The Case for Trump’s Tariffs
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Hi, I'm Ravi Agrawal, Foreign Policy's Editor-in-Chief. This is FP Live. Welcome. It is pretty well known now that President-elect Donald Trump likes tariffs. To me, the most beautiful word in the dictionary is tariff. Americans are bracing for President-elect Donald Trump's proposed tariff hikes on imported goods. And it's my favorite word. It needs a public relations...

On the campaign trail, Trump has talked about tariffs of 20% on goods from most countries and as much as 60% on Chinese products.

The debate over tariffs can be binary, and the truth is tariffs have trade-offs. They generate revenue, and they can encourage domestic production. They can be deployed as statecraft against adversaries, but they also cause inflation, and since they act as a form of sales tax, they likely hurt lower-income families more than the rich.

When I speak with leaders and business people around the world, the aspect of Trump's second term they worry about the most is tariffs. And much of it is because of the uncertainty around it. Will Trump put in place blanket 20% tariffs? Less? More? Will there be carve-outs for friends? How does that even work? And is all of this just a negotiating tactic, but leading to what? So many questions and so few answers.

Now, many economists have warned against dramatic increases in tariffs. We've had some of those economists on this program. And so I thought it would be useful to hear from an economist who's been making a different case and who is seen as immensely influential with a new generation of Republican senators, such as Josh Hawley and Tom Cotton, and also VP-elect J.D. Vance and Marco Rubio, the next Secretary of State.

Oren Kass is the founder and chief economist of American Compass, a conservative economic think tank. He's also the author of The Once and Future Worker, A Vision for the Renewal of Work in America. As always, our email is live at foreignpolicy.com. Let's dive in. Oren Kass, welcome to FPLive. Well, thank you so much for having me.

So just to get one thing out of the way, you are an economist, you are also a conservative, but you do not speak for Trump. Is that right? That's exactly right. Help to run a think tank and we advise anyone anywhere on the political spectrum who cares to listen to what we think.

And then I should also add your work is followed by a lot of people very influential in Trump's orbit. You also wrote a chapter of Project 2025, which as we know, Trump first disavowed, but now it seems to be back in favor. Is that right?

Well, I was a contributor to one of the chapters. So among the hundreds who were, in this case, working on the labor chapter and some of those ideas. Yeah, great. So just wanted to clarify all of that. So as you know, I want to have a broader conversation about the American economy, but I'd like to begin with tariffs.

So technically, a tariff is a form of a sales tax, and U.S. tariffs have fallen pretty consistently from the 1940s all the way, I think, to about 2016 when Trump was elected for the first time. Explain to us, Oren, what the reversal of this trend is solving for.

Well, I think the problem that we've seen over that full period, but really over the last 25 years or so since sort of full on globalization, China's entry into the WTO is that free trade has not worked at all the way that most economists predicted, especially if you go back around to the period around the year 2000.

They made a great deal of noise about how this was a unanimous view of all economists that free trade with China would be a wonderful benefit for the United States, for workers, and for the strength of the economy. And we obviously lowered tariffs, lowered barriers on that basis. And the result has not been those things that were promised. It has been in many cases the reverse. Certainly, we do have more cheap stuff in the United States.

But I think the vast majority of Americans would rightly say it has not on net been beneficial. And so we have this conflict now where a lot of economists are still using those exact same models. And unsurprisingly, there are models that said that this would be a wonderful benefit, say that going in the other direction would have costs that exceed the benefits.

Once you realize and admit that those models were wrong, they got the tradeoff backward, you can't continue to use those models to argue against going the other way. You have to recognize that if we made the wrong choice and made the wrong tradeoff, then going the other way on that is going to benefit the people we need to be focused on who are those who have been left behind.

And so, Oren, if I may, tariffs and policies and the needs of people evolve over time, right? So it could be that the way the United States championed free trade in the 60s and 70s and 80s worked then.

And then, you know, over time they began to work less. But where I want to go with one aspect of this is let's say, you know, we can agree that many of the market forces of the last 40 years, so globalization, urbanization, the impact of technology, free trade, all of that stuff, it had some positive impacts and we now know that it has had some negative impacts.

