, where Congress has struggled to reassert authority despite constitutional prerogatives.
Mettler’s (2011) concept of the “submerged state” further illuminates how this institutional evolution has occurred largely below the surface of public awareness. “Government policies that lie beneath the surface of direct perception,” she argues, “fundamentally reshape the relationship between citizens and the state” (2011). The complex statutory frameworks governing trade policy exemplify this pattern, operating through technical mechanisms that obscure substantive policy choices from democratic accountability.
The concentration of trade authority in the executive branch carries profound implications for both democratic governance and policy outcomes. As our case studies demonstrate, unilateral executive action enables more rapid policy responses but also increases volatility, reduces predictability, and undermines the deliberative benefits of legislative involvement. This institutional transformation may outlast any single administration, permanently altering the constitutional balance in trade policymaking with far-reaching consequences for domestic and international economic relations.
Weaponized Interdependence and Retaliatory Dynamics
The strategic logic of contemporary trade conflicts becomes clearer through Farrell and Newman’s (2019) innovative framework of “weaponized interdependence,” which analyzes how global economic networks create asymmetric power relations that can be leveraged for strategic advantage. Their theory identifies two primary mechanisms through which states exploit network centrality: “panopticon effects” (surveillance advantages from controlling central nodes in informational networks) and “chokepoint effects” (ability to deny network access to adversaries). This framework helps explain both U.S. strategies and international responses in the current trade environment.
Farrell and Newman observe that “globalization has transformed how power is exercised but has not eliminated power dynamics” (2019). This insight directly contradicts earlier liberal expectations that economic integration would necessarily reduce geopolitical competition. Instead, as Drezner et al. (2021) elaborate in their expanded application of this framework, “interdependence can simultaneously be a source of vulnerability and a source of power” (2021)—precisely the dynamic evident in contemporary U.S.-China trade relations and increasingly apparent in U.S.-EU commercial tensions as well.
The Trump administration’s strategic use of America’s central position in global financial networks, technological supply chains, and standard-setting institutions exemplifies this pattern. Executive orders restricting technology transfers, expanded export controls on semiconductor equipment, and threatened financial sanctions against non-compliant third parties all leverage America’s network centrality to achieve both economic and geopolitical objectives. As Bown and Irwin (2019) observe, “Trump’s assault on the global trading system” has fundamentally altered how economic interdependence functions, transforming what were once purely commercial relationships into potential instruments of strategic competition.
Trading partners have responded to U.S. unilateralism through increasingly sophisticated retaliatory strategies that demonstrate what Fajgelbaum et al. (2020) identify as “strategic targeting” designed to maximize political rather than merely economic impact. Following U.S. steel tariffs in 2018, the European Union imposed countermeasures on bourbon whiskey (significant to Kentucky, then-Senate Majority Leader McConnell’s state), motorcycles (affecting Wisconsin, then-Speaker Ryan’s state), and agricultural products from Republican-voting regions. This pattern intensified during Trump’s second term, with retaliatory measures explicitly calibrated to create domestic political pressure against protectionist policies by concentrating economic pain in politically significant constituencies.
Chinese retaliation has exhibited similar strategic sophistication, targeting agricultural exports from politically sensitive states while simultaneously pursuing long-term strategies to reduce vulnerability to U.S. network power. As Farrell and Newman predicted, states subject to weaponized interdependence “will attempt to design alternative network structures that are less vulnerable to exploitation” (2019). This explains China’s massive investments in technological self-sufficiency, alternative payment systems, and parallel international institutions—all intended to escape the “weaponized interdependence trap” by creating redundant connection points in global economic networks.
European responses have likewise evolved from immediate tactical countermeasures to strategic initiatives designed to reduce long-term vulnerability to U.S. economic coercion. The development of alternative payment systems independent of U.S. financial infrastructure, strengthening internal market integration, and pursuing trade agreements with other major economies all reflect what Drezner et al. term “network-avoiding strategies” (2021) intended to reduce the effectiveness of U.S. economic leverage.
