The palpable frenzy in mainstream economics set off by Donald Trump’s trade war has led many to fear it is only a matter of months before an indefinite, and possibly very long, period of stagflation begins.
Excellent article. People are way too wedded to theory and not enough to reality. Trump has basically stolen the trade platform of the Democrats from 30 or 40 years ago but Orange Man Bad so the Democrats have to be free trade advocates now. The article captures the mindset of the real Republican exploiters of the working class, exemplified by Mitt Romney, very well. They are free traders too. Trade policy is really a dial and not an on-off switch.
He was in the upper level management of Baine Capital, President, CEO. They'd take over companies, accrue huge amounts of debt, charge millions, then fire most of the workforce to pay off debt. Many did the same in the 80s. Or they'd buy a company, keep the name, move the factories to china, and import.
I don't see private equity as different from bad government policy, corrupt non profits or poorly run public corporations. If they don't provide a good or service people want, they lose money like anyone else. Do you prefer state control?
Pure BS: "Ardent free-traders certainly sound as if they are looking out for the working class when they counter Trump’s case for high and broad tariffs. In the last thirty-five years, consumers have benefitted significantly from low-cost imports and the strong dollar, both of which partly offset the decline in wage growth that began in the 1970s". //// Between 1979 and 2014, productivity rose by 65% while hourly wages stagnated at up 8%. Consumer purchases are a small fraction of household expenses...Housing costs, Health Care, Taxes, Food....make up most of household expenses. Wall Street and corporate executives have made out like bandits since 1979.
Imported goods are components of all those expenses, though, (minus taxes, obviously) to a greater or lesser extent, due to the globalization of their supply chains; thus the strong dollar, as an importer of deflation, has arguably kept the price of them down as well. So I don't think the fact that they're central expenditures for Americans makes the author's point any less true.
I don't want to engage in an extensive theoretical economic debate...but here's the data from BEA..."In the U.S., consumer spending is the value of goods and services purchased by U.S. residents. Goods purchases account for about 34% of consumer wallet share, while services purchases account for about 66%. Over the last 30 years, consumer expenditures in the U.S. have shifted from commodities to services."
Perhaps I need to clarify: while housing costs are unique for several reasons, imports and globalized supply chains are priced into food and and healthcare. Particularly when you drill down to the production inputs. For example, while we only import 15% of our food supply in terms of actual foodstuffs, and much of the inputs to creating actual foodstuffs come from American farmers, both American farmers and the domestic food producers they sell to utilize machinery (e.g. combines, harvesters, seeders) and other forms of technology (i.e. chemicals for fertilizers, preservatives, etc.) that all use imported components. Those lower import prices are factored into the price of the foodstuff itself. A John Deere harvester uses steel from Germany, computer components from Japan and Taiwan, etc.--John Deere (and us, by extension, since we compose its labor force and its customer base) gets those for cheap due to the dollar's uniquely elevated exchange rate. So our wages go farther than they otherwise would.
Enough to totally make up for the whole decline in wage growth since the end of Bretton Woods? Not remotely--but maybe to partially *offset* that decline? I think so.
My initial take is that this lengthy piece said little that isn’t obvious and, while suggesting that progressives need to come up with a trade plan, does not offer one.
I would point out that while trade is fundamental, there are other inputs that impact domestic economics and quality of life. Our low education standards, poor physical health, family fragmentation and massive entitlement disincentives all impact the dynamism of our domestic economy and society. In plain English, this is complicated stuff.
I am not sure what to think about the tariffs. My husband keeps telling me how bad they are but the impact so far has not born that out. I have a small business that has many moving parts. I was worried how they could impact it but so far we have been able to negotiate them just fine. From a personal standpoint the biggest items which impact our budget has stayed the same or gone down(food and fuel). The rest can be worked around. I am really worried about buying a car or car repairs though. On the other hand there are several companies whose business is thriving right now because of the tariffs. So all in all the majority of the people of this small- medium sized rural city are either neutral to supportive of the tariffs. I am a wait and see. If food and fuel keep down for the working class this is a big deal. On the other hand I do hear how passionately negative my husband is on tariffs.
The resistance has vehemently opposed tariffs because that’s all they have. When it starts with “has led many to fear…” and moves to “there is broad agreement there a strong chance…” and “eventually these trends could lead to…” I stop reading. There isn’t enough information to act upon, so what’s the point? My guess is as good as theirs.
The biggest obstacle to dealing honestly with the issue of globalization is that, when you look beyond campaign rhetoric into revealed preferences via polling, you see that Americans do not want to give up American global dominance, and to truly reverse globalization you essentially must be willing to do so, because of the way the dollar system works. Globalization has been the method by which the U.S. has maintained global hegemony since the end of WWII, by allowing America to remain the global balancer of trade. Protectionism works against this hegemonic position.
Yes, Bretton Woods made it seem like *gold* remained the great balancer of global trade, but it was predicated on the dollar-gold peg, which was only possible because, at the end of WWII, the U.S. possessed over half of the world's gold reserves. For over three decades it spent these reserves away, mostly on military engagements and to rebuild Europe and Japan. When those reserves ran out and Nixon was forced to sever the gold/dollar peg, U.S. treasury debt became the universal currency that financed and 'balanced' global trade. That allowed the U.S. to indebt other nations to itself as it built military bases all over the world, and supercharged Wall Street returns and financialization, as the world's surplus savings were recycled back to Wall Street and U.S. banks.