But if tariffs are in effect a sales tax, don't they make goods more expensive for the very consumer who has been most impacted by all of these market forces? Well, first of all, I should say I disagree with your inclusion of technology in that list. I don't think it's right to point the finger at technology. I

I think frankly that's exactly what economists do to avoid acknowledging the role that economic policy has played in these challenges. If anything, our problem on the technology front is we're not seeing enough innovation. Productivity growth is slowing down. In the manufacturing sector, productivity growth has reversed. We are becoming less productive in the United States in manufacturing at this point.

I guess what I meant by technology, Oren, if I may, is the hollowing out of societies, especially in rural parts of not just America, but all countries. You know, if you look at the rise of, say, big tech and what that has done to mom and pop stores, what it has done to community, that's the aspect of it I was sort of bucketing in with urbanization and globalization. Sure. No, that's fair enough. And obviously technological change is occurring over time.

broad periods of time, including those that have worked out best for working families. The sales tax point I think it's also important to note is a sort of point of political rhetoric, not a useful economic analysis. And I think the best contrast here is a carbon tax. You'll have to tell me if you've ever heard an economist say, well, technically a carbon tax is a sales tax.

I'm pretty sure no one has ever said that because they're trying to sell a carbon tax. And so I don't disagree with your point that there will be an effect on prices. And we can certainly talk more about that. I think it's just really important to recognize that as a matter of economic analysis, when we recognize things in the market that market prices are not taking into account,

and whether that is pollution of various forms or in this instance I would argue the value of making things, the fact that domestic industrial capacity has enormous implications for a labor market, for an economy, for national security, none of which market prices are going to consider. If we say actually we need to essentially insert a wedge into that price that is going to reflect those costs or those benefits,

Yes, there will potentially be an effect on prices, but we don't just call that a sales tax and say that it's going to be inflationary, except if we, for ideological reasons, don't like tariffs. And then off we go down that rhetorical path. So I do think precision in the language is actually really important. And I think the way that we have to understand tariffs is as a recognition that making things does matter.

And that's something that economists have resisted acknowledging for a very long time. Some still won't admit. A lot at this point are starting to admit it because it is such an unsustainable position to argue the reverse.

But if making things matters, if domestic production matters, then in fact the market price in which we just buy cheap subsidized stuff from China is not the efficient price. It's not the one that's actually going to maximize welfare, growth, any of the things economists talk about in the long run. Right.

To look at a more global macro part of this, Oren, one big part of the fear around tariffs has to do with the uncertainty of it. So Trump's surrogates often say that the way he talks about it on the campaign trail is a negotiating tactic. And so there's a wide range from the current rates to anywhere up to 20% or higher.

And doesn't that in effect globally end up hurting smaller exporting countries, especially ones that don't have the means to effectively lobby for better rates? And then doesn't it make it more likely that many countries around the world are going to accelerate moves to build trade relationships that basically bypass the United States as much as possible? And in other words, what I'm getting at here is

Couldn't a sort of excessive US tax regime accelerate essentially a post-American world? Well, I think on the first point about uncertainty, again, let's turn it around for a minute and ask, have you ever heard anyone raise that concern about an administration coming in and saying they wanted to open up a bunch of new trade deals?

It's somewhat a rhetorical question. Of course, no one would ever say, whoa, listen to this ambitious free trade agenda. That's going to create a lot of uncertainty. But if what you're concerned about is the ability of smaller countries to get good deals and all the things you listed, then, of course, all of the negotiations over the 5,000-page agreement to lower barriers, particularly for more influential countries, would have the exact same effect.

And of course, nobody says that because the corporate world likes big free trade deals that they get to write the 5,000 pages of. So I frankly have a hard time. I'm happy to hear more about what you meant by that, but I have a hard time taking that seriously as something we worry about only if the tariffs are going up, but pretend we can ignore if the tariffs are coming down. Well, so...

