Articulate a Clear Tariff Roadmap

• The administration should develop a tariff roadmap that defines and prioritizes the policy goals that tariffs are intended to advance.
• The administration should have specific, measurable policy objectives for each use of new tariffs and clarity on the conditions under which tariffs will be removed.
• U.S. tariff policy should differentiate between tariffs on U.S. allies and those on strategic competitors, reserving the use of high tariffs and national security–based tariff authorities for the latter.
• The administration should develop a differentiated tariff rate for China, rather than an across-the-board rate, to prioritize derisking from China in critical supply chains.
• The administration should publish its own assessment of the economic costs and benefits of any tariff regime.

The second Trump administration appears set on wielding tariffs aggressively on friends and foes alike. Yet the exact purpose, structure, and impact of any new tariffs remain hotly contested. Critics argue that tariffs will impose costs on U.S. consumers, spark inflation, and prompt retaliation from countries targeted by the tariffs.¹ Proponents, including the president, offer tariffs as a remedy to U.S. trade deficits, unfair trading practices of other countries, and a host of nontraditional objectives, such as stemming the flow of fentanyl into the United States and preventing dedollarization.² The debate over whether tariffs are a means to achieve other policy objectives or an ends unto themselves remains unsettled.

To ensure that tariffs effectively advance U.S. economic and security interests, the administration should develop a tariff roadmap that defines and prioritizes the various policy goals that tariffs are intended to advance.

Define realistic policy goals and off-ramps. The administration should articulate specific, measurable policy objectives that it is seeking to achieve with each use of new tariffs, along with defining the conditions under which tariffs will be removed. If tariffs are intended to be used as a tactic to advance other objectives, clear goals and off-ramps can ensure that tariffs are truly coercive (i.e., intended to change the target’s behavior) rather than punitive or counterproductive. The use of coercive tariffs should be informed by the long U.S. history of sanctions, which tend to be more effective when imposed with realistic policy aims, against a smaller economy, and in concert with other major economies.³

Tariffs may be less coercive, and thus less negotiable, when used for certain policy goals. Using tariffs as a revenue source in place of tax revenue, for example, may lock the United States in to set higher minimum tariff rates as the government becomes dependent on that revenue stream. Using tariffs to reshore manufacturing capabilities or counter unfair Chinese trade practices may have a similarly sticky nature, as protected industries create strong political interests in maintaining their tariff protections. The tariff roadmap should provide clear guidance on when tariffs are intended to be permanent and when they are more transitional and thus may be removed if certain economic milestones are achieved.

Treat friends as friends and foes as foes. U.S. tariff policy should reflect the unique challenge China presents to U.S. economic and security interests. Imposing high tariff rates or invoking national security authorities to justify tariffs may be appropriate, albeit costly, when dealing with China. When addressing challenges with allies, the United States should keep tariffs targeted, proportionate, and based on trade remedy authorities rather than national security authorities. The administration also should be mindful of potential national security repercussions arising from tariffs on imports from allies, if tariffs fracture integrated defense industrial bases or raise the costs of inputs for key military platforms. National security exclusions should be incorporated into any new tariffs imposed on allies.

Any potential benefits of imposing tariffs on allies must be weighed against the diplomatic downsides, particularly if heightened trade disputes between the United States and its allies slow down coordination on counter-China priorities of the administration. Key U.S. allies in Europe and Asia have grown more skeptical of China in recent years, as China threatens Indo-Pacific peace and stability and supports Russia in its war against Ukraine. The administration has an opportunity to leverage this new skepticism to build a coalition to push back on China’s unfair economic practices. Partners have shown increased willingness to align with U.S. counter-China tariffs, notably in the electric vehicle case with the European Union and Canada imposing tariffs alongside the United States.⁴ Aligning counter-China tariffs can sharpen the bite of U.S. actions, while also reducing the risk that U.S. actions are undercut by transshipment or trade diversion activities. On the flip side, U.S. partners already are signaling their willingness to impose retaliatory tariffs on the United States if needed, raising the risk of a trade war on multiple fronts.⁵

Set China tariff rates strategically. The administration should develop new China tariff rates strategically. Higher tariff rates should be used for supply chains that the United States needs to derisk from China (e.g., chips) or where the United States is countering heavily subsidized excess capacity exported from China (e.g., electric vehicles). Lower rates should be used for goods that do not present a strategic risk to U.S. interests (e.g., toys). A strategic rather than blunt force approach to setting tariff rates is more likely to advance U.S. security interests in derisking from China, mitigate the potential negative costs of tariffs, and provide more opportunities for other major economies to align with U.S. policy.

The complexity of the U.S.-China relationship means that the policy objectives and potential off-ramps for tariffs may differ based on the sector or the good at issue. For example, tariffs imposed to counter Chinese overcapacity may, at least in theory, no longer be necessary if China reins in its excess investment in manufacturing export sectors. In contrast, tariffs that are intended to exclude strategic goods, such as chips, from the U.S. market for security reasons are less likely to be negotiable. A tariff roadmap should provide clarity on how the administration will distinguish between these different types of tariff strategies, including signaling to China the actions it needs to take for the United States to consider tariff relief for sectors or goods—or if such relief is even possible, based on the ultimate objective of the tariffs.

The administration has a strong interest in revoking China’s permanent normal trade relations (PNTR) status, which allows China to benefit from the most preferential trade terms that the United States grants any of its trading partners and was part of China’s accession to the World Trade Organization in 2001.⁶ The practical effect of China’s PNTR status, however, has diminished as the United States has hiked tariff rates during the past two administrations. Formally revoking PNTR is likely to spark international backlash and sharp retaliation from China, for whom PNTR holds immense symbolic value. It is also unnecessary for achieving the new administration’s objectives. China’s existing PNTR status has not constrained the U.S. government from a broad swath of measures, including tariffs, intended to advance U.S. economic and security interests. Rather than formal revocation, the administration instead should focus, in close coordination with Congress, on setting a regularized process for reviewing China tariff rates and exclusions.

Publish economic cost-benefit assessments. Tariff hikes will cause economic disruptions, some intended and others not. As the administration eschews traditional economic views on the impact of tariffs, it should publish its own assessments of the anticipated and actual impact of tariffs on U.S. workers, consumers, farmers, companies, and overall U.S. competitiveness.⁷ These assessments should account for employment dislocation, inflationary impacts, and the costs of retaliation from other countries. Prior U.S. trade policy has been criticized for failing to anticipate negative shocks to U.S. workers.⁸ A rigorous good-faith effort to anticipate and measure the economic shifts resulting from tariffs will be essential to avoid repeating this mistake.

A cost-benefit assessment also should square the impact of tariffs with other Trump administration objectives, including the desire to reduce U.S. trade deficits and spur domestic manufacturing. All else equal, an aggressive tariff strategy can lead to a stronger U.S. dollar, as lower demand for imported goods leads to lower demand for the foreign currencies with which to buy those goods.⁹ A stronger U.S. dollar, in turn, makes U.S. produced goods relatively more expensive on global markets, hampering the competitiveness of U.S. firms. A cost-benefit analysis of tariffs must account for these complex market dynamics.¹⁰