That system broke down in '08, and we haven't figured out what to replace it with. The dollar remains the global reserve currency, but it is no longer recycling surplus savings into Wall Street to the extent it once did, and so Americans no longer feel that the gains are "equally distributed". Nonetheless, there are a host of privileges reserve currency status and global hegemony confers that Americans have taken for granted for almost a century, and it's dubious Americans will be fine with parting with them. So the heart of the issue is A.) giving away the privileges of the global hegemon aren't likely to magically solve this economic stagnation, and B.) Americans also become enraged when they feel the U.S. is 'losing' global respect and influence. (which giving away global hegemony will require, at a very large scale)
I mean, look at the obsession over trade deficits, and people pointing back to the 'trade surpluses' of the pre-Bretton Woods world, when the reality is that we've been running balance-of-payments deficits since basically 1945. If they can't even understand that, I really don't think people are really cognizant of what the loss of the 'exorbitant privilege' of dollar hegemony really entails, and will be extremely upset if and when it is lost and the economic maladies they are concerned about remain. (One more reason I doubt history will look favorably on Trump, who is trying his darnedest to dislodge the dollar as GRC and may be the one who tips the financial domino)
Good comments. So far there is no competition for U.S. dollar hegemony, but history suggests this will change at some point. Our massive federal debt and unfunded entitlements could hasten this process.
In re reading, the last sentence struck me, it went like this.
"If progressives are to succeed, they will have to propound a vision of economic well-being that reconciles the country’s different regions and that restores among workers a deeper sense of agency, possibility, and life purpose."
How about we just get paid money instead? The 10% can keep all the deep sense of agency and life purpose, we'll get that part figured out on our own. The dinner for 4 with maybe a couple bottles of wine will cost a thousand instead of half that. Hard labor might double in price, and when people get sick they are going to have to go to the hospital. The wealthy will have to feel a little less wealthy.
I think a 50% tariff won't be permanent, maybe jackfruit and hand forged decorative hardware need to be higher. John Muir only had one backpack.
There are huge competing interests with trade, as Bill Edley says up top of these comments, "Housing costs, Health Care, Taxes, Food" those are the major costs that people have to spend money on.
In opposition are the young urban childless who spend most of their money on entertainment, and the upper middle class who fills the landfills with stuff bought and never used. Peloton bikes and Patagonia clothes.
I'm not MAGA but I'm certainly of the "burn it all down" contingent. The message has been sent but it hasn't been received yet. Need a major economic meltdown. All that said I just ordered an AC compressor from Amazon this morning. Highest star rating. $150. Cost at a repair shop $500 parts, maybe $700 labor. Made in ?
Since NAFTA nearly all US financial gains inured to the top quintile of US earners. Most Dems are find with that. They expect the rest of Americans to be happy with handouts and 3 cheap TVs in a rental, rather than 1 in an owned home.
Trump gave permission for Dems to say what they really think. The US needs a small ruling class comprised of the intellectually and morally superior, a class of government workers that will follow them to gates of Hell, and everyone else. The latter should be satisfied with scraps, especially a vast permanent servant caste, that knows better than to ever complain.
Trump tossed a wrench in their plans, but good. They utilized Covid and Courts to remove the meddlesome Queens builder, and then like an unlikely movie Superhero, shot from head to toe, the old man got up, again. I was never a fan personally, but like a lot of Americans, after the Biden years, the loud mouth is beginning to grow me.
For decades it didn't matter who was in the WH, most of the country got screwed. Trump either actually cares about those left behind, or he is doing a really god job of faking it.
Vassallo’s sober and nuanced critique of free trade rightly emphasizes its class-skewed legacy—how it enriched coastal professionals while hollowing out working-class communities in the heartland. But if we’re serious about reviving the middle class, we have to confront a new and perhaps even more destabilizing force than globalization: AI and the coming wave of cognitive automation.
The logic of free trade was that even as blue-collar jobs vanished, white-collar knowledge workers would thrive in a globally networked, service-oriented economy. And for a time, that was true: professionals in law, IT, finance, HR, and consulting flourished. These were the winners in what Vassallo calls the “upper-middle-class consumption ecology” of the post-industrial city. But that class is now on the edge of disruption.
AI is not just replacing physical labor—it is encroaching on the very cognitive work that defined the meritocratic professional tier. Large language models can already write legal briefs, debug code, generate HR policies, and audit financial data. Superintelligent systems on the horizon threaten to outperform humans across nearly all mental domains. The very credentialed class that benefited from free trade may soon find itself displaced by systems that do their jobs faster, cheaper, and without vacation days.
This poses a profound challenge to Vassallo’s call for progressive renewal. The project of restoring the American middle and working class assumed that human labor would remain central—that we could revive good jobs through industrial policy, smart trade realignment, and place-based investment. But if AI continues at its current pace, the entire framework collapses. We face not just a shortage of good jobs, but a shrinking need for any jobs across vast swaths of the economy.
Just as globalization decimated industrial towns while fueling prosperity in knowledge economies, AI threatens to do the same—this time by unseating the urban technocratic elite. It could make even successful efforts at trade reform or reshoring moot by erasing the labor component altogether.
So yes, we need to reckon with the broken promises of free trade. But we also need to widen the lens. AI is not an extension of the global economy—it is a step toward an economy without people. Unless we begin to think seriously about power, ownership, and dignity in a post-labor world, we may find ourselves nostalgic not just for factory jobs—but for jobs, period.