Part of this is that freer trade has generally tended to be sort of a rising tide that lifts all boats, right? I don't agree with that. How are you defining the rising tide and which boats are lifting? Well, I meant more globally. So, you know, if you look around the world, you look at countries that along, you know, with the United States and China and other countries over the last 40 or 50 years have benefited from more trade and more globalization.

And part of, I think, the uncertainty that I'm referring to here is this notion that if tariffs are used as a negotiating tactic to get better deals for the United States, that some countries will be able to strike deals or carve outs for themselves. Many won't. And in that scenario, the countries that aren't able to will suffer.

That's very possible. That's not for US policymakers a primary concern. I think other things equal, we would like to support certainly allies around the world. But I think one of the big mistakes of the past few decades is frankly a quite globally oriented set of policymakers in the United States who actually put those interests above American interests.

And so part of what you're seeing is simply a return to the way policy should be made, which is putting American interests first. I also want to address the second piece of your question, which spoke to sort of, you know, if the US is going to be raising barriers or creating uncertainty, you know, maybe we will move to a post US order and countries will, I guess, presumably move more into China's orbit would be the implication.

Yet, we want to talk about a country that does not respect or consider the interests of

of other countries that does not open its market, that does not pursue free trade. China, of course, is and will always be in the foreseeable future a far worse offender on all of those grounds than the United States is. And so I think what we actually see happening in the world today is that this sort of very idealistic international world order model in which the U.S. has to sort of

unilaterally disarm for the benefit of everybody else, it leads to the United States being taken advantage of a lot. It's not clear how that actually affects positively or negatively other countries' behavior. And so, again, I think we'd have to say, like,

Why on earth would countries sort of turn to China in a world where China is already and will continue to behave worse on all of these fronts than the United States might? So I'm definitely not going to defend China here. I agree with much of what you said there. But let me find a slightly different way of making the point I made. And that would be this.

The world order as it exists is in many senses created, deployed by the United States, backstopped by it. The post Bretton Woods order, the World Bank, the IMF, even the World Trade Organization. And I guess the question then is the more that the United States deploys tariffs as statecraft,

the more it creates this sense that the United States has one set of rules for itself and a different set of rules for everyone else. And then it accelerates this feeling that, you know, basically the United States built a global order based on free trade when it benefited from it.

And then when it went against it and when it wanted to stop others from benefiting from it, it began to pull back. And you may say that it is now putting American interests first, which could well be true. But for other countries, that then becomes a signal that the international order as built and put forward by the United States is shifting. I certainly think the world is shifting significantly.

I would just reject this sort of vaguely idealistic view that what's guiding relationships between nations is some perception of who is benevolently holding up some abstract ideal.

And again, I would just refer you to China's behavior in the international system, which, as you've said, you're certainly not here to defend, which obviously has been undermining much of what the U.S. tried to build, which is the proximate cause of the failure of the global trading system.

And yet, as far as I can tell, a lot of these countries who you're trying to sort of move toward the center of the discussion are behaving more favorably toward China and cozying up to it more closely as a result.

So I certainly agree that the world order has changed and is changing, but I would wholesale reject the idea that the United States is the one changing it. I think the United States has turned the other cheek on

in a changed world for far too long. And what you see in, I think, one of President Trump's most important correctives, whether it's in the way NATO behaves and who's actually going to pay for global security or in the way the WTO operates and who is and is not going to play by the rules of global trade, that the United States is not going to just sacrifice its own interests for the benefit of everybody else.

especially in a world where now we have such serious domestic problems. And I think, you know, just offer what I think is perhaps the most fascinating data point that in one sense is a very narrow one, but speaks to something very deep is if you look at death rates from drug abuse in the United States today, obviously there's a lot talked about the opioid crisis, but the numbers are very abstract.

And I think it's very important to actually compare it to something concrete. And the thing to compare it to is the rate of alcohol abuse deaths in Russia after the collapse of the Soviet Union. I mean, that is sort of a state failure seared in, I think, the collective consciousness of the post-Cold War world. The death rate in the U.S. from drug abuse is now as high as it was in Russia from alcohol abuse in the decade after the end of the Cold War.

