Transcript: Why Tariffs Work – Economist Oren Cass Explains Logic of Trump’s Tariffs

If we have to do even, if we just do less work, if we can just sit around and have the Chinese send us cheap stuff, that would be best of all, right? It’s very funny to remember that in formal economics, the more stuff you can get with the less work you have to do, the better off you’re supposed to be. And so the person just sitting on his couch, having stuff mailed to him every day, is supposedly the happiest and best-off person.

So one thing to notice is that that’s probably not true. And you mentioned my book that focuses a lot on this, that part of what we actually want from an economy is not just cheap stuff for everybody. We actually want the jobs, too.

Having productive opportunities for people to work and support themselves and their families is not some inconvenient requirement. It is an active good that we need that economists ignored. But the other thing to recognize is that all of these free trade analyses that say, well, look, you get more cheap stuff are just at one point in time.

So snap your fingers, stop making stuff in the U.S., make it all in China for less. On day one, yes, you’re probably very happy. And I think we even saw this, certainly in the U.S., probably in decade one, you’re very happy, right? If you think about the initial wave of what was globalization, what for the U.S. was deindustrialization, we were still sort of coasting on a lot of the prosperity that we had built up for a while.

But what you start to realize is that if you don’t have that domestic industry anymore, if you have hollowed out your ability to produce things, you actually start to see investment decline. You start to see economic growth decline. You start to see innovation decline.

You start to see sort of rapidly metastasizing social decay. And so you then look back a couple of decades later and you find that actually, yes, the price tags on the stuff from China are still lower, but are we actually better off, even as consumers, than we would have been in a world where we didn’t do this? I don’t think so. I think the trajectory where the U.S. had actually stayed focused on manufacturing would have been a trajectory in which we could have gotten costs way down as well, but done it in sort of modern, innovative, efficient ways that were good for American workers too.

And we have instead dug ourselves a hole. I think it’s important to say there are absolutely going to be costs associated with climbing out of that hole, but that at some point you have to bite the bullet and do that. One step back, two steps forward.

The Human Cost of Deindustrialization

WINSTON MARSHALL: As you’re talking there, I can’t help but think about not only Trump’s first successful campaign and second successful campaign. The first time he managed to persuade a lot of Bernie bros, I think something like a quarter of people who had supported Bernie went over to support Trump, but this time around he had the unions as well. So it is obvious that the working people of America do agree that there’s something that they’ve lost.

Would you mind elaborating on the specifics of what it is that they have lost? Maybe the commentariat, the liberal elites don’t understand.

OREN CASS: I think there’s sort of an economic dimension to it and then also a broader social and cultural dimension.

And maybe actually a really helpful place to start in understanding what’s happened is if you look at what has happened with the opioid epidemic. And I think the opioid epidemic has almost become kind of oversaturated at this point. Everybody kind of wants to talk about it and recognize it as a serious problem in the U.S. And yet I don’t think there’s a good understanding of how serious it is.

You know, if you look and opioids have now spread into a broader range of addictions and so forth. But if you look at the rate of death from drug addiction in the United States over the past five years, it’s now actually as high as the rate of death from alcohol abuse in post-Soviet Russia in the decade after the collapse of the Soviet Union. And you think about, you know, I think in the Western imagination, certainly in the U.S., that kind of post-Soviet Russia, you know, collapse into alcoholism is sort of the quintessential illustration of a failed society and markets gone wrong.

And that has literally been the experience in the United States, essentially. And of course, concentrated in particular demographics and particular regions. So if you were to just zoom in on that, it looks much, much worse than post-Soviet Russia.

How does that happen? One element of it is the direct economic consequence. You know, you literally lose millions of jobs. And what the economists have sort of started to very awkwardly acknowledge is, oh, well, you know, we didn’t really account for the transition costs is what they will call it.

The very antiseptic term is we sort of figured we just destroy your livelihood, but of course, you know, turn around and go work at Chipotle instead and everything’s great. And it turns out that that doesn’t happen. Which again, anybody who was not an economist could have told you is not what would happen.

The Myth of Automation vs. Reality of Disinvestment

OREN CASS: But there’s also a broader structural sense in terms of what happens to communities and local economies when you shut down industry. And I think it’s actually really helpful in this respect to compare, you know, the de-industrialization associated with free trade to automation, because this is something you’ll sometimes hear, right? Well, actually a lot of the job loss is because of new technology, because, you know, we’ve automated things, we’ve become more productive. First of all, not true.

In fact, productivity growth has slowed in manufacturing and then turned negative, which is a shocking fact. In the past decade, productivity in US manufacturing has fallen. You literally need more labor in American factories today to produce the same output from a decade ago.

And that’s because of a sort of combination of factors, including it’s a combination of competition with people that America can no longer compete with.

WINSTON MARSHALL: Well, that’s right.

OREN CASS: So I think it’s less about the competition directly and more about just the total disinvestment from the sector, right? So whereas there’s this stereotype of, oh, the US is automating, where it’s actually not true.

The use of robots in manufacturing in the US is at roughly the same level as Slovakia, which, you know, no shade on the Slovakians, but roughly a third of the level of, you know, a Korea or far behind China. And so in a sense, what you have is this kind of declining industry. You have, you know, many fewer people going into it.

They’ve been told it’s not a good job. You have a retiring workforce. Again, alongside that social decay, you essentially have an economic decay also in the industrial base.

