Trump's Trade Chaos Actually Echoes America's Pragmatic Past

In just one year, Trump's administration became the most disruptive force in global trade since the 1930s. But what if this "destruction" is actually a return to America's traditional approach?

Peter Harrell, a visiting scholar at Georgetown's Institute of International Economic Law, offers a provocative thesis: while Trump's trade policy is chaotic, its shift away from rigid rules toward pragmatic negotiations echoes how America actually conducted trade policy for most of its history.

When Rules-Based Trade Was Born

The concept of a "rules-based trading order" first appeared in U.S. government documents only in 1991. Before that, American presidents were far more flexible. The 1947 General Agreement on Tariffs and Trade (GATT) included broad exceptions allowing countries to manage currency issues and import shocks.

Ronald Reagan exemplifies this pragmatic approach. While he championed "free and fair" trade in 1982, he simultaneously used whatever tools worked. In 1981, he struck a deal with Japan for "voluntary" auto export limits. In 1985, he imposed 100% tariffs on Japanese semiconductors when he felt Tokyo wasn't keeping its promises.

The most dramatic example was the 1985 Plaza Accord. When the strong dollar hurt U.S. exports, Reagan coordinated with France, Japan, West Germany, and the UK to deliberately weaken the dollar. The results were striking: the dollar fell 40% against other major currencies over two years, and America's trade deficit shrank by the late 1980s.

Why Rigid Rules Don't Work Anymore

Harrell argues that comprehensive trade rules make less sense as great-power competition accelerates. "The United States is not in a position to set durable global trade rules when its own domestic economic model is the subject of sharp internal debates," he writes.

Consider the contradictions: Biden's green energy subsidies and Trump's proposed government equity stakes in companies both violate traditional free-trade principles. If America can't stick to its own rules, why expect others to?

With China, the stakes are even higher. "A level playing field of mutually agreed-on rules is not what the United States should pursue," Harrell contends. In strategic competition with Beijing, Washington should "work to tilt the playing field to its advantage."

The Reagan Playbook

Reagan's approach offers lessons for today's challenges. When Japanese cars flooded U.S. markets in the early 1980s, Reagan didn't craft universal auto industry rules. He negotiated a specific deal that bought American carmakers time to become competitive—and eventually led Honda and Toyota to build U.S. factories.

Similarly, Reagan's semiconductor strategy wasn't about setting global chip industry standards. It was about ensuring American companies could compete in a specific, strategically important sector.

These weren't permanent solutions or ideological statements. They were pragmatic responses to discrete problems.

The Cost of Chaos

Trump's approach has serious flaws. His excessive tariff rates and wild threats often undermine America's economic goals. His fondness for trade wars creates unnecessary uncertainty for businesses and consumers.

But Harrell suggests future leaders should build on the useful elements: expanding deals with Japan and European partners, integrating trade and national security considerations, and innovating new policy tools while discarding Trump's worst excesses.