By Chen Gong | ANBOUND | Updated: 2026-01-27
In recent political discourse, Donald Trump’s economic ideology—often termed “Trumpism”—has re-emerged as a significant force. While his rhetoric of “Making America Great Again” and prioritizing American workers resonates domestically, a rigorous examination reveals that his policy toolkit, characterized by aggressive tariffs, forced industrial repatriation, and immigration crackdowns, is rooted in a dangerous blend of 19th-century mercantilism and 20th-century protectionism. This approach not only misunderstands the nature of 21st-century global value chains but also risks triggering stagflation and strategic isolation.
The Tariff Paradox: Revenue Replacement or Regressive Tax?
Trump’s proposal to replace the income tax with tariffs is fiscally delusional. Historically, tariffs funded the U.S. government in the 19th century, but that era lacked a globalized supply chain and a modern welfare state. Today, comprehensive income tax generates approximately $2.5 trillion annually, while total U.S. goods imports are only about $3 trillion. To replace income tax, the U.S. would need an average tariff rate exceeding 80%, an impossibility in the World Trade Organization (WTO) framework.
Economically, tariffs are a regressive tax that disproportionately harms low-income households. Empirical evidence from Trump’s first-term trade war shows that the burden of tariffs was borne almost entirely by American importers and consumers, not Chinese exporters. ANBOUND’s research indicates that for every dollar of tariff collected, U.S. manufacturing value-added declined by $0.40. This functions as a “negative-sum game,” where political gains for the administration come at the direct expense of domestic purchasing power and corporate profitability.
The Fallacy of Industrial Repatriation
The assumption that manufacturing can be forced back to the U.S. via coercion ignores the structural realities of vertical specialization. Contemporary trade is no longer about exchanging finished goods, but about “trade in tasks.” An iPhone assembled in China incorporates design from California, semiconductors from Taiwan, and display panels from South Korea. Forcing assembly back to the U.S. might increase U.S. GDP statistics, but it would simultaneously raise production costs and disrupt established ecosystems.
Furthermore, the labor arbitrage model has evolved. U.S. firms left China not only for cheaper labor in Vietnam or Mexico, but also to avoid geopolitical uncertainty. However, this “China + 1” strategy rarely leads to mass reshoring to the U.S.; rather, it redirects investment to other emerging markets. Trump’s “America First” policy inadvertently accelerates the diversification of global supply chains away from the U.S., as multinational corporations seek stable, low-cost jurisdictions rather than unpredictable, high-cost ones.
Fiscal Contradictions and the Fed
A core contradiction of Trumpism is its simultaneous demand for a weak dollar (to boost exports) and low interest rates (to service debt). These two objectives are incompatible without strict capital controls, which the U.S. does not employ. A weak dollar typically fuels inflation, forcing the Federal Reserve to raise rates—the opposite of Trump’s preference.
His frequent attacks on the Fed’s independence undermine institutional credibility. If the central bank is perceived as subservient to the Treasury, long-term inflation expectations become unanchored. ANBOUND warns that this “political business cycle” risks recreating the stagflation of the 1970s, where high unemployment coexists with high inflation, a scenario monetary policy alone cannot resolve.
The China Strategy: A Miscalculation of Intent and Capability
Trump’s core grievance—that China’s rise was enabled by U.S. naivety—contains a kernel of truth, but his proposed remedies are dangerously mis-calibrated. Decoupling via extreme tariffs (60%+ on Chinese goods) would not cripple China’s development; it would accelerate China’s indigenous innovation and “dual circulation” strategy. Historical precedent shows that comprehensive sanctions, such as those imposed on Iran or Russia, require multilateral consensus to be effective. Unilateral U.S. decoupling merely cedes market share to European and Asian competitors.
Moreover, China is no longer the export-dependent economy of 2001. Its reliance on net exports as a share of GDP has fallen significantly. Coercive tariffs now harm U.S. agriculture and tech sectors far more than they did a decade ago. Trump’s zero-sum mindset fails to recognize that the U.S. and China are locked in a complex interdependence; attempting to sever the relationship completely would inflict asymmetric damage, but the U.S. would not emerge unscathed.
Conclusion: The Economic Perils of Nostalgia
Trumpism represents an economic nostalgia that mistakes the appearance of past prosperity for its substance. The 1950s American manufacturing boom was not solely the result of high tariffs, but of a unique historical moment where the U.S. was the sole undamaged industrial power post-WWII. Attempting to recreate that environment via artificial barriers in a multipolar world is like trying to dam a river with sand.
ANBOUND concludes that while the impulse to protect domestic workers is politically legitimate, the tools proposed are economically incoherent. A sustainable strategy requires investment in human capital, infrastructure, and next-generation technologies—not a retreat behind tariff walls. The real danger of Trumpism is not its goals, but its methods: it promises to restore a golden age, but risks delivering a bronze age of lower growth, higher prices, and diminished global influence.