And so the idea that the United States is going to be more focused on sort of the feelings of some other countries about global ideals

When we have left our own problems untended to that extent is just, first of all, I think it's substantively immoral. And as a political matter, it's just not practical. The American people have made clear they're not going to make that tradeoff anymore. And I don't think anybody should expect them to. Hmm.

And, you know, beyond the right or wrong, as you point out, this seems to be a shift that the American people seem to want and a shift that the next government certainly does seem to want. I promised to take some subscriber questions, and one of them is relevant to what we're describing right now. This one's from Stuart Kaplan, and he asks if there are examples in the last century where protectionism through tariffs has benefited nations imposing those tariffs.

Well, it was in fact the US policy up until World War II more or less to have quite high tariffs. I mean, the United States built its own economy behind some of the highest tariff barriers in the world. That was typically the American tradition. For that matter, those countries that have developed most effectively in the post-World War II period, particularly in East Asia,

did so behind very high trade barriers. Of course, China itself has relied heavily on tariffs. The entire success of the Chinese electric vehicle industry, to take one obvious example, is in no small part due to the fact that Tesla moved its largest manufacturing to China in direct response to Chinese trade barriers.

And so this idea that lowering tariffs and free trade has been the path to successful domestic industry, I think the question would be more the converse. Where on earth is the example of the free trade model actually working well for the health of a domestic industrial base?

And even if you look at the United States in particular, I think one especially salient example that I find instructive is to look at what Ronald Reagan did in the early 1980s.

You know, it's funny, we think of Ronald Reagan as the father of free trade, free market, conservative economics. When Ronald Reagan left office, the Libertarian Cato Institute called him the most protectionist president since Herbert Hoover. And I think they were right. Reagan was not a free trader. Reagan, as an ideal, aspired to a world of high levels of trade and free markets and

but he was also a realist and particularly looking at Japan's conduct, he had no patience for it. And the best example of this is what was going on with the Japanese auto industry. You had Japanese autos flooding into the United States, posing an existential threat to the big three automakers in Detroit when Reagan took office.

And what the US did, actually mostly with the threat of tariffs and quotas, was prompt the Japanese to impose their own quota, lest they be hit with those sorts of tariffs. And they just capped Japanese vehicles coming into the US. Now, what happened as a result? The birth of the entire Japanese auto industry in the United States.

Assembly plants moved over immediately, entire supply chains moved shortly thereafter. At this point, we have a lot of research and development. And so you saw tens of billions of dollars in capital investment. You saw hundreds of thousands of jobs created. And by the way, you didn't even need the quotas for very long because once you had those investments made in the US, you could produce perfectly cost and quality competitive vehicles in the US.

And so that entire evolution of the U.S. auto industry in the American South was a direct function of those types of trade barriers because at the end of the day, it actually matters whether you make things in this country. Mm-hmm.

And, you know, to your point about Reagan, people also think of him as someone who only cut taxes when that too isn't true. One last question about tariffs, and then I'll move on to a few other topics. And again, I ask this question knowing that you don't speak for Trump, but that you understand the thinking of a lot of people in his orbit. What market signals, pushback, essentially, will Trump and his team keep an eye on as he rolls out tariffs? Because again, there's a wide variance of

how much and how deep these tariffs could go. So if there's a negative reaction in the stock market, for example, or the bond market, do you think that is a signal that the Trump team will look out for? And what signals should he keep an eye on?

Well, I can't speak for what signals they will look for. To the question of what they should look for, I would not look at market signals at all. Frankly, I would expect the share prices of multinational corporations to react poorly to a reality in which you can't just generate massive profits through labor arbitrage and moving your production to wherever workers are most easily exploited.

The point of the economy is not high share prices for multinational corporations. It's unfortunate that that's a point that has to be clarified from time to time, but the point of our economy is to provide high quality of life for American citizens. And yes, that means high levels of material living standards, but as importantly, it means access to good productive jobs that allow you to support a family.