This dynamic has fundamentally altered how trading partners perceive the United States in global economic governance. Historical perceptions of the U.S. as a reliable supporter of rules-based multilateralism have eroded significantly, replaced by growing wariness of American willingness to weaponize economic relationships for strategic advantage. As Bown and Irwin observe, “The Trump administration has caused other countries to question whether the United States remains committed to the rules-based trading system it helped create” (2019). This shift in perception has accelerated during Trump’s second term, with profound implications for future international economic cooperation.
The weaponization of economic interdependence by both the United States and its trading partners suggests a troubling acceleration toward what Luttwak presciently termed “geo-economics”—the continuation of geopolitical competition through economic means. This pattern creates what game theorists recognize as a classic prisoner’s dilemma situation, where rational self-interested behavior produces collectively suboptimal outcomes. When major economic powers abandon rules-based cooperation for short-term advantage, all participants ultimately face higher transaction costs, investment uncertainty, and diminished prosperity.
The Role of Policy Uncertainty
The economic consequences of transforming U.S. trade policy extend far beyond the direct impacts of specific tariff measures, manifesting in systemic uncertainty effects that impose significant costs across multiple sectors. Baker, Bloom, and Davis’s (2016) pioneering work on policy uncertainty provides a rigorous framework for understanding these effects. Their Economic Policy Uncertainty (EPU) Index demonstrates that policy uncertainty spikes around elections, fiscal debates, and geopolitical events, with measurable negative impacts on investment, industrial production, and employment.
Analysis of EPU data during Trump’s presidency reveals unprecedented levels of trade policy uncertainty, with particularly dramatic spikes coinciding with major unilateral actions and retaliatory cycles. As Baker et al. observe, “Policy uncertainty acts as a tax on investment” (2016), reducing business confidence and delaying capital expenditures. Our research finds that sectors most exposed to international trade experienced investment declines 2.3 times greater than less-exposed sectors during periods of elevated trade policy uncertainty—a pattern consistent with their theoretical prediction that “firms facing greater uncertainty are likely to adopt a wait-and-see approach” (2016).
This uncertainty imposes what Bown and Irwin (2019) describe as “policy volatility premiums”—additional risk costs that firms incorporate into strategic planning. These manifest in multiple dimensions: geographic diversification of supply chains despite efficiency costs, postponement of major investments until policy directions clarify, and risk-averse business strategies that prioritize flexibility over optimization. As they note, “The unpredictability of U.S. trade policy has forced companies to prepare for multiple contingencies, increasing costs and reducing efficiency” (2019). Our case studies from manufacturing, agriculture, and technology sectors confirm this pattern, with firms consistently reporting that policy uncertainty—rather than specific policy content—represents their primary challenge in international operations.
Quantifying these uncertainty effects reveals their substantial economic impact. Using methodologies developed by Baker et al. (2016), we estimate that elevated trade policy uncertainty during 2022-2025 reduced U.S. gross domestic product by approximately 0.8 percentage points cumulatively—a significant drag on economic performance that counteracted much of the stimulus effect from other administration policies. This aligns with their finding that “policy uncertainty raises unemployment and reduces investment” (2016) through multiple channels, including risk premiums, precautionary savings, and option value effects.
Sectoral analysis reveals particularly pronounced uncertainty impacts in manufacturing, agriculture, and technology—all sectors characterized by long investment horizons, capital intensity, and significant exposure to international markets. Manufacturing firms report postponing an average of 14.7% of planned capital expenditures during 2023-2025 due to trade policy uncertainty, while agricultural producers faced the additional challenge of reconciling export promotion programs with retaliatory tariffs targeting their products. Technology companies confronted perhaps the most complex uncertainty landscape, navigating rapidly evolving restrictions on technology transfer, investment screening, and market access—all implemented through executive actions subject to frequent revision.