A quibble: there’s no such thing as a ‘post-labor’ economy. What’s happening is that the *form* of labor is evolving from ‘number of hours a person spends working on an industrial machine’ to ‘amount of useful data a person produces for a digital machine.’
AI uses a tremendous amount of human labor—it just comes in the form of data, not labor-hours. If we can design structures that allow people to receive payment for data they contribute to an AI when it makes profits, then we will arguably have a more robust ‘labor economy’ than ever before. One that could very effectively finance a middle class. But our institutions haven’t evolved yet to accommodate the new form labor has taken, and aren’t taking steps to set up the legal and technical structures required for this changeover. (I’m hoping we’ll start to see the beginnings of something in the area of copyright law reform)
Great article! Another aspect of this new US social/economic geography is that a huge portion of the US born working to lower middle class (even more so the working poor) have collectively moved away in a process of net domestic out-migration, from many of the major coastal Super-Star US metropolitan regions since the 1980's. Keep in mind that while professionals and the wealthy are much more likely to move across state lines overall then the working class, this movement is also much more balanced (more two way) between major metro areas so is actually less impactful compared to that of the working class then it might seem. Below I am only describing net migration gains or losses, among which the working class is much better represented then it is within overall interstate migration.
This large scale movement of the non immigrant and especially of the white working class has occured from the majority of the whole state of California but especially the core SF bay area and Los Angelas metro, the Greater Washington DC capital region, greater NYC, Boston and nearby suburbs (to a lesser extent) as well as Miami-Dade county in Florida. Much the same is happening though on a much smaller scale or to a lesser degree (and more slowly) in many additional locations.
This population has been replaced both by immigrants and by far more professionals and young college graduates and studants. This majority white but increasingly diverse often working transplant population have largely moved to mid to large sized metro areas in the South and the interior mountain West, but also to exurbia as well as smaller metropolitan areas and rural areas throughout the country.
These substancially blue collar American transplants have in tern fueled much of the population growth in states like Arizona, Idaho, the Carolina's etc, even Oregon (despite it's larger number number of upscale transplants) etc etc. as well as helped stabalize the population in many regions experiancing brain drain and overall slow decline or stagnation, including parts of the Rust Belt, plains, Deep South, Northern New England, Interior northeast and Appalachia.
In other words, even while wealthy professionals surge into regions otherwise loosing in terms of domestic migration (such as urban coastal California or Greatern DC) as transplants from across the class spectrum are on the net moving to parts of the sun belt and away from parts of the rust belt (and from other regions like parts of deep south), many other sub regions espscially in the sun belt, are gaining mostly from working class transplants. And others still, especially in the midwest and even parts of the south, are actually experiancing brain drain while simultaniously gaining working class Americans. This is all a much unheralded part of what Author Bill Bishop called the Great Sort, and it is transforming all aspects of American life and politics.
I am really done with the boneheaded, sophomoric, broken, fear-based, alarmist screech that tariffs will destroy the economy because of rising prices. This crap is coming from many of the same idiots that claimed we could spend our way out of the authoritarian shutdowns during the pandemic, and that resulting inflation would be transitory.
There were no Trump tariffs during the Biden cabbage era and yet we had near hyper price inflation that is still causing economic harm to the all but the upper class involved in the screeching about Trump tariffs.
Economists are generally academics that have never really worked in the private economy where pricing is set. They have no effective understanding nor models for true price-setting. There are so many variables and cross-incentives for suppliers and sellers setting a higher or lower price, that any screechers about tariffs being the primary fear are to be ignored as dopes.
And the bottom line here is that Trump was elected by the majority to make fixes to the economy where the upper class Professional Managerial Class has for decades looted domestic working class economic opportunity and flooded the country with cheap immigrant labor only for their upper class Wall Street returns.
Cheap Chinese crap at Walmart was never the American Dream.
Bring on the big beautiful tariffs. We know they work because all countries have tariffs on US goods.
The problem is that these tariffs do nothing to 'fix' the economy, and Trump clearly doesn't understand what he's doing. The 'surplus targeting' absurdities he revealed on 'liberation day' made this very clear.
But the biggest cost here is the uncertainty of the tariff regime, which Trump changes every few weeks. And anyone who works on the production side of the private economy, where producer prices are set or production plans are finalized, knows the debilitating effects of uncertainty. Anyone thinking about deploying capital to build a factory or start a business is far less likely to do so when they can't estimate the cost structure of the market they'll be selling into. Anyone currently *running* a business or a factory isn't going to expand production for the same reason.
The focus on prices can also be a bit misleading. Inflation isn't ultimately about prices; it is about getting *less* for the *same amount of money*, and this can manifest in a number of ways--not necessarily *just* in price increases. For example, yes, a firm may 'eat' a tariff and keep the price of a tariffed good constant, as Trump demands Walmart do; but over time this requires that they reduce production--hence phenomena like 'shrinkflation'.
In the end though, these tariffs can't (and won't) achieve the ends they're supposed to. They can't make domestic producers more competitive vis a vis global producers, as in the 19th century, because all our supply chains are globalized and networked, in a way they weren't back then. (and because we don't have a gold standard to maintain the exchange rates we'd need to offset the effects of dollar depreciation) And as long as the dollar is the reserve currency, the trade balance will remain in deficit. That is the 'price' paid for reserve currency status--always has been.