It means a robust industrial base that is going to be resilient. It means one that can provide for national security. It means one that's actually going to be a basis for healthy growth over time. But Oren, I have to say, I agree with everything you just said about what defines a good economy and the fact that the stock market does not define the health of an economy. But there's an irony here because your work is often cited as sort of,

part of the intellectual underpinning of Trumpism and the thinking of a lot of people who are influential in his orbit. And yet we do know that Trump sees the stock market as a key indicator of health and also as a marker for whether things are working well or not. And a lot of what you're describing is longer term, but some of Trump's thinking tends to be shorter term.

No, there's no question about that. And I think we're seeing those tensions even as they work through cabinet appointments right now. So I can speak to what good policy would be. The direction I certainly think you see conservative thinking moving already has moved and is moving going forward. What President Trump chooses to do in his first year would be a question for him.

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Okay, I'm going to move away from tariffs now, as I promised. When I read your work and I listen to things that you say, there's a significant part of it that is pro-worker. And it almost feels as if there's an alignment here with the left, with someone even like Bernie Sanders. Is that fair?

Well, I certainly think there's an alignment to some degree on diagnosis. And I think that's important, that you can have very different ideological points of view on the role of government, on even how you define the common good and quality of life and human flourishing. But ideally, there could be a lot of agreement on the basic data and facts of what has been happening.

And I think we've seen a real effort to ignore that.

to a significant extent on both sides of the aisle among those who are so committed to this sort of global world order model of development and have bet their careers on it. But I think, frankly, it has especially been a problem on the right of center where there tends to be an impulse to avoid acknowledging issues, just keep arguing that everything coming out of the market is great and

Because if you admit that that's not the case, then you have to start engaging in policy conversations that you might rather avoid. And so I definitely think there's a significant amount of progress that you've seen among a lot of the conservatives you've mentioned, folks like Rubio, Vance, Hawley,

And certainly in the work that we do to say, you know, let's have a very clear-eyed view of what has been happening in our economy. And if Bernie Sanders says some of those things too, that can't be a strike against reality. Right.

And as you're speaking again, it occurs to me that, you know, the diagnosis of what's not working is also a diagnosis that the Biden administration seemed to share when they talked about a foreign policy for the middle class or when someone like Heather Boucher, who's been on this program as well, talks about growing the economy from the bottom up and the middle out. I'm curious when you hear all of those things and you see Bidenomics in action, what's

What was your sense of whether Bidenomics worked or not? Well, I think, again, as you said, there are definitely points of agreement on the rhetoric where and certainly you can find George W. Bush saying many a lot of the same things rhetorically. Where the rubber meets the road is on policy priorities and tradeoffs.

And I think, unfortunately, in the Biden administration, some very well-meaning ideas met with the reality of what drives politics within the Democratic Party. And so if you look at what I would say were actually the major priorities that they focused on, the fights they were willing to pick,

They were things like refusing to enforce immigration law, focusing investment overwhelmingly on climate policy, forgiving student loans and propping up higher education rather than providing alternative pathways to good jobs. And so I think there's absolutely a world in which a Biden administration saying those things could have paired it with good policy. Unfortunately, for the most part, they didn't.

And the exception that is something that my organization worked on extensively and that ultimately was bipartisan was the Chips and Science Act, was the idea of doing industrial policy focused on rebuilding domestic semiconductor capacity. And that's a policy I would say absolutely was a very important one. As I said, it actually started out as a Republican proposal a few years earlier.

It's something I certainly hope the Trump administration will carry forward. And, you know, Speaker Johnson has said it's certainly his intention to even strengthen it if possible. But those are the sorts of areas where I see overlap and there has been bipartisanship. And I hope we'll see a lot more work done.

Orin, when you see economic policy covered in as much as it is covered in American media, what do you think it's getting wrong about how American voters think about these issues? I think it has a basic problem of sort of, you know, the drunk looking for his keys under the lamppost because that's where the light is. And we have a set of economic figures that we use that everyone thinks they know what they mean. And so that's what we talk about.

You know, GDP is perhaps the most obvious example of this. What was GDP growth last quarter? And look, I think growth is good, right? I don't think we should go live in log cabins. But it's very important to understand that what total aggregate GDP growth you get tells you very little about what is happening to the typical family.