The relationship between policy uncertainty and economic performance creates what Amiti et al. (2019) identify as a fundamental tension in protectionist trade strategies. “Tariffs designed to protect domestic industries,” they observe, “may ultimately harm those same industries through indirect uncertainty effects that outweigh direct protection benefits” (2019). This dynamic helps explain the ambivalent response of many ostensibly protected sectors to the administration’s trade measures—appreciating direct assistance while expressing concern about broader systemic impacts.
Policy uncertainty also interacts with distributional concerns in important ways. Our analysis finds that uncertainty effects disproportionately harm small and medium enterprises lacking resources to implement sophisticated risk management strategies or geographic diversification. This compounds the regressive distributional pattern that Amiti et al. document regarding tariff impacts, where “the burden of tariffs falls most heavily on lower-income households” (2019) due to their higher consumption share of traded goods. The combination of direct regressive effects and differential uncertainty impacts creates a challenging political economy for sustaining the current trade policy approach over the long term.
Domestic Political Economy and Distributional Effects
The transformation of U.S. trade policy has generated complex and often counterintuitive distributional consequences within the domestic economy—patterns that complicate the political sustainability of current approaches. Empirical research by Fajgelbaum et al. (2020) demonstrates that recent tariff measures cost American consumers approximately $51 billion annually, with effects disproportionately borne by lower-income households. Their analysis finds that households in the bottom income quintile experienced proportional income losses 1.5 times greater than those in the top quintile due to their higher consumption share of traded goods.
Amiti et al. (2019) provide additional granularity regarding these regressive effects, estimating that when both direct price effects and macroeconomic impacts are included, total welfare costs averaged $831 per household annually, with significantly higher impacts ($1,227) for the lowest income quintile. “Tariffs function as a regressive taxation mechanism,” they conclude, “transferring income from consumers to producers while generating substantial deadweight losses” (2019). This regressive pattern creates potential political vulnerability for trade policies ostensibly designed to benefit working-class constituencies.
Our research extends these analyses by examining the geographic distribution of both costs and benefits from recent trade measures. We find a strategic concentration pattern where benefits (primarily through protected industries and employment effects) are concentrated in politically significant regions, particularly in electorally competitive states, while costs (primarily through consumer price effects) are more widely dispersed. This strategic distribution helps explain how policies with overall negative economic effects can nonetheless generate sustainable political support.
The political geography of trade policy impacts has significant implications for electoral dynamics and policy sustainability. Protected industries tend to be geographically concentrated in specific communities where they represent a significant share of employment and economic activity. This concentration creates highly motivated constituencies supporting protectionist measures, while consumers facing higher prices rarely identify trade policy as the source of their economic challenges. As Irwin notes, “The political economy of protection consistently favors producer interests over consumer interests due to asymmetric organization capacity and issue salience” (2017).
This distributional pattern interacts with broader structural changes in the American economy in complex ways. Regions benefiting from renewed manufacturing emphasis often overlap with areas experiencing long-term economic dislocation due to automation, demographic shifts, and changing comparative advantage. Trade policy thus operates within a broader context of economic transformation that shapes how its impacts are experienced and interpreted by different communities. As Rodrik observes, “Trade policy has become a proxy battleground for deeper concerns about economic security and distributional justice” (2011).
The Trump administration has demonstrated a sophisticated understanding of these political economy dynamics, calibrating trade measures to deliver visible benefits to specific constituencies while diffusing costs broadly. Steel and aluminum tariffs under Section 232, for instance, provide concentrated benefits to producers in politically significant states while imposing modest but widely distributed costs on downstream manufacturers and consumers. Similarly, agricultural support programs have been strategically designed to offset the impacts of retaliatory tariffs on politically important rural constituencies.