There *are* ways of implementing protectionism, of course. But they require intelligent, non-ideological approaches to economic realities--and they all involve political cooperation that trade wars have never (and in essence cannot) achieve. Trump has shown himself incapable of this kind of approach, and his economic advisors (looking at you, Stephen Miller!) have thus far been so sycophantic that they haven't even followed the advice forwarded in their own research.
You can't fix an economy by running it like a reality TV show--and that's all we've seen from Trump so far.
LOL. So tariffs are a reality TV show and yet all other countries have them and the US already had them.
So many people full of words to say and write on the topic without having real understanding of the economic forces at play.
Note that you don't fix the problems from the previous decades of fuck-ups like allowing communist China into the WTO, allowing all other countries to implement their own national domestic industrial policies to protect their jobs while the US funded the Global Order... and leaving the southern border open for all the cheap labor... in a few months.
The US has the leverage given where we are today and Trump is using it. To hell with all the greedy wieners crying about their Wall Street returns.
***"So many people full of words to say and write on the topic without having real understanding of the economic forces at play."***
If you think targeting trade surpluses with tariffs and making it impossible for a firm to estimate its cost structure is 'good' for economic growth or the 'rebalancing' of trade, (if you can even coherently define what that means) I think you need to reevaluate the depth of your own understanding of the economic forces at work here.
***"allowing all other countries to implement their own national domestic industrial policies to protect their jobs while the US funded the Global Order"***
'Funding the Global Order' is what allowed for the unprecedented dominance of American industry all over the world from 1945 to the 1970s, and what allowed for the dominance of American finance in the '80s up until the early '00s. The number of jobs and benefits we reaped by being able to rebuild the world so that we were at the center of it is unfathomable. Yes, the rest of the world got to implement industrial policies, because the rest of the world had to rebuild its industries after their decimation in WWII--but what did we get? Well, we got to *own* those industries, and recycle all their resources and surplus savings into our own economy. To go about blubbering about how this was some instance of us getting 'ripped off' is to show absolutely no understanding of the global economic order post-1945, much less the "exorbitant privilege"--as John Maynard Keynes, who was jealous of all the benefit America reaped from its unipolarity, put it--that we gained from it.
You might ask yourself: if the output of American industries resulted in trade surpluses, but China functionally *owned* all of said industries, would you be happy with the arrangement? Because that's the arrangement nigh every country outside the Soviet Bloc found itself in in regards to the United States as we were 'funding the Global Order'.
‘The unprecedented dominance of American industry from 1945 to the 1970s’ was also related to a lack of competition. The US was the only industrialized country in the world to survive WW2 with their industrial base intact. It took decades for Europe and Asia to rebuild.
Indeed—and the U.S. was in large part a financier of this rebuilding, which is what cemented the dollar’s GRC status, and made these countries’ (now-dollarized) trade and industry essentially completely dependent on the U.S. There’s a reason the economies that joined the USSR stopped invoicing trade in dollars. Dollars are the means through which we essentially owned those countries’ surplus exports and recycled them back into the U.S. economy. You can only call that a ripoff (don’t know if that’s what you’re doing, I’m referring to the poster above and, well, Trump) if you don’t understand global trade at all.
As a response to the effects of Great Depression 2.0, (inaugurated by the 2008 financial crisis), which itself marked the breakdown of the post-Bretton Woods iteration of the global dollar system.
But here are two questions for you:
A.) when was the last time the U.S. had a balance of payments surplus? (The basis for a trade surplus, the sign of ‘balanced trade’, according to Trump)
And
B.) When was American industry at its peak after WWII?
Critics of the administration (and I am one on many issues) only analyze tariffs as if they are permanent. These are temporary, as our trade partners lower their own tariffs or government support for manufacturers, we will negotiate ours down. We'll never be a manufacturing nation again, except in certain hi-tech sectors, but we can balance out trade. If I have a hotdog stand with slave labor, and your stand pays $25 per hour, you'll go under.
If we outlaw slavery and make 25 minimum you will compete for hot dog customers. I've no idea why people think we can't manufacture here, we have to or we will cease to be.
Actually that is not accurite. The US is still a major manufacturing nation in diverse sectors, even though there are some products we no longer make or seldom make anymore. But our long term manufacruring growth has certialy fallen well behind both overall growth as well as that of other countries, while automation has led to our more recent major absolute decline in manufacturing employment more then anything else.
What does 'balanced trade' mean, though? So much hinges on how it's defined, and it rarely is.
If it means we must eliminate the trade deficit at all costs, (which seems to be the most popular conception, and the one Trump/MAGA uses) then you will never have 'balanced' trade as long as the dollar is the reserve currency. As long as the latter is the case, there will always be more dollars flowing out of the country than flowing in, because there will always be a greater demand for dollars from the rest of the world than there is domestically from Americans alone.
Giving up the dollar as GRC would hold up the possibility of eliminating persistent trade (and balance-of-payments) deficits, but you'd have to sacrifice things it's unlikely people want to sacrifice--among other things, things in general would be more expensive, interest rates would have to be higher and less stables, costs for American producers would be higher, you'd have to be open to other countries holding power over you, you'd have to constantly be on the lookout for currency crises...the list goes on.
Excellent article. People are way too wedded to theory and not enough to reality. Trump has basically stolen the trade platform of the Democrats from 30 or 40 years ago but Orange Man Bad so the Democrats have to be free trade advocates now. The article captures the mindset of the real Republican exploiters of the working class, exemplified by Mitt Romney, very well. They are free traders too. Trade policy is really a dial and not an on-off switch.
