How Democrats Can Leverage Trump’s Tariffs to Overturn Reagan’s Policies

The media frenzy this week is centered on U.S. President-elect Donald Trump’s recent declaration to impose sweeping 25% tariffs on all imports from China, Mexico, and Canada as a measure to curb fentanyl trafficking and undocumented immigration into the United States.

This is a significant undertaking, and should he proceed with this plan (which appears likely, though expect numerous exemptions to appease corporate backers), it would significantly disrupt American business operations. After all, these three nations represent over 40% of U.S. trade.

Surprisingly, Trump’s aggressive tariff stance might inadvertently benefit the Democrats, not just because it could harm the economy and undermine his party’s prospects in the upcoming 2026 and 2028 elections, but also for deeper strategic reasons.

Implemented correctly, tariffs can be beneficial for a country.

Tariff elimination was a key element of former President Ronald Reagan’s neoliberal agenda. Reagan, along with George H.W. Bush, crafted the NAFTA agreement, which was later signed by Bill Clinton. This is detailed extensively in my book, The Hidden History of Neoliberalism: How Reaganism Gutted America. Unfortunately, Bill Clinton and his team fully embraced neoliberalism, effectively eliminating tariffs as a tool to protect American jobs and manufacturing.

Democrats like Senators Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) have long endeavored to steer the Democratic Party away from staunch neoliberal trade policies. Trump’s bold move with tariffs could potentially fracture the remaining neoliberal trade consensus within the Democratic Party, which would greatly benefit both the party and the nation.

Tariffs, when applied judiciously, can serve a nation well. Those of us from the Midwest, like myself, were taught about the importance of tariffs from a young age (I recall learning about them in 5th grade civics!).

However, Trump’s previous attempts at imposing tariffs were poorly executed, leading to significant financial losses and necessitating federal subsidies for Midwestern farmers. If he maintains his current stance, Democrats need to prepare effective counterarguments and policies that could turn this scenario to their advantage by advocating for sensible tariffs and trade protections that could revive U.S. manufacturing.

Let’s revisit the role of well-executed tariffs in American history and discuss why they should be a topic of rational discussion today.

Tariffs are essentially taxes levied on imported goods, serving dual purposes: generating revenue and modifying behavior. The latter (encouraging local manufacturing) is far more crucial than the former.

The importance of tariffs was underscored when General Henry Knox informed George Washington in 1789 that he had been elected the first president of the United States. Washington’s response was telling; he delayed his departure to bid his ailing mother farewell and requested Knox to procure an American-made suit from a Connecticut manufacturer, which he proudly wore at his inauguration. This anecdote not only highlights the early challenges of American manufacturing dependence on British imports but also Washington’s deliberate choice to promote domestic production.

Britain had, for centuries, enriched itself at the expense of American colonies by restricting manufacturing capabilities in America. This led to the infamous Boston Tea Party of 1773, a direct protest against British economic policies, which precipitated the American Revolution. Upon his presidency, Washington faced the immediate task of establishing a self-sufficient American manufacturing sector.

In 1776, British economist Adam Smith argued in An Inquiry into the Nature and Causes of the Wealth of Nations that manufacturing was essential for a nation’s wealth, a principle that influenced Washington to implement Alexander Hamilton’s protective tariff-based “American Plan.”

Hamilton’s strategy, which included protective tariffs and government subsidies for domestic industries, was largely successful, enabling the U.S. to operate its government almost entirely on tariff revenue until the Civil War. This framework supported the U.S. economy well into the early 20th century.

Finding a product made in the USA in most stores today can take hours.

Hamilton’s economic plan helped propel the U.S. into becoming the wealthiest nation globally, with tariffs funding government operations from the founding until the Civil War. The shift away from tariffs began with the neoliberal policies of the 1980s, advocated by Reagan, Bush, and Clinton, who argued that reducing tariffs would lower consumer prices by outsourcing manufacturing to countries with cheaper labor.

The result was the closure of over 70,000 U.S. factories and the loss of approximately 8 million manufacturing jobs, often unionized and well-paid, contributing to the decline of the American middle class. The transition of manufacturing overseas typically took between one and two decades, and reversing it is expected to take just as long.

How can we reintroduce tariffs and avoid a trade war disaster like the one Trump triggered during his first term?

Another justification for outsourcing was the belief in the peace-building capabilities of “free trade,” a theory popularized towards the end of the 20th century which suggested that countries with significant mutual trade were less likely to engage in conflict. This notion was notably supported by Thomas Friedman in his 1999 book The Lexus and the Olive Tree.

The shift of American manufacturing to China mirrored Hamilton’s model, rapidly transforming China from a Third World country to a global economic powerhouse.

So, how do we reintroduce tariffs effectively without causing the economic and political upheavals associated with Trump’s approach?

Tariffs should be strategically applied to encourage domestic production over imports, with a clear, long-term policy that gives businesses confidence to invest in U.S. manufacturing. This approach must be gradual, selective, and accompanied by international cooperation to minimize negative impacts on global trade relations and national security.

While Trump’s approach to tariffs was fundamentally flawed, Democrats should not dismiss the concept outright.

It is crucial to reintroduce tariffs intelligently, considering their historical importance in building and maintaining national wealth and independence, as taught by Hamilton and Washington.

With Trump ready to impose harsh tariffs, potentially causing economic turbulence and a recession, Democrats have an opportunity to advocate for sensible, targeted tariffs, returning to pre-1980s trade policies and positioning themselves to restore and enhance the American economy in the upcoming elections after Trump’s policies have taken their toll.