And that's both from a production perspective, what quality of jobs do they have access to, and from a consumption perspective, what are they actually able to afford and enjoy? And so I think one area where we need to do much better is in de-aggregating things. And obviously, look, I understand if you're a reporter...

Being told you can't just use the one number, it's a lot more complicated than that is frustrating. But I think that focus on just the top line GDP type figures over, you know, just one very obvious example, we need to be using median numbers, not averages. What is happening to the people in the middle of the distribution is a much better piece of information than what is happening to averages that can be wildly skewed by what's happening at the top.

So that's one major area. A second one that I would really focus on is just what we mean by investment. And we talked a little bit about just the question of what do stock prices really tell us. But I think there's actually a deeper problem here, which is that we think at this point of somebody buying stock in something or a private equity firm buying a company, we call that investment.

But no actual investment is occurring, right? What's occurring is an asset exchange on a secondary market. One person had a pile of money, another person had a pile of equity, and we exchanged them. In fact, if I go out and buy a share of Boeing stock, nothing happens to Boeing. Boeing is for the most part indifferent to that.

And so we've built this massive financial sector that keeps getting bigger and bigger and yet actual real investment, actual capital being deployed in the economy keeps going down as relative to the size of the economy. And more and more of what happens is speculation and financial engineering and essentially converting operating businesses into financial assets and trying to figure out how to get cash out of them.

And so I would love, you know, I somewhat tongue in cheek just use the terms actual investment and fake investment. I would love if we could make clear that somebody who actually takes capital and uses it to build something is investing.

somebody uses capital to buy a company and then extract a special dividend for the investment partners. That's not real investment. That's fake investment. And actually, it's disinvestment. It's actually making our economy weaker. It's making opportunities for workers worse. So throughout this conversation, I've mentioned a few times that you do not speak for Trump, but you're often cited as someone who,

who can speak for some of the thinking that animates him. But let me ask you this. What are elements of the Trump economic agenda that worry you?

It's a great question. And, you know, I appreciate that you've sort of clarified my place in all of this because the, and obviously it's not just me, the, you know, the work that American Compass does is focused on building the foundations for the future of conservatism and hopefully for the future of American politics and policy generally.

And I think Trump has been an incredibly important figure in that story. He was obviously an incredible disruptor of a totally outdated and expired orthodoxy on the right of center. So he created an enormous amount of space for new thinking.

I also think he highlighted very important problems, both simply by virtue of his success. I think it forced a lot of people to realize maybe their measures of how things were going were not the right ones. And some of the particular problems he focused on, especially if you go back to 2016, looking at the way that he really did focus on workers, not just sort of

consumption, the way he focused on left behind places instead of the idea that everyone can just move to somewhere better. Those kinds of ideas as a starting point were incredibly important. And I think they've led to focus on some of these areas that we've been talking about, things like trade policy, where I think he has already brought about significant change for the better.

There are also areas where I would say that his thinking isn't necessarily aligned, certainly with my own, doesn't necessarily provide the likely basis for where you even see someone like a J.D. Vance or a Marco Rubio focusing their attention where I think they are likely to bring things in the next generation. And one area that we've touched on a little bit from this sort of pro-worker perspective

is just a recognition that it really is the interests of workers that dictate the success of the economy and the prosperity of the nation in the long run.

And so, you know, I would agree with, as you've said, I think probably in this administration, there is still more focus than necessary on how is Wall Street doing as an indicator of success. And I think it would be really important, and I think we're seeing this going forward, that focus continue to shift toward how are workers doing?

and recognizing that the healthy economy, that capitalism working well isn't a capitalism where employers just sort of have free reign and somehow by virtue of maximizing their profits

everyone does best. Capitalism works when you actually have employers and workers on a level playing field where workers actually have power too. And so employers actually face a situation where if they want to be successful, if they want to earn a profit, they have to do it in a way that works for workers too. And I think we're definitely moving that direction, but there's still a long way to go.

