Tariffs as a Tool for Stability: Rebalancing Trade Without Breaking the Global Order
By Victoria Chen-Hartwell | Circus of Power | March 22, 2026
In an era of geopolitical storms—from the escalating U.S.-Iran conflict to domestic shutdown brinkmanship—the release of the United States Trade Representative's (USTR) 2026 agenda arrives like a quiet anchor amid the chaos. At stake is nothing less than the resilience of the global economy, the health of American markets, and the fraying threads of the rules-based international order. With the U.S. trade deficit hovering at an estimated $900 billion for 2025, driven by imbalances with major partners like China and the European Union, the agenda's emphasis on bilateral deals, targeted duties, and deficit reduction offers a pragmatic path forward. Yet, as a former State Department official who has negotiated through cycles of protectionism and openness, I caution that wielding tariffs as a blunt instrument risks accelerating the very fragmentation we seek to avoid. The challenge is to harness trade policy for incremental reform, bolstering institutions and high-skilled immigration flows that underpin long-term prosperity, without succumbing to the populist temptations that have historically backfired.
The USTR's blueprint, unveiled this week, prioritizes bilateral negotiations to slash foreign tariffs on American exports, a welcome nod to reciprocity in a world where non-tariff barriers—from regulatory hurdles to subsidies—have proliferated. It also proposes temporary import duties on goods linked to "fundamental payment problems," a euphemism for addressing currency manipulations and unfair trade practices that exacerbate deficits. Ongoing talks with China and the EU underscore the administration's intent to continue these dialogues, even as Beijing reports a staggering $1.2 trillion trade surplus and vows to "continue opening its economy." No sweeping new tariffs were announced today, but whispers in Washington suggest escalation could follow if the Iran war drags on, disrupting supply chains and inflating import costs through the Strait of Hormuz.
This approach echoes the Trump administration's 2018 playbook, when Section 301 tariffs on Chinese goods aimed to rectify intellectual property theft and forced technology transfers. Those measures, while politically popular, raised U.S. consumer prices by 1-2% according to studies from the Peterson Institute for International Economics, and prompted retaliatory duties that hit American farmers and manufacturers hard. Soybean exports to China plummeted 75% in 2018-2019, necessitating $28 billion in federal bailouts—a reminder that trade wars are neither easy nor won. Historical parallels abound: Think of the Smoot-Hawley Tariff Act of 1930, which deepened the Great Depression by sparking global retaliation and contracting world trade by 66%. In today's volatile context, with oil prices surging 5% amid U.S.-Iran tensions and the partial government shutdown entering its fifth day, ill-timed tariffs could amplify economic pain, delaying shipments and eroding investor confidence.
Yet, dismissing tariffs outright would ignore the real grievances fueling trade imbalances. The U.S. deficit isn't merely a ledger problem; it's a symptom of policy failures at home and abroad. Decades of globalization have benefited consumers with cheaper goods and powered innovation through high-skilled immigration—H-1B visas, for instance, have fueled Silicon Valley's dominance, with over 500,000 backlogged applications underscoring the need for reform. But wage stagnation in manufacturing heartlands, exacerbated by automation and offshoring, has bred resentment that populism exploits. The USTR agenda smartly targets bilateral deals to open markets for U.S. services and agriculture, sectors where America holds comparative advantages. Negotiations with the EU, for example, could build on the 2020 Phase One deal with China by addressing digital trade barriers, potentially unlocking $200 billion in annual exports per a Council on Foreign Relations analysis.
On China, nuance is essential. Beijing's surplus, while massive, reflects not just mercantilism but also U.S. consumption patterns and supply chain efficiencies that have kept inflation low. The USTR's focus on "payment problems"—likely aimed at undervalued currencies and state subsidies—aligns with World Trade Organization rules, avoiding the unilateralism that alienated allies in Trump's first term. China's recent pledge to liberalize further, amid its own economic slowdown, presents an opening for engagement alongside competition. As I've argued in Brookings Institution reports, decoupling from China is neither feasible nor desirable; instead, we need "friendshoring" to trusted partners like Mexico and Vietnam, coupled with domestic investments in semiconductors and clean energy under the CHIPS and Science Act. This balances security concerns—vital given Iran's disruptions—with the globalization that has lifted billions, including through skilled worker inflows critical for antitrust-resistant tech innovation.
The agenda's timing, overshadowed by the Iran escalation and immigration-fueled shutdown, highlights broader risks to democratic norms and institutional integrity. President Trump's threats to "obliterate" Iranian power plants, while Iran rejects ceasefires, have spiked global energy costs—U.S. gas at $4.50 per gallon—and diverted attention from trade's stabilizing role. The shutdown, tied to DHS funding and mass deportation plans, has already caused 15% drops in airport traffic, per KSAT reports, hampering logistics that underpin trade. Border czar Tom Homan's deployment of ICE agents to assist TSA evokes echoes of executive overreach, undermining the rule of law that foreign partners rely on for predictable commerce. In this environment, tariffs could become a scapegoat for war-driven inflation, fragmenting alliances like NATO and the WTO just as we need them most.
Internationally, the stakes are dire. The EU, facing its own energy crunch from reduced Russian gas, has signaled countermeasures to any U.S. duties, per CNBC analysis. This could unravel progress on transatlantic trade, vital for countering China's Belt and Road dominance. Emerging markets, from India to Brazil, watch warily; a fragmented order invites authoritarian inroads, as seen in Iran's alliances with Moscow and Tehran. Climate policy intersects here too: Tariffs on clean tech imports could stall the energy transition, with the International Energy Agency estimating $500 billion in annual U.S. costs by 2030 from inaction. The USTR must integrate these threads, prioritizing deals that facilitate high-skilled visas for green jobs and antitrust measures against Big Tech monopolies that stifle innovation.
Pragmatic solutions abound if we lean on expertise over ideology. First, Congress should ratify bilateral pacts swiftly, perhaps tying them to immigration reform that expands H-1B caps while securing borders humanely—addressing working-class concerns without the shutdown theatrics. Second, the administration could multilateralize efforts through the WTO's dispute settlement revival, enlisting allies to pressure China on subsidies. Third, invest tariff revenues—projected at $80 billion annually from existing measures—into workforce retraining and R&D, echoing the bipartisan Infrastructure Act's successes. These steps acknowledge complexity: Tariffs may reduce deficits short-term, but sustainable balance requires fiscal discipline at home, where entitlement spending drives 70% of the federal budget per Congressional Budget Office data.
Critics on the left decry any protectionism as regressive, while MAGA voices demand more sweeping barriers—both miss the point. Populism, as I've witnessed across administrations, thrives on policy vacuums, not robust governance. The USTR agenda, if executed with restraint, counters this by focusing on economics over cultural battles, fostering the incremental reforms that strong institutions demand. In a world where Iran's defiance and domestic gridlock test our resolve, trade policy isn't just about numbers; it's about reaffirming America's role as a steward of open markets and alliances.
We've navigated such tempests before—from the 1970s oil shocks to the 2008 financial crisis—and emerged stronger through multilateralism and expertise. The path forward demands the same: Engage China and the EU not as adversaries but as necessary partners in a shared order. Only then can we reduce deficits without dismantling the globalization that, properly managed, rewards productivity and innovation for all.
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Victoria Chen-Hartwell is a former State Department official and senior fellow at the Brookings Institution, writing on international order and democratic institutions.
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