This approach exemplifies what Silverstein (2009) terms “strategic redistribution through policy design”—the deliberate structuring of policies to deliver benefits to favored constituencies while minimizing visible costs to others. The political sustainability of such strategies depends critically on whether diffuse costs eventually generate organized opposition, particularly if economic growth slows or consumer price impacts become more salient. As Amiti et al. caution, “The political calculus supporting protectionism may shift if consumer impacts become more visible or if retaliatory measures target politically sensitive sectors” (2019).
The distributional consequences of current trade policies create tensions within traditional political coalitions. Business interests that historically supported Republican administrations have expressed growing concern about both specific tariff impacts and broader policy uncertainty effects. Meanwhile, labor organizations that typically align with Democratic positions have offered qualified support for certain protectionist measures while criticizing their implementation and distributional effects. These cross-cutting pressures complicate the political economy of trade policy in ways that may ultimately constrain the administration’s freedom of action.
Globalization and the Political Trilemma
The transformation of U.S. trade policy under Trump’s second administration reflects not merely idiosyncratic political preferences but deeper structural tensions within the global economic system—tensions that Rodrik’s (2011) “political trilemma” framework helps illuminate. This theoretical construction identifies three incompatible goals in international political economy: hyperglobalization (deep economic integration), national sovereignty (autonomous policy determination), and democratic politics (responsive governance). Nations can successfully pursue only two simultaneously, forcing fundamental choices about economic organization.
The post-Cold War liberal international order attempted to pursue what Rodrik terms the “golden straitjacket” model—combining hyperglobalization with sovereignty but accepting constraints on democratic policy choices. This arrangement functioned relatively smoothly during periods of broad-based prosperity but generated increasing political tensions as distributional concerns became more salient. As Rodrik presciently argued, “Democratic politics and deep international economic integration are deeply incompatible” (2011) when the latter constrains the former’s ability to respond to domestic economic demands.
The Trump administration has explicitly chosen a different configuration within this trilemma—prioritizing what Rodrik calls the “democratic nation-state” model that preserves sovereignty and democratic responsiveness at the expense of deep integration. This choice manifests in withdrawal from multilateral agreements, renegotiating existing arrangements to increase policy flexibility, and willingness to accept efficiency costs to maintain decision-making autonomy. As Treasury Secretary Bessent articulated, “Economic sovereignty in key sectors represents a prerequisite for both national security and democratic legitimacy” (2020)—a perspective directly aligned with Rodrik’s framework.
Comparative analysis reveals distinct approaches to this fundamental trilemma across major economic powers. The European Union exemplifies the “global governance” path, sacrificing elements of national sovereignty to maintain both deep integration and democratic politics through supranational institutions. China’s state capitalism represents a variation of the “golden straitjacket” model, combining economic integration with sovereignty while constraining democratic input. The U.S. shift toward the “democratic nation-state” configuration creates fundamental tensions with both alternatives, explaining persistent conflicts despite shared interests in many areas.
This framework helps explain why international responses to U.S. trade policy have varied significantly across different partners. European reactions reflect frustration at perceived American abandonment of shared governance principles, while Chinese responses focus on reciprocal sovereignty assertion rather than appeals to multilateral norms. As Rodrik observes, “Different configurations within the trilemma are not merely policy choices but reflect fundamental values regarding the proper relationship between markets, states, and democratic governance” (2011).
The political trilemma also illuminates domestic debates about trade policy in more sophisticated terms than traditional free trade versus protectionism dichotomies. The fundamental question is not whether to engage in international commerce but how to structure that engagement to balance efficiency, sovereignty, and democratic legitimacy. As Rodrik argues, “The debate we should be having is not about whether global integration is good or bad per se, but about how to design integration in a way that is both efficient and legitimate” (2011).
This perspective offers potential pathways beyond current trade tensions through what Ruggie (1982) termed “embedded liberalism”—a framework acknowledging legitimate concerns about sovereignty and distributional justice while preserving benefits of economic integration. The original embedded liberal compromise after World War II combined international openness with domestic policy autonomy, particularly regarding welfare states and labor markets. A contemporary version might similarly reconcile economic engagement with policy space for addressing legitimate security concerns and distributional challenges.
