In Trump's America, There Are No Rules, Only Access

New York Times

20-04-2025

One of the most dramatic policy reversals in U.S. economic history happened this month. In the span of just a few days, President Trump announced sweeping tariff increases, panicking global markets, and then partially backed down — all without meaningful consultation with Congress or much evidence his administration used a rational process to arrive at the numbers.
Economists, who don't often agree on much, greeted the plan with near unanimous criticism and a fair degree of derision. Few if any political analysts could articulate a coherent rationale for why threatening to launch a trade war on most nations on earth would make strategic sense.
Yet in a way it does, because the real story may not be about trade. Looked at in a different way, it's about power.
In principle, it is not up to the president to decide unilaterally whether to impose tariffs, or on which countries to impose them. The Commerce Clause of the U.S. Constitution clearly vests this authority in Congress. However, Mr. Trump made use of his powers to restrict trade under the International Emergency Economic Powers Act, which allows the president to regulate trade during economic emergencies. The president effectively declared that the executive branch could bypass Congress's constitutional authority.
Financial markets seemed to grasp this. Unlike past global crises, this episode did not send investors fleeing into the dollar's safety. Quite the opposite: The dollar dropped sharply when the tariffs were announced and continued to fall even after the administration reversed course. This suggests that investors are anxious about much more than just the economic damage from protectionist policies. They're worried about the United States no longer being a safe place to hold their assets. They have good reason to be concerned.
To those familiar with policymaking in countries where authoritarianism is emerging, the seemingly irrational exercise in wealth destruction rings all too familiar.
Starting in 2003, President Hugo Chávez of Venezuela imposed draconian price and exchange controls that severely hampered productivity and ultimately led to rising scarcity of goods and the evaporation of a massive oil boom — yet gave him the power to control the private sector's access to government-subsidized foreign exchange. Zimbabwe's Robert Mugabe instituted large-scale expropriation of white-owned farmland in 2000, devastating agricultural productivity in a country once known as Africa's breadbasket, but allowing him to reward political allies by giving them the land.
Argentina's central bank nationalized all bank deposits in 1946, fueling double-digit inflation and a run on the currency but giving President Juan Perón the power to decide who received loans. In 2018, Turkey's President Recep Tayyip Erdogan gave himself the power to fire central bank governors, which he later used to push down interest rates ahead of elections, boosting near-term growth while undermining longer-term macroeconomic stability.
In my research, I have studied precisely this type of decision-making in developing countries. While economists are often puzzled by the apparent lack of economic logic behind such measures, the reality is that almost invariably, the politicians imposing them know perfectly well what they are doing. They don't misunderstand the economy — rather, they understand all too well how to exploit it for political gain.
Let's allow that some people inside the White House are true believers in tariffs. They argue that tariffs will bring back manufacturing jobs, put money in America's coffers, restore fairness in trade and spur investment.
But looking for logic behind the Trump administration's tariff calculations is missing the point: Only by imposing apparently arbitrary decisions can a government intent on carrying out a power grab effectively signal that it can do whatever it wants.
Mr. Trump's use of executive authority under stretched legal interpretations is not restricted to the trade sphere. He invoked the 1798 Alien Enemies Act to deport hundreds of Venezuelans to El Salvador without due process, using the false pretext that the United States was being invaded by Venezuelan criminal gangs. His administration has issued executive orders punishing prominent law firms — effectively retaliating for their previous legal challenges to Mr. Trump or his policies.
When viewed through the prism of authoritarian consolidation of power, the government's actions begin to appear coherent and consistent. Elon Musk's Department of Government Efficiency has not come close to its goal of drastically reducing government expenditures — and may in fact end up increasing the deficit — but it has delivered an unequivocal message to America's civil servants: They serve at the discretion of the chief executive. Nearly every major decision taken by the president in the three months since his inauguration shares a common denominator, which is the assertion of executive power at the expense of the legislative and judicial branches and the professional civil service.
It is hard to overstate the corrosive effects of this pattern of decision-making on economic incentives. Corporate leaders today may not know how to respond to the uncertainty created by the apparent unpredictability of the president's decisions. Over time, they will be replaced by others who will learn how to play the influence game. Mr. Trump made the new dynamic transparently explicit when he declared that tariff exemptions would now be decided 'instinctively.' The message to the private sector was clear. There are no rules — there is only access.
Half a century ago, the American economist Anne Krueger brilliantly described these dynamics as the political economy of a rent-seeking society — one in which the efforts of entrepreneurs are aimed not at understanding how to satisfy the needs of consumers to improve productivity, but rather at currying favor with the politicians who ultimately determine the winners of the economic contest.
Falling into a rent-seeking dynamic makes countries poorer, but it also gives politicians the ability to exploit the economy for political gain in ways that may seem unthinkable in modern democratic societies. That is why the discretionary and often seemingly arbitrary use of power to determine economic fortunes lies at the heart of nearly every episode of democratic backsliding.
Raising tariffs on the world economy will not make America stronger. It will strengthen the group that currently holds political power, and it will undermine America's democratic institutions. That is the true cost of reckless economic power.