Mitt Romney made the mistake of pointing out that half of U.S. taxpayers pay no Federal income tax, which is true. How exactly did he exploit workers?
He was in the upper level management of Baine Capital, President, CEO. They'd take over companies, accrue huge amounts of debt, charge millions, then fire most of the workforce to pay off debt. Many did the same in the 80s. Or they'd buy a company, keep the name, move the factories to china, and import.
I don't see private equity as different from bad government policy, corrupt non profits or poorly run public corporations. If they don't provide a good or service people want, they lose money like anyone else. Do you prefer state control?
Private equity. And FICA is income tax
No, FICA is payroll tax, not income tax.
Distinction without a difference
Pure BS: "Ardent free-traders certainly sound as if they are looking out for the working class when they counter Trump’s case for high and broad tariffs. In the last thirty-five years, consumers have benefitted significantly from low-cost imports and the strong dollar, both of which partly offset the decline in wage growth that began in the 1970s". //// Between 1979 and 2014, productivity rose by 65% while hourly wages stagnated at up 8%. Consumer purchases are a small fraction of household expenses...Housing costs, Health Care, Taxes, Food....make up most of household expenses. Wall Street and corporate executives have made out like bandits since 1979.
Imported goods are components of all those expenses, though, (minus taxes, obviously) to a greater or lesser extent, due to the globalization of their supply chains; thus the strong dollar, as an importer of deflation, has arguably kept the price of them down as well. So I don't think the fact that they're central expenditures for Americans makes the author's point any less true.
I don't want to engage in an extensive theoretical economic debate...but here's the data from BEA..."In the U.S., consumer spending is the value of goods and services purchased by U.S. residents. Goods purchases account for about 34% of consumer wallet share, while services purchases account for about 66%. Over the last 30 years, consumer expenditures in the U.S. have shifted from commodities to services."
Perhaps I need to clarify: while housing costs are unique for several reasons, imports and globalized supply chains are priced into food and and healthcare. Particularly when you drill down to the production inputs. For example, while we only import 15% of our food supply in terms of actual foodstuffs, and much of the inputs to creating actual foodstuffs come from American farmers, both American farmers and the domestic food producers they sell to utilize machinery (e.g. combines, harvesters, seeders) and other forms of technology (i.e. chemicals for fertilizers, preservatives, etc.) that all use imported components. Those lower import prices are factored into the price of the foodstuff itself. A John Deere harvester uses steel from Germany, computer components from Japan and Taiwan, etc.--John Deere (and us, by extension, since we compose its labor force and its customer base) gets those for cheap due to the dollar's uniquely elevated exchange rate. So our wages go farther than they otherwise would.
Enough to totally make up for the whole decline in wage growth since the end of Bretton Woods? Not remotely--but maybe to partially *offset* that decline? I think so.
My initial take is that this lengthy piece said little that isn’t obvious and, while suggesting that progressives need to come up with a trade plan, does not offer one.
I would point out that while trade is fundamental, there are other inputs that impact domestic economics and quality of life. Our low education standards, poor physical health, family fragmentation and massive entitlement disincentives all impact the dynamism of our domestic economy and society. In plain English, this is complicated stuff.
You might add to your excellent list of complicated stuff ”Good Governance”.
“Homelessness is on the rise in the US. Why is Miami-Dade reporting a decrease?”
Read more at: https://www.miamiherald.com/news/local/community/miami-dade/article299852664.html#storylink=cpy
Thank you. Our community is struggling with this issue now. Of course, what can you expect if you live in California?
I am not sure what to think about the tariffs. My husband keeps telling me how bad they are but the impact so far has not born that out. I have a small business that has many moving parts. I was worried how they could impact it but so far we have been able to negotiate them just fine. From a personal standpoint the biggest items which impact our budget has stayed the same or gone down(food and fuel). The rest can be worked around. I am really worried about buying a car or car repairs though. On the other hand there are several companies whose business is thriving right now because of the tariffs. So all in all the majority of the people of this small- medium sized rural city are either neutral to supportive of the tariffs. I am a wait and see. If food and fuel keep down for the working class this is a big deal. On the other hand I do hear how passionately negative my husband is on tariffs.
The resistance has vehemently opposed tariffs because that’s all they have. When it starts with “has led many to fear…” and moves to “there is broad agreement there a strong chance…” and “eventually these trends could lead to…” I stop reading. There isn’t enough information to act upon, so what’s the point? My guess is as good as theirs.
The biggest obstacle to dealing honestly with the issue of globalization is that, when you look beyond campaign rhetoric into revealed preferences via polling, you see that Americans do not want to give up American global dominance, and to truly reverse globalization you essentially must be willing to do so, because of the way the dollar system works. Globalization has been the method by which the U.S. has maintained global hegemony since the end of WWII, by allowing America to remain the global balancer of trade. Protectionism works against this hegemonic position.
Yes, Bretton Woods made it seem like *gold* remained the great balancer of global trade, but it was predicated on the dollar-gold peg, which was only possible because, at the end of WWII, the U.S. possessed over half of the world's gold reserves. For over three decades it spent these reserves away, mostly on military engagements and to rebuild Europe and Japan. When those reserves ran out and Nixon was forced to sever the gold/dollar peg, U.S. treasury debt became the universal currency that financed and 'balanced' global trade. That allowed the U.S. to indebt other nations to itself as it built military bases all over the world, and supercharged Wall Street returns and financialization, as the world's surplus savings were recycled back to Wall Street and U.S. banks.