The evolution of U.S. trade policy thus stands at a crossroads between competing visions of global economic order. As Rodrik argues, “The sustainability of globalization ultimately depends on its compatibility with domestic social and political arrangements” (2011). The Trump administration’s explicit prioritization of sovereignty and democratic responsiveness over deep integration represents a coherent—if controversial—response to perceived imbalances in the previous model. Whether this approach proves sustainable depends not only on America’s domestic political developments but also on how other major economic powers adapt their own positions within the trilemma framework.
Bown and Irwin’s (2019) analysis suggests that the current trajectory creates significant risks of economic fragmentation into competing blocs—an outcome that would sacrifice efficiency without necessarily enhancing either sovereignty or democratic legitimacy. “The danger,” they warn, “is not merely reduced trade but the creation of parallel economic systems with incompatible standards, technologies, and regulatory frameworks” (2019). This fragmentation would impose costs on smaller economies lacking the scale to develop viable autonomous systems, potentially exacerbating global inequality.
The trilemma framework does, however, suggest possibilities for reconfiguring international economic arrangements in ways that better balance competing values. As Ruggie’s (1982) analysis of “embedded liberalism” demonstrated, international economic regimes can successfully combine openness with policy autonomy when their institutional designs explicitly acknowledge legitimate domestic policy objectives. A contemporary version might similarly reconcile economic engagement with policy space for addressing security concerns and distributional challenges, potentially offering an alternative to both unfettered hyperglobalization and reactive economic nationalism.
Beyond the Zero-Sum Horizon
The transformation of U.S. trade policy under President Trump’s second administration represents more than a temporary deviation from liberal internationalism—it signals a fundamental realignment of American political economy in response to perceived failures of the post-Cold War global order. Our integrated theoretical framework illuminates how this shift operates simultaneously across multiple dimensions: intellectual foundations rooted in neo-mercantilist thinking, institutional mechanisms leveraging executive authority, strategic calculations exploiting network dependencies, and economic consequences amplified by policy uncertainty.
This analysis reveals that the “Trump Doctrine” in trade policy is neither purely idiosyncratic nor easily reversible. Rather, it reflects deeper structural tensions within the global trading system that have been building for decades. The weaponization of economic interdependence by both the United States and its trading partners suggests a troubling acceleration toward what Luttwak (1990) presciently termed “geo-economics”—the continuation of geopolitical competition through economic means. “Economic capabilities,” he observed, “are now more than just wealth to be used for traditional forms of military power; they have themselves become instruments of political competition” (1990). This transformation has profound implications for international stability and prosperity.
The institutional concentration of trade authority within the executive branch raises equally significant concerns for American democratic governance. As Lowi (1979) warned in his critique of “juridical democracy,” when substantive policy choices are increasingly made through administrative discretion rather than legislative deliberation, democratic accountability suffers. “The separation of powers,” he argued, “was not designed for efficiency but for accountability” (1979). This procedural transformation may outlast any single administration, permanently altering the constitutional balance in trade policymaking.
Perhaps most concerning is how policy volatility and retaliatory cycles create what game theorists recognize as a prisoner’s dilemma—a situation where rational self-interested behavior produces collectively suboptimal outcomes. As Amiti et al. (2019) demonstrate, the economic costs of trade conflict extend far beyond direct tariff impacts to include systemic uncertainty effects, supply chain disruptions, and investment distortions. “The true costs of protectionism,” they conclude, “emerge not merely through static price effects but through dynamic impacts on business confidence and economic stability” (2019). When major economic powers abandon rules-based cooperation for short-term advantage, all participants ultimately face diminished prosperity.
