Bretton Woods 2.0: How Holistic Tariffs Can Rebuild the Rules of Global Trade
The international trading system is broken. Through years of asymmetric globalization, the U.S. has seen the rise of global rivals and domestic economic stagnation. Over the past 20 years, America has transferred over $20 trillion to abusive trading partners who engage in currency manipulation, illegal subsidization of their industries, and exploitative labor practices. For decades, American workers have borne the brunt of unfair trade agreements. Millions of good-paying jobs have been shipped overseas, decimating communities across the American Heartland and adding to a $1.2 trillion trade deficit that has left the U.S. vulnerable to economic stagnation. As former U.S. Trade Representative Robert Lighthizer put it, “We and our children are poorer and our ‘trading partners’ are richer.”
A fundamental restructuring of the U.S. approach to trade is needed.
On April 2nd, President Donald Trump announced his long-promised “Liberation Day” tariffs—declaring universal 10 percent tariffs on foreign imports and higher, supposedly “half-reciprocal” rates on countries like China, Brazil, and the EU. Trump’s sweeping policy has faced significant blowback, fueled by record stock market crashes and fears of a recession. Consequently, the President announced a 90-day pause on reciprocal tariffs for over 70 nations. This economic upheaval has reinvigorated a fervent debate about the nature of U.S. trade policy, challenging decades of international trading norms and their benefits.
Although many have reservations about President Trump’s economic agenda, tariffs represent a necessary realignment as part of a broader, holistic economic revival strategy that includes investments in infrastructure, education, energy, and tax reform. By taking a bipartisan approach to economic policy, we can use tariffs with targeted exemptions to build an economy that truly works for all Americans and maintain the U.S.’s role as the global economic hegemon.
To understand why this approach is needed, we must confront a painful reality. The current system is broken not because free trade in principle doesn’t work, but because, in reality, free trade doesn’t exist. Global trade’s premise is that nations export in order to import, completing mutually beneficial transactions by exporting what they make best and importing cheaper goods. However, in the decades since the Bretton-Woods conference, which established the postwar international trading order, that system of free trade has been eroded by strategic abuse and regulatory failure. Countries have abused free trade agreements, violated IP rights, dumped goods into foreign markets, and manipulated their currency to artificially inflate trade surpluses, illegally subsidizing their economies at the consumer’s expense.
Take China, which announced a nearly $1 trillion trade surplus in 2024. This surplus led to a substantial net inflow of foreign currency, allowing China to unfairly build up its foreign exchange reserves to finance imports, further manipulate its currency, and increase exports, effectively restructuring the international system. But it's not just China that has engaged in what economists label “chronic-surplus trade.” Countries like Germany and Vietnam have adopted similar policies, shifting resources like subsidies and tax breaks from their consumers to their manufacturing sector to increase exports.
Adding insult to injury, countries run up the score on trade surpluses with the U.S. while shielding their domestic industries through an array of non-tariff barriers to entry, effectively shutting American exports out of their markets. In Canada, our largest trading partner, U.S. dairy producers face one of the world’s most stringent protectionist regimes. Using a system of loopholes and quotas, Canada taxes U.S. dairy imports up to a mind-numbing 270%, blocking wholesale American market access to protect their domestic dairy cartels. India is even more abusive, levying tariffs as high as 150% on alcoholic beverages, 50% on motorcycles, and 40% on agriculture. Like the EU, India’s complex regulatory and licensing structure makes selling American goods enormously difficult.
Yet this pales in comparison to China’s most egregious offenses. Combining high tariffs on U.S. exports and non-tariff barriers like export subsidies, import quotas, and Sanitary and Phytosanitary (SPS) regulations, China has constructed a fortress economy designed to dominate global trade instead of promoting fair competition under World Trade Organization rules. The result? Deficit-running nations like the U.S. and the UK are left vulnerable to currency depreciation and capital outflows, eroding their economic sovereignty.
Both allies and adversaries alike have proven that the current international trading system is neither free nor fair to American interests, underscoring the need for a clear structural reset. While critics argue that tariffs raise consumer prices and disrupt global supply chains, such assertions isolate tariffs from the broader economic context. When paired with energy policy and targeted tax incentives, tariffs can shift the balance of trade without triggering runaway inflation. These policies can, in fact, facilitate America’s transition to a manufacturing-oriented economy.
For starters, companies like Apple and TSMC have committed over $3 trillion in American investment to reshore their production capacity before the tariffs take place. Building on the bipartisan CHIPS and Science Act, which invested $50 billion in American chip manufacturing, TSMC has launched a 2-year plan to build cutting-edge semiconductor plants in Arizona and Texas, reviving regional economic hubs vital to our national security. After receiving a month-long tariff exemption, companies like Hyundai, Ford, Stellantis, and GM have committed billions to building new U.S. car plants, creating thousands of jobs in the process. Furthermore, Apple is already establishing several research and development centers across the U.S. after being granted targeted exemptions for smartphones and computers. These high-capital, forward-looking investments signal confidence and direction to markets, creating a buffer against short-term stock market volatility and demonstrating how the tariffs use policy certainty to drive effective capital formation and industrial renewal.