That system broke down in '08, and we haven't figured out what to replace it with. The dollar remains the global reserve currency, but it is no longer recycling surplus savings into Wall Street to the extent it once did, and so Americans no longer feel that the gains are "equally distributed". Nonetheless, there are a host of privileges reserve currency status and global hegemony confers that Americans have taken for granted for almost a century, and it's dubious Americans will be fine with parting with them. So the heart of the issue is A.) giving away the privileges of the global hegemon aren't likely to magically solve this economic stagnation, and B.) Americans also become enraged when they feel the U.S. is 'losing' global respect and influence. (which giving away global hegemony will require, at a very large scale)
I mean, look at the obsession over trade deficits, and people pointing back to the 'trade surpluses' of the pre-Bretton Woods world, when the reality is that we've been running balance-of-payments deficits since basically 1945. If they can't even understand that, I really don't think people are really cognizant of what the loss of the 'exorbitant privilege' of dollar hegemony really entails, and will be extremely upset if and when it is lost and the economic maladies they are concerned about remain. (One more reason I doubt history will look favorably on Trump, who is trying his darnedest to dislodge the dollar as GRC and may be the one who tips the financial domino)
Good comments. So far there is no competition for U.S. dollar hegemony, but history suggests this will change at some point. Our massive federal debt and unfunded entitlements could hasten this process.
In re reading, the last sentence struck me, it went like this.
"If progressives are to succeed, they will have to propound a vision of economic well-being that reconciles the country’s different regions and that restores among workers a deeper sense of agency, possibility, and life purpose."
How about we just get paid money instead? The 10% can keep all the deep sense of agency and life purpose, we'll get that part figured out on our own. The dinner for 4 with maybe a couple bottles of wine will cost a thousand instead of half that. Hard labor might double in price, and when people get sick they are going to have to go to the hospital. The wealthy will have to feel a little less wealthy.
I think a 50% tariff won't be permanent, maybe jackfruit and hand forged decorative hardware need to be higher. John Muir only had one backpack.
The article was too long and dense. Tighten it up Mr. Vassallo.
There are huge competing interests with trade, as Bill Edley says up top of these comments, "Housing costs, Health Care, Taxes, Food" those are the major costs that people have to spend money on.
In opposition are the young urban childless who spend most of their money on entertainment, and the upper middle class who fills the landfills with stuff bought and never used. Peloton bikes and Patagonia clothes.
I'm not MAGA but I'm certainly of the "burn it all down" contingent. The message has been sent but it hasn't been received yet. Need a major economic meltdown. All that said I just ordered an AC compressor from Amazon this morning. Highest star rating. $150. Cost at a repair shop $500 parts, maybe $700 labor. Made in ?
Since NAFTA nearly all US financial gains inured to the top quintile of US earners. Most Dems are find with that. They expect the rest of Americans to be happy with handouts and 3 cheap TVs in a rental, rather than 1 in an owned home.
Trump gave permission for Dems to say what they really think. The US needs a small ruling class comprised of the intellectually and morally superior, a class of government workers that will follow them to gates of Hell, and everyone else. The latter should be satisfied with scraps, especially a vast permanent servant caste, that knows better than to ever complain.
Trump tossed a wrench in their plans, but good. They utilized Covid and Courts to remove the meddlesome Queens builder, and then like an unlikely movie Superhero, shot from head to toe, the old man got up, again. I was never a fan personally, but like a lot of Americans, after the Biden years, the loud mouth is beginning to grow me.
For decades it didn't matter who was in the WH, most of the country got screwed. Trump either actually cares about those left behind, or he is doing a really god job of faking it.
Vassallo’s sober and nuanced critique of free trade rightly emphasizes its class-skewed legacy—how it enriched coastal professionals while hollowing out working-class communities in the heartland. But if we’re serious about reviving the middle class, we have to confront a new and perhaps even more destabilizing force than globalization: AI and the coming wave of cognitive automation.
The logic of free trade was that even as blue-collar jobs vanished, white-collar knowledge workers would thrive in a globally networked, service-oriented economy. And for a time, that was true: professionals in law, IT, finance, HR, and consulting flourished. These were the winners in what Vassallo calls the “upper-middle-class consumption ecology” of the post-industrial city. But that class is now on the edge of disruption.
AI is not just replacing physical labor—it is encroaching on the very cognitive work that defined the meritocratic professional tier. Large language models can already write legal briefs, debug code, generate HR policies, and audit financial data. Superintelligent systems on the horizon threaten to outperform humans across nearly all mental domains. The very credentialed class that benefited from free trade may soon find itself displaced by systems that do their jobs faster, cheaper, and without vacation days.
This poses a profound challenge to Vassallo’s call for progressive renewal. The project of restoring the American middle and working class assumed that human labor would remain central—that we could revive good jobs through industrial policy, smart trade realignment, and place-based investment. But if AI continues at its current pace, the entire framework collapses. We face not just a shortage of good jobs, but a shrinking need for any jobs across vast swaths of the economy.
Just as globalization decimated industrial towns while fueling prosperity in knowledge economies, AI threatens to do the same—this time by unseating the urban technocratic elite. It could make even successful efforts at trade reform or reshoring moot by erasing the labor component altogether.