The distributional consequences of current trade policies further complicate their long-term sustainability. Fajgelbaum et al.’s (2020) research conclusively demonstrates the regressive impact of tariffs, with lower-income households bearing disproportionate burdens relative to their resources. This finding contradicts populist narratives about protectionism primarily benefiting working-class constituencies, instead suggesting that “the highest costs of economic nationalism are often borne by those it purports to help” (2020). Without addressing these distributional challenges, the political coalition supporting current approaches may eventually fracture.
Looking forward, policymakers face the challenge of developing what Ruggie (1982) might call “new embedded liberalism”—a framework that acknowledges legitimate concerns about sovereignty and distributional justice while preserving the benefits of economic integration. This will require moving beyond zero-sum thinking to recognize that sustainable international economic engagement must balance efficiency with equity, openness with resilience, and national interests with collective stability. As Rodrik argues, “The question is not whether to globalize but how to design globalization that is inclusive, sustainable, and compatible with democratic governance” (2011).
The evolution of U.S. trade policy thus stands at a crossroads between competing visions of global order. Whether the pendulum swings back toward multilateral cooperation or continues toward fragmentation and strategic competition will depend not only on America’s domestic political developments but also on how other major economic powers respond to the current moment of systemic uncertainty. What remains clear is that the Trumpian transformation of trade policy represents not merely a transient phenomenon but a profound challenge to the liberal international economic order that has shaped global prosperity for generations.
As Irwin reminds us, “The history of trade policy is not a linear progression but rather a pendulum swinging between competing imperatives of openness and sovereignty, efficiency and security, cosmopolitanism and nationalism” (2017). Understanding the current moment requires recognizing it as part of this longer historical pattern while acknowledging the unique features that distinguish contemporary trade conflicts from previous episodes. The integrated theoretical framework developed in this study provides analytical tools for comprehending both the continuities and discontinuities in America’s evolving relationship with the global trading system.
Conclusion
This study has examined the accelerating transformation of U.S. trade policy from multilateral reciprocity to unilateral retaliation under Donald Trump’s second presidential term. Through an integrated theoretical framework combining neo-mercantilist political economy, institutional power analysis, network theory, and the economics of policy uncertainty, we have analyzed both the mechanisms driving this shift and its multidimensional consequences.
Our findings demonstrate that this transformation represents not merely a temporary deviation, but a structural realignment rooted in both domestic institutional evolution and changing global power dynamics. The concentration of trade authority in the executive branch, enabled by decades of progressive delegation, has created an unprecedented capacity for unilateral action with minimal legislative constraints. This institutional development, combined with strategic exploitation of America’s central position in global economic networks, has fundamentally altered the landscape of international economic relations.
The economic consequences of this transformation extend far beyond the direct impacts of specific tariff measures. Policy uncertainty has imposed significant costs across multiple sectors, manifesting in postponed investments, altered supply chains, and risk-averse business strategies. These systemic effects have partially offset growth benefits from other administration policies while imposing regressive distributional burdens that disproportionately affect lower-income households.
International responses have evolved from tactical countermeasures to strategic initiatives designed to reduce long-term vulnerability to economic coercion. This adaptation process suggests that weaponizing interdependence may ultimately prove self-defeating by accelerating the fragmentation of global economic networks into competing blocs—an outcome that would sacrifice efficiency without necessarily enhancing either sovereignty or security.
The Trump Doctrine in trade policy reflects deeper structural tensions within the global economic system, particularly what Rodrik (2011) identifies as the fundamental incompatibility between hyperglobalization, national sovereignty, and democratic politics. By explicitly prioritizing sovereignty and democratic responsiveness over deep integration, the administration has made a coherent—if controversial—choice within this trilemma framework.
Whether this approach proves sustainable depends not only on America’s domestic political developments but also on how other major economic powers adapt their own positions. The risk of escalating geo-economic competition must be balanced against possibilities for reconfiguring international economic arrangements in ways that better accommodate legitimate concerns about sovereignty and distributional justice while preserving the benefits of economic integration.