Moreover, the diplomatic component of tariffs helps them function as powerful foreign policy leverage because America remains the world’s premium export market. Consequently, reciprocal tariffs will penalize those who exploit the system while rewarding nations willing to negotiate. The EU, Vietnam, and Israel have already signaled interest in “zero-for-zero” agreements, taking a step towards truly free and fair trade. Targeted exemptions for electronics, automobiles, and agriculture will also cushion consumer impacts, protecting sensitive sectors and reinforcing the tariffs’ strategic purpose.
The tariff policy will only work if domestic firms have the resources to achieve competitive economies of scale, producing goods in larger volumes at lower average costs. Enter: the Bipartisan Infrastructure Bill. Passed in 2021, its $1.2 trillion investment addressed decades of decaying roads, bridges, ports, and broadband, offering a blueprint to spur industrial activity. Building on its success, the U.S. should fund more semiconductor corridors in the Southwest and greentech production in the Midwest. Additionally, modernizing rail capacity, ports, and smart grids will lower domestic production costs, offsetting tariff-driven inflation. Paired with tariffs, the infrastructure bill is truly a cornerstone of the holistic trade strategy needed to give U.S. firms a fighting chance.
The U.S. should adopt a national workforce strategy to ensure these investments materialize as firms need skilled workers. Executive orders from previous administrations have already advanced this by investing in vocational education, community colleges, HBCUs, and distributing grants to programs that place workers into advanced manufacturing. To ensure that tariffs reshore domestic industry, the U.S. must subsidize R&D and human capital. Without them, any new investment wave will inevitably falter.
Energy is both an output and a lever in this new trading system. Throughout the manufacturing process, from assembly to transport to shelving, energy costs dictate final prices. That means lower energy costs equal lower inflation and cheaper goods. As such, America’s abundance of natural gas, solar, wind, and nuclear energy is a major strategic advantage, especially as crude oil’s barrel price remains at a post-pandemic low. If harnessed, energy infrastructure investment via permit reform, grid resilience, and clean energy credits can complement tariff policy to keep prices down. This also enables “friend-shoring”: a practice of realigning our supply chains with democratic allies and reducing reliance on authoritarian petro-states.
The final piece of this holistic trade strategy is a successful tax code. The U.S. tax code should reward firms that invest in physical capital and labor. That includes:
Middle-class tax cuts to offset the price burden of tariffs.
Full expensing for domestic capital investments.
Enhanced R&D credits tied to domestic employment.
Payroll tax relief for firms in strategic sectors.
Tax penalties for offshoring production after receiving public subsidies.
While 10% tariffs are expected to have inflationary effects until 2026, they will bring in $5.2 trillion over the next 10 years, more than enough to finance these cuts and generate enough revenue-based growth to pay down $2.1 trillion in deficits.
These policy measures represent a realignment—a Bretton Woods 2.0 rooted in long-term equilibrium. This two-tiered system would be led by democratic, market-based nations and levy calibrated restrictions on those that manipulate markets for strategic advantage. This would ultimately ensure fairness, embodying the core principle of free trade—nations exporting in order to import, not hoarding power or stripping others of industry.
Of course, this would require significant public and political buy-in. However, as recent bipartisan achievements show, this buy-in is possible and necessary. If integrated with infrastructure, education, energy, tax reform, and diplomatic coordination, tariffs can be the keystone of a new economic order.
America’s trade system failed not because it was too open, but because it was too naive. The U.S. mistook market access for strength, tolerating trade deficits and job losses in the name of efficiency. But in 2025, when opioid epidemics, housing crises, and life expectancy gaps in rural America run rampant, the era of trade exploitation must end. While Trump’s tariffs certainly have their flaws, riddled with dubious formulas and erratic rollouts, they offer a potential path towards economic prosperity. With targeted exemptions on key industries and over $3 trillion in onshoring investment, the foundation is already laid for a moment of tremendous opportunity.
By pairing tariffs with bold, bipartisan action, we can build a resilient, fair, and modern American economy—one that is both globally competitive and domestically anchored. That is a future worth building. Indeed, it was U.S. President Franklin D. Roosevelt who once said, “It is common sense to take a method and try it, and if it fails, admit it frankly and try another. But above all, try something.”
Aum Desai (CC ’28) is a staff writer at CPR studying political science and economics. He is passionate about U.S. economic, immigration, and foreign policy as well as international relations. He also enjoys competing in track and field and playing alto saxophone, as well as engaging in legislative advocacy and coalition-building on campus. He can be reached at ad3999@columbia.edu.