So yes, we need to reckon with the broken promises of free trade. But we also need to widen the lens. AI is not an extension of the global economy—it is a step toward an economy without people. Unless we begin to think seriously about power, ownership, and dignity in a post-labor world, we may find ourselves nostalgic not just for factory jobs—but for jobs, period.
A quibble: there’s no such thing as a ‘post-labor’ economy. What’s happening is that the *form* of labor is evolving from ‘number of hours a person spends working on an industrial machine’ to ‘amount of useful data a person produces for a digital machine.’
AI uses a tremendous amount of human labor—it just comes in the form of data, not labor-hours. If we can design structures that allow people to receive payment for data they contribute to an AI when it makes profits, then we will arguably have a more robust ‘labor economy’ than ever before. One that could very effectively finance a middle class. But our institutions haven’t evolved yet to accommodate the new form labor has taken, and aren’t taking steps to set up the legal and technical structures required for this changeover. (I’m hoping we’ll start to see the beginnings of something in the area of copyright law reform)
Great article! Another aspect of this new US social/economic geography is that a huge portion of the US born working to lower middle class (even more so the working poor) have collectively moved away in a process of net domestic out-migration, from many of the major coastal Super-Star US metropolitan regions since the 1980's. Keep in mind that while professionals and the wealthy are much more likely to move across state lines overall then the working class, this movement is also much more balanced (more two way) between major metro areas so is actually less impactful compared to that of the working class then it might seem. Below I am only describing net migration gains or losses, among which the working class is much better represented then it is within overall interstate migration.
This large scale movement of the non immigrant and especially of the white working class has occured from the majority of the whole state of California but especially the core SF bay area and Los Angelas metro, the Greater Washington DC capital region, greater NYC, Boston and nearby suburbs (to a lesser extent) as well as Miami-Dade county in Florida. Much the same is happening though on a much smaller scale or to a lesser degree (and more slowly) in many additional locations.
This population has been replaced both by immigrants and by far more professionals and young college graduates and studants. This majority white but increasingly diverse often working transplant population have largely moved to mid to large sized metro areas in the South and the interior mountain West, but also to exurbia as well as smaller metropolitan areas and rural areas throughout the country.
These substancially blue collar American transplants have in tern fueled much of the population growth in states like Arizona, Idaho, the Carolina's etc, even Oregon (despite it's larger number number of upscale transplants) etc etc. as well as helped stabalize the population in many regions experiancing brain drain and overall slow decline or stagnation, including parts of the Rust Belt, plains, Deep South, Northern New England, Interior northeast and Appalachia.
In other words, even while wealthy professionals surge into regions otherwise loosing in terms of domestic migration (such as urban coastal California or Greatern DC) as transplants from across the class spectrum are on the net moving to parts of the sun belt and away from parts of the rust belt (and from other regions like parts of deep south), many other sub regions espscially in the sun belt, are gaining mostly from working class transplants. And others still, especially in the midwest and even parts of the south, are actually experiancing brain drain while simultaniously gaining working class Americans. This is all a much unheralded part of what Author Bill Bishop called the Great Sort, and it is transforming all aspects of American life and politics.
I am really done with the boneheaded, sophomoric, broken, fear-based, alarmist screech that tariffs will destroy the economy because of rising prices. This crap is coming from many of the same idiots that claimed we could spend our way out of the authoritarian shutdowns during the pandemic, and that resulting inflation would be transitory.
There were no Trump tariffs during the Biden cabbage era and yet we had near hyper price inflation that is still causing economic harm to the all but the upper class involved in the screeching about Trump tariffs.
Economists are generally academics that have never really worked in the private economy where pricing is set. They have no effective understanding nor models for true price-setting. There are so many variables and cross-incentives for suppliers and sellers setting a higher or lower price, that any screechers about tariffs being the primary fear are to be ignored as dopes.
And the bottom line here is that Trump was elected by the majority to make fixes to the economy where the upper class Professional Managerial Class has for decades looted domestic working class economic opportunity and flooded the country with cheap immigrant labor only for their upper class Wall Street returns.
Cheap Chinese crap at Walmart was never the American Dream.
Bring on the big beautiful tariffs. We know they work because all countries have tariffs on US goods.
The problem is that these tariffs do nothing to 'fix' the economy, and Trump clearly doesn't understand what he's doing. The 'surplus targeting' absurdities he revealed on 'liberation day' made this very clear.
But the biggest cost here is the uncertainty of the tariff regime, which Trump changes every few weeks. And anyone who works on the production side of the private economy, where producer prices are set or production plans are finalized, knows the debilitating effects of uncertainty. Anyone thinking about deploying capital to build a factory or start a business is far less likely to do so when they can't estimate the cost structure of the market they'll be selling into. Anyone currently *running* a business or a factory isn't going to expand production for the same reason.
The focus on prices can also be a bit misleading. Inflation isn't ultimately about prices; it is about getting *less* for the *same amount of money*, and this can manifest in a number of ways--not necessarily *just* in price increases. For example, yes, a firm may 'eat' a tariff and keep the price of a tariffed good constant, as Trump demands Walmart do; but over time this requires that they reduce production--hence phenomena like 'shrinkflation'.
In the end though, these tariffs can't (and won't) achieve the ends they're supposed to. They can't make domestic producers more competitive vis a vis global producers, as in the 19th century, because all our supply chains are globalized and networked, in a way they weren't back then. (and because we don't have a gold standard to maintain the exchange rates we'd need to offset the effects of dollar depreciation) And as long as the dollar is the reserve currency, the trade balance will remain in deficit. That is the 'price' paid for reserve currency status--always has been.