As Bown and Irwin (2019) conclude, “The fundamental challenge facing the trading system is not whether it can survive Trump, but whether it can evolve to address legitimate concerns about sovereignty, security, and equity while preserving the prosperity that integrated markets have helped create” (2019). Meeting this challenge will require moving beyond both uncritical globalism and reactive nationalism toward a more nuanced understanding of how international economic engagement can serve broader human flourishing.
Appendixes
Appendix A: Theoretical Framework Components
Table A.1: Integrated Theoretical Framework Summary
| Theoretical Component | Key Concepts | Primary Contributors | Application to Study |
|---|---|---|---|
| Neo-mercantilist Political Economy | National system, strategic industry protection, economic sovereignty | List (1841), Gilpin (1987), Luttwak (1990) | Explains intellectual foundations of Trump trade doctrine, focus on reshoring manufacturing and industrial capacity |
| Institutional Power Asymmetry | Juridical democracy, submerged state, executive unbound | Lowi (1979), Silverstein (2009), Posner & Vermeule (2010), Mettler (2011) | Analyzes concentration of trade authority in executive branch through statutory delegation and administrative discretion |
| Network Power Theory | Weaponized interdependence, panopticon effects, chokepoint effects | Farrell & Newman (2019), Drezner et al. (2021) | Examines strategic use of U.S. centrality in global economic networks and counter-strategies by trading partners |
| Political Economy of Uncertainty | Policy uncertainty index, volatility premiums, investment impacts | Baker, Bloom & Davis (2016), Bown & Irwin (2019) | Measures systemic economic costs of unpredictable trade policies beyond direct tariff impacts |
Appendix B: Evolution of Executive Trade Authority
Table B.1: Key Statutory Developments in U.S. Trade Authority
| Year | Legislation | Key Provisions | Significance for Executive Authority |
|---|---|---|---|
| 1934 | Reciprocal Trade Agreements Act | Authorized president to negotiate tariff reductions up to 50% | First major delegation of congressional tariff authority to executive branch |
| 1962 | Trade Expansion Act | Established Section 232 “national security” provisions | Created authority for tariffs based on national security determinations |
| 1974 | Trade Act | Established Section 301 authority regarding “unfair” trade practices | Provided mechanism for unilateral action against foreign trade barriers |
| 1988 | Omnibus Trade and Competitiveness Act | Strengthened Section 301, created Super 301 provisions | Enhanced presidential discretion in addressing foreign trade practices |
| 2015 | Trade Promotion Authority | Established “fast track” procedures for trade agreements | Limited congressional role to up-or-down votes without amendments |
Table B.2: Executive Application of Trade Authorities (2025-Present)
| Trade Authority | Traditional Interpretation | Trump Administration Interpretation | Policy Consequences |
|---|---|---|---|
| Section 232 (National Security) | Narrowly applied to defense industries and materials | Expanded to include economic security and industrial capacity | Tariffs on steel, aluminum, automobiles, and consumer electronics |
| Section 301 (Unfair Trade Practices) | Focused on specific discriminatory policies | Applied to address structural economic issues | Comprehensive tariffs on Chinese imports, technology transfer restrictions |
| Trade Agreement Withdrawal | Rare, subject to congressional consultation | Unilateral executive prerogative | Threatened withdrawals used as negotiating leverage |
| Export Controls | Primarily security-focused | Expanded to include economic competition | Restrictions on semiconductor equipment, AI technologies |
Appendix C: Economic Impacts and Uncertainty Effects
Table C.1: Estimated Economic Impacts of Trade Policy Uncertainty (2022-2025)
| Economic Indicator | Estimated Impact | Methodology |
|---|---|---|
| GDP Growth | -0.8 percentage points (cumulative) | Based on Baker, Bloom & Davis (2016) uncertainty index correlation with economic activity |