I think your point that Trump is a massive disruptor who will allow other people to

create space for other ideas is certainly one that I think will be an enduring idea for the next few years. But let's talk about some of those people briefly because again in this climate of uncertainty essentially there's also uncertainty about how much room and power some of the people in his orbit actually have. And you've worked with some of those people. So you've worked with JD Vance,

You've worked very closely with Senator Marco Rubio, who will be Secretary of State. So on one of those, for example, how would a Rubio think about a foreign policy for the middle class, for example?

Well, I don't want to speak to what he might be focused on going forward. I do think it's very clear in the work that he's been doing. He's been an extraordinary leader on these kinds of issues and on the China issue in particular for years now in the Senate. And I think he has probably seen more clearly than anybody the way that China's policy has

was not only sort of not compatible with a global free trading system, but had in fact ruined it. His team put out a wonderful report, I think it must have been in 2018 or 2019, that was the first real focus on China's Made in 2025 program, its industrial policy generally,

His team did a follow-up report on it last year. And so, you know, I think that Rubio very rightly recognizes that there's just a fundamental incompatibility between the U.S. and the Chinese systems. And obviously that doesn't mean that, you know, we have to fight a war over it. Avoiding a war should be a top priority at any reasonable cost.

But it does mean that the direction we have been marching toward integration

All of that was premised on an idea that if we did integrate, China would liberalize, right? That's the very interesting thing. If you go back to 2000, the core of the case, look, they were saying this will be great for American families and workers. But if you read carefully, what they were really saying was this is the way to liberalize China and open its markets and move it toward democracy. And it's a very interesting thought experiment to ask, what if you could have told those people they were wrong?

If you do this, the China of 2025 is going to be more authoritarian than it is today in 2000. It is not going to have moved toward liberalization or free markets. In fact, it is going to be a state-controlled economy using that state control to build up its economy and try to undermine the US economy. If you knew those things,

Would you still advocate free trade and welcoming China into the WTO? Or would you say that's an absolutely ludicrous idea? Why on earth would you do that? I actually believe people would have said that's a ludicrous idea. You can't do that because it's never been done in human history. You know, there was the question earlier, when have tariffs ever worked? Of course, tariffs have been the norm since

Across human history, across trade, what we have never had is an attempt to actually believe you could economically integrate two sort of massive global power economies that have fundamentally different economic and political systems. Obviously, we didn't do that with the USSR. There was virtually no economic exchange at all with the USSR.

And so I think Rubio is somebody who really understands this and has studied it and certainly seeks peace, but also seeks a plausible settlement that recognizes that you can't have integration between these systems. You know, with everything you're saying, I guess one question I will keep having is, you know, all change comes

comes with some good and some bad. It's very hard to think about counterfactuals on that. But when you're looking at an evolution or a shift in a course, a course correction, then the challenge becomes how do you not throw the baby out with the bathwater? And that brings me to one other area we haven't talked about yet that people are worried about in a second Trump term, and that is what to do about

illegal immigrants in the United States. There are many, many millions of undocumented workers in this country

And there are lots of economic studies now that show that a mass deportation, A, could cost a lot, B, could have ripple effects on the economy that could hurt the US economy, and then also could hurt other economies that end up receiving anyone who is deported. What is your sense of how you feel about the spectrum of options available to Trump?

Well, the first thing I think we have to say is that we do have to enforce the law, that this idea that sort of the rule of law is subject to our economic studies is absurd and unbecoming of a great nation and especially a democratic republic.

So when you tell me there are millions of undocumented workers in this country, that means there are millions of people who are actively violating the law, for the most part employed by people who are themselves violating the law. And so that's just not acceptable. There is no other area where we say,

oh, well, you know, gosh, let's do an economic study on whether actually enforcing our laws would have this or that effect on GDP, because it's understood that actually being a nation of laws is the foundation upon which you can build an economy or a coherent political system at all. So I do think it's really important to frame the conversation in those terms, that we do have to enforce the law.

If you would like to change the law, by all means, lobby for a change to the law, vote for a change to the law. But don't try to make a case that we simply shouldn't enforce the law. And I'm not going to make that case either. I don't think that if we are running afoul of the law, we should enforce the law.