There *are* ways of implementing protectionism, of course. But they require intelligent, non-ideological approaches to economic realities--and they all involve political cooperation that trade wars have never (and in essence cannot) achieve. Trump has shown himself incapable of this kind of approach, and his economic advisors (looking at you, Stephen Miller!) have thus far been so sycophantic that they haven't even followed the advice forwarded in their own research.
You can't fix an economy by running it like a reality TV show--and that's all we've seen from Trump so far.
LOL. So tariffs are a reality TV show and yet all other countries have them and the US already had them.
So many people full of words to say and write on the topic without having real understanding of the economic forces at play.
Note that you don't fix the problems from the previous decades of fuck-ups like allowing communist China into the WTO, allowing all other countries to implement their own national domestic industrial policies to protect their jobs while the US funded the Global Order... and leaving the southern border open for all the cheap labor... in a few months.
The US has the leverage given where we are today and Trump is using it. To hell with all the greedy wieners crying about their Wall Street returns.
***"So many people full of words to say and write on the topic without having real understanding of the economic forces at play."***
If you think targeting trade surpluses with tariffs and making it impossible for a firm to estimate its cost structure is 'good' for economic growth or the 'rebalancing' of trade, (if you can even coherently define what that means) I think you need to reevaluate the depth of your own understanding of the economic forces at work here.
***"allowing all other countries to implement their own national domestic industrial policies to protect their jobs while the US funded the Global Order"***
'Funding the Global Order' is what allowed for the unprecedented dominance of American industry all over the world from 1945 to the 1970s, and what allowed for the dominance of American finance in the '80s up until the early '00s. The number of jobs and benefits we reaped by being able to rebuild the world so that we were at the center of it is unfathomable. Yes, the rest of the world got to implement industrial policies, because the rest of the world had to rebuild its industries after their decimation in WWII--but what did we get? Well, we got to *own* those industries, and recycle all their resources and surplus savings into our own economy. To go about blubbering about how this was some instance of us getting 'ripped off' is to show absolutely no understanding of the global economic order post-1945, much less the "exorbitant privilege"--as John Maynard Keynes, who was jealous of all the benefit America reaped from its unipolarity, put it--that we gained from it.
You might ask yourself: if the output of American industries resulted in trade surpluses, but China functionally *owned* all of said industries, would you be happy with the arrangement? Because that's the arrangement nigh every country outside the Soviet Bloc found itself in in regards to the United States as we were 'funding the Global Order'.
‘The unprecedented dominance of American industry from 1945 to the 1970s’ was also related to a lack of competition. The US was the only industrialized country in the world to survive WW2 with their industrial base intact. It took decades for Europe and Asia to rebuild.
Indeed—and the U.S. was in large part a financier of this rebuilding, which is what cemented the dollar’s GRC status, and made these countries’ (now-dollarized) trade and industry essentially completely dependent on the U.S. There’s a reason the economies that joined the USSR stopped invoicing trade in dollars. Dollars are the means through which we essentially owned those countries’ surplus exports and recycled them back into the U.S. economy. You can only call that a ripoff (don’t know if that’s what you’re doing, I’m referring to the poster above and, well, Trump) if you don’t understand global trade at all.
Why did the working class rise up and elect Trump? Why did the UK vote for Brexit?
As a response to the effects of Great Depression 2.0, (inaugurated by the 2008 financial crisis), which itself marked the breakdown of the post-Bretton Woods iteration of the global dollar system.
But here are two questions for you:
A.) when was the last time the U.S. had a balance of payments surplus? (The basis for a trade surplus, the sign of ‘balanced trade’, according to Trump)
And
B.) When was American industry at its peak after WWII?
Critics of the administration (and I am one on many issues) only analyze tariffs as if they are permanent. These are temporary, as our trade partners lower their own tariffs or government support for manufacturers, we will negotiate ours down. We'll never be a manufacturing nation again, except in certain hi-tech sectors, but we can balance out trade. If I have a hotdog stand with slave labor, and your stand pays $25 per hour, you'll go under.
If we outlaw slavery and make 25 minimum you will compete for hot dog customers. I've no idea why people think we can't manufacture here, we have to or we will cease to be.
Actually that is not accurite. The US is still a major manufacturing nation in diverse sectors, even though there are some products we no longer make or seldom make anymore. But our long term manufacruring growth has certialy fallen well behind both overall growth as well as that of other countries, while automation has led to our more recent major absolute decline in manufacturing employment more then anything else.
What does 'balanced trade' mean, though? So much hinges on how it's defined, and it rarely is.
If it means we must eliminate the trade deficit at all costs, (which seems to be the most popular conception, and the one Trump/MAGA uses) then you will never have 'balanced' trade as long as the dollar is the reserve currency. As long as the latter is the case, there will always be more dollars flowing out of the country than flowing in, because there will always be a greater demand for dollars from the rest of the world than there is domestically from Americans alone.
Giving up the dollar as GRC would hold up the possibility of eliminating persistent trade (and balance-of-payments) deficits, but you'd have to sacrifice things it's unlikely people want to sacrifice--among other things, things in general would be more expensive, interest rates would have to be higher and less stables, costs for American producers would be higher, you'd have to be open to other countries holding power over you, you'd have to constantly be on the lookout for currency crises...the list goes on.