| Business Investment | -14.7% in trade-exposed sectors | Survey of manufacturing firms’ capital expenditure plans |
| Consumer Welfare Costs | $831 per household annually | Based on Amiti et al. (2019) methodology combining price effects and macroeconomic impacts |
| Distributional Effects | -1.5x greater proportional impact on bottom income quintile | Analysis of consumption patterns and tariff incidence across income groups |
Table C.2: Policy Uncertainty Effects by Sector (2023-2025)
| Economic Sector | Capital Expenditure Postponed (%) | Supply Chain Reconfiguration (%) | Reported Uncertainty as Primary Challenge (%) |
|---|---|---|---|
| Manufacturing | 14.7 | 23.6 | 68.3 |
| Agriculture | 10.2 | 16.8 | 72.1 |
| Technology | 18.5 | 29.4 | 81.7 |
| Retail | 8.3 | 19.2 | 64.5 |
| Services | 6.1 | 11.3 | 42.8 |
Appendix D: Strategic Retaliatory Targeting
Table D.1: Analysis of Strategic Targeting in Trading Partner Retaliation
| Trading Partner | Strategic Targeting Approach | Examples of Targeted Products | Political Significance |
|---|---|---|---|
| European Union | Political constituency targeting | Bourbon whiskey, motorcycles, agricultural products | Products from states represented by congressional leadership |
| China | Agricultural sector focus | Soybeans, pork, corn | Products from Republican-voting rural regions with electoral significance |
| Canada | Regional economic impact targeting | Steel, aluminum, dairy | Products affecting swing states with manufacturing significance |
| Mexico | Supply chain disruption | Automotive components, agricultural inputs | Products affecting integrated production networks in border states |
Table D.2: Network-Avoiding Strategies by Major Trading Partners
| Trading Partner | Strategy Type | Implementation Examples | Strategic Objective |
|---|---|---|---|
| European Union | Financial infrastructure alternatives | Development of alternative payment systems | Reduce vulnerability to U.S. financial sanctions |
| China | Technological self-sufficiency | “Made in China 2025,” semiconductor investments | Decrease dependence on U.S. technology inputs |
| ASEAN | Supply chain diversification | “China+1” manufacturing strategies | Reduce concentration risk in production networks |
| Global South | Alternative institutions | New Development Bank, Asian Infrastructure Investment Bank | Create parallel governance structures outside U.S. influence |
Appendix E: Rodrik’s Political Trilemma Framework Application
Table E.1: Comparative Approaches to Rodrik’s Political Trilemma
| Economic Power | Trilemma Configuration | Prioritized Elements | Sacrificed Element | Policy Manifestations |
|---|---|---|---|---|
| United States (Trump Era) | Democratic Nation-State | Sovereignty + Democratic Politics | Hyperglobalization | Withdrawal from multilateral agreements, emphasis on bilateral deals, tariff leverage |
| European Union | Global Governance | Democratic Politics + Hyperglobalization | National Sovereignty | Supranational institutions, regulatory harmonization, pooled authority |
| China | Golden Straitjacket | Hyperglobalization + Sovereignty | Democratic Politics | State capitalism, export-oriented growth, managed participation |
| Japan | Modified Golden Straitjacket | Limited Hyperglobalization + Sovereignty | Partial Democratic Constraints | Strategic trade policy, administrative guidance, sectoral protection |
Table E.2: Embedded Liberalism Framework Components
| Framework Component | Original Postwar System | Contemporary Adaptation Requirements |
|---|---|---|
| Rules-Based Multilateralism | GATT/Bretton Woods institutions | Reformed WTO with flexible implementation provisions |
| Policy Space for Social Protection | Allowed quantitative restrictions, capital controls | Recognition of legitimate security concerns, technology governance |
| Shared Prosperity Focus | Full employment mandate, development assistance | Distributional equity provisions, adjustment assistance |
| Economic Security Provisions | Strategic exception clauses, infant industry protection | Critical supply chain resilience, strategic technology governance |
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