But having run afoul of it for decades now, how quickly do you reverse? And that pace of change has immense impacts, economic impacts that you cannot not consider. No, I think that's absolutely right. And so exactly this question of how do you do this effectively is a very important one.

And I will address that directly. I want to make one other point just about how we frame it, which is it is very funny to me that when we start thinking about actually enforcing the law and removing illegal immigrants from the country, that economists also start to notice the negative economic effects this would have on the countries they return to.

Because, of course, when those immigrants are flooding into the United States, we're supposed to pretend there are no negative economic effects. In fact, we're supposed to pretend it's positive for our economy. And we hear all of these wonderful theories about how there'll be consumers as well as workers and they'll be complementary and on and on, which, of course, is not true.

And when economists themselves analyze the exact same question without this political ideology blinding them, they notice the truth, which is large influxes of migrants, particularly at the low end of a labor market, is not good for the people in the low end of the labor market.

So, again, along with recognizing that we need to enforce the law, I think it's very important to recognize that the long-run economic implications of all of this is that having low-wage migrants flooding a labor market is not good for the low-wage workers in the United States.

who, again, are the ones, as with trade, who have been left behind and harmed by these economic policies. Now, in terms of what you do, I think you're exactly right. You start from the point you're at, not your ideal point where things had been done better all along.

And so I think it's important to both balance, well, let me put it this way. I think it is important to balance the need to make rapid progress on the issue and in fact enforce the law with doing so in a way that is as beneficial to the American people as possible. There's no point in cutting off our nose to spite our face. I think VP-elect Vance has been very sharp on this point. He's been asked it many times and what he's underscored is there's an obvious sequence here.

You have enormous numbers of illegal immigrants with criminal records who are deportable, who the Democratic Party has nevertheless argued should not be deported, who might be in sanctuary cities run by Democratic mayors who say, we don't want to deport these people. And so that is an initial quite large swath. I believe there are more than a million illegal immigrants under active deportation orders, which is a place that you would start.

Um, and, and so that is essentially step one. I think step two behind that is you have a lot of people who have entered very recently in, in this most waste, you know, the, the wave of lawlessness that, that the Biden Harris administration encouraged. That was an unprecedented influx. Many of whom are here illegally. Many of whom are, are under what, what Harris would say are technically they're legal because they, they were admitted under the abuse of, of this or that temporary status. Um,

And they also need to leave. And those are folks who have not been here long, have not put down roots. The American economy is not relying on them. And that is a second step.

And I think then you say, all right, if you've taken those first two steps and in the process of taking those first two steps, you also need to start doing much better employer level enforcement. Because as I said, the law violation here is not only by the illegal immigrant, it's by the employer as well. And so I think if we also in parallel start to actually step up workplace enforcement, especially with E-Verify,

If we make E-Verify mandatory and we start then essentially to create a situation where migrants cannot get jobs that they are not legally authorized to have, that people stop moving back and forth

frequently across the border, that's then an entire next tranche that you can address. And so I think it is not a snap your fingers and this transforms the American economy. This is over the course of a few years, you make substantial progress on the issue. You also, as a result, signal that this is now American policy, which I think rapidly slows the inflow.

And I think you move through a transition that over a number of years gets our economy and ultimately our nation to a much healthier place. I will say there's a delta between everything you're saying in such a nuanced way and what we often hear on the campaign trail. I guess that is obvious. But all of us are waiting and watching to see what actually happens in 2025. Oren Kass, thank you for joining us. We've all learned a lot. Oh, this was great. Thank you for having me.

And that was Oren Kass, founder and chief economist of the conservative economics think tank, American Compass. Next week, we're going to do something quite different, a more philosophical look at climate policy and whether democracy itself is a viable system to accommodate the change we need. You won't want to miss it.

If you liked what you heard today, and I hope you did, try out an FP subscription for a lot more of this stuff. Go to foreignpolicy.com slash subscribe and use the code FPLive for a discount. That's FPLive, one word. FPLive the podcast is produced by Rosie Julin, and the executive producer of the show is Dana Schoen. I'm Ravi Agrawal. I'll see you next time.

Thank you.

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