I suspect the ten percent tariff threatened on China may not be a negotiation but instead aimed at changing something deleterious in the relationship.

For reasons that would take a short history course to explain, American conservatives reject the American school of economics in favor of the post-war Austrians, whose chief concern was rebuilding Europe and uniting it as a bulwark against communism.

This school of economics rejects trade protectionism dogmatically, often rhetorically treating it as if it were a form of proto-socialism. When they talk about tariffs, they denounce government planners and faux geniuses who cannot overcome the knowledge problem or who deign to “pick winners and losers.” Tariffs are always and everywhere bad. Paul Krugman used to sum it up: “The economist’s case for free trade is essentially a unilateral case: a country serves its own interests by pursuing free trade regardless of what other countries may do.” In recent decades, some on the center-left, and worse, the center-right, have even tried adopting the view that free trade is another form of mandatory anti-racism.

For those of us who think international trade is a practical matter of prudence and statesmanship downstream of geopolitics rather than a principled, ideological project to achieve or approximate global economic efficiency, tariffs are just tools like any other tax. You might try to tax to stop a firm or a foreign mercantile policy from externalizing its costs. You might decide that your free citizens shouldn’t be put into competition for investment with legal slaves, and tax the products produced by slave-holding nations differently.

That is, tariffs have discreet ends as policy and should be judged by whether they achieve them. Oren Cass helpfully spells out what ends tariffs might be aimed at achieving.

President Trump’s threat to impose tariffs of 25% on Mexico and Canada, and 10% on China, effective more-or-less immediately, has created a great deal of confusion and consternation, most of which stems from the conflation of four different uses for tariffs.

Use #1: Funding. Tariffs can generate revenue. A nation wanting to use tariffs as a tax base would ideally deploy them in the broadest, most stable and predictable, and least economically disruptive way possible.

Use #2: Decoupling. Tariffs can shift supply chains. A nation wanting to reduce reliance on imports from particular countries would ideally impose a steep tariff on those particular imports, encouraging both producers and consumers to seek imports from elsewhere instead.

Use #3: Rebalancing. Tariffs can promote domestic production. A nation wanting to reduce its trade deficit and reindustrialize its economy would ideally impose a global tariff, encouraging domestic investment by giving domestic producers an advantage over imports.

All three of these uses are fundamentally economic in nature and the policymaker’s goal should be to impose them in a way that minimizes economic costs domestically (e.g., with a predictable phase-in) and creates confidence that they will remain for the long-term (e.g., by codifying them in legislation).

Then there is Use #4: Negotiating. Tariffs can provide powerful leverage. A nation wanting some other nation to change its behavior can threaten or in fact levy a tariff designed to cause more economic damage abroad than at home, creating an incentive for the other nation to comply with the demand.

We saw an example of tariffs as a negotiating tool just last week when Columbia refused to repatriate its citizens. Trump threatened a 25 percent tariff, rising to 50 percent, among other measures, until they relented.

The tariffs on Mexico and Canada look like a species of negotiation. It was never clear when they would be implemented to start. And the White House used telling language about “leverage” in its fact sheet announcing the policy. In less than a day or two, Mexico has already agreed to move some troops to the border and to open up a series of further talks with Secretary of State Rubio. Whatever this is, it’s not about fundamentally changing economic relations between Mexico and the United States, and so should not be judged on that scale.

Like Cass, I suspect the ten percent tariff threatened on China may not be an opening gambit in a simple diplomatic negotiation but aimed at changing something deleterious in our trade relationship. The threat to stop de minimus imports would hurt rising Chinese firms like Temu and Shein, which use the de minimus loophole, allowing them to directly ship goods for less than $800 per package to American customers. This business model is built on policy arbitrage, and it is used to outcompete American retailers who manufacture in China but ship their goods overseas in containers headed for retail outlets and who pay the existing tariffs to do so. The rise of these Chinese direct-to-consumer retailers has had another ancillary problem. It has increased the number of small packages sent directly to American addresses by such a huge degree that it allows fentanyl makers in China to also evade enforcement and ship to American distributors by hiding their packages in a sea of small shipments that can’t be thoroughly inspected with our current resources.