And so if you imagine, OK, but let’s say, you know, we were automating. Let’s say you were bringing in great new robots. You needed fewer workers in the factories.

A couple of things would happen. First of all, that would happen gradually. So if you’re doing, you know, incredibly well, you’re getting, let’s say, 5% productivity growth in a factory.

You know, that means every year you’re finding another part of the factory that you can automate, bring in new technology for. It turns out that you almost never actually have to lay anybody off because that’s the rate at which people are going to be leaving the job anyway. So you might be hiring fewer people in to that kind of job, but you’re not experiencing widespread job loss.

The other thing you notice is that, well, if you’re getting more productive, those jobs you do have are better jobs. They’re more productive. They’re going to pay better.

That company is probably going to be more competitive. Its sales are probably rising. It’s now a customer for more other things in the community.

It now has other people that are, and businesses that are buying those things moving into the area. And so the overall ecosystem and sort of strength of the economy actually improves. That’s the positive story.

That’s how capitalism is supposed to work. And that’s how you can actually have an economy where fewer people are working in factories over time, which absolutely is going to happen. And yet those local economies and communities and the quality of jobs is improving.

The Economic Impact of Offshoring

[WINSTON MARSHALL:] When you shut down the factory and move it to China, again, economists focused only on consumption or say these are basically the same thing. All that we want to know is the price of the stuff we’re buying. And what that misses is everything I just described that actually matters.

[OREN CASS:] And so what we have seen is that social decay, that decline in the actual quality of our industrial economy, much lower quality jobs available, worse pathways, fewer pathways into the middle class, significant dropout of the labor force altogether. And all of these things sort of compound to a situation where, look, if you’re somebody who is earning a college degree, then moving into the kind of career that uses a college degree, which is still only about half the people who earn a college degree in the US. If you’re somebody who’s eager to maybe move away from a place that you grew up, go relocate to somewhere that has one of these booming knowledge industries, things feel great.

And on top of everything else, the stuff is cheaper. What could be wrong? If you’re the majority of Americans who, and we do a lot of survey work on this, who really value being able to build their lives in the place where they grew up, being able to find a job that’s going to support a family. You’re probably not somebody who is completing college at all.

Then the economic trajectory that you’ve experienced in recent decades has just been a really negative one. And is it those people who are going to hurt with the one step back before the two steps forward?

The Trade-Off of Protectionist Policies

[WINSTON MARSHALL:] So in terms of sort of, if we do turn away from free trade, if we do therefore say, let’s, well, I guess let me ask you, what do you see as the one step back there? The one step back, well, you said earlier that it’s going to hurt a little bit the turnaround. And I assume that would mean that, well, firstly, there’s going to be a build up in the manufacturing sector a little bit within the States, where there’s going to be change.

But, and then also what I mentioned that there will be a, presumably a slight increase in, well, maybe a large increase in the cost of goods. So those are the steps back, it seems to me. Have I missed something?

[OREN CASS:] No, so I think that’s a good description of it. And I think if you zoom out even farther and ask what we’re talking about, what we’re essentially talking about is correcting for a deficit, right? Right now we have roughly a trillion dollar a year trade deficit. We are taking, we are consuming a trillion dollars more than what we produce. And what that means is we’re basically consuming that on credit, right? Because people don’t send it to us for free.

We are either sending back assets, so ownership of our corporations, ownership of our real estate. In a lot of cases, we’re just sending back debt. We’re sending back pieces of paper that say, I owe you. A lot of times federal government owes you and will someday pay for it.

And so in a sense, it’s actually quite parallel to the budget deficit problems that we have. You know, we are in many ways enjoying in the United States, the benefits of consuming close to $2 trillion per year in government services, more than what the government actually collects in taxes.

That’s another huge gap. And so the question is, what happens when you try to close those gaps? You can think about it at the household level. If you’re somebody who has been essentially working part time and running up credit card debt for a long time, and you say, actually, no, I need to work more and earn more and also stop spending more than what I earn.

Then one way to look at that would be to say, yes, there’s some pain associated with that. Another way to look at that would be to say, actually, I’m probably going to be a lot happier. And so I think what it means for individual households, what it means for the economy generally, is that we need to see a shift toward higher levels of investment.

So relatively more of what we do in our economy is going to have to be not just stuff that we consume, but stuff that actually builds toward the future. It means some things that we’ve completely lost the ability to make and need to learn again, probably will be more expensive in the short run. But it’s also going to mean better jobs at higher wages.

[WINSTON MARSHALL:] So people will have more money anyway to compensate for the-

[OREN CASS:] That’s right. And I think that’s a key difference between, or a difference from what we experienced in the last few years with the very high levels of inflation, where people said, wait a minute, I’m looking kind of year over year, my grocery bill is going up 10%. Some things are 25% more expensive.

When you’re talking about, particularly in the US, the things that we import, it’s not that big a share of what people consume. A lot of it, we actually do know how to make, or we can make for not significantly more cost than what it costs to import. And so you’ll see some things, yes, this kind of toy that only came from China, if we have a high tariff, well, now there’s going to be a tariff on that thing from China.

But we’re also, by doing that, creating the incentive to find a way to make it here, make it American.

The Reagan Example with Japanese Autos

[OREN CASS:] And so I think a good kind of example to think about in terms of how does this play out in practice, I mentioned Reagan earlier. One of the key things that Ronald Reagan actually, right when he came into office in 1981, the US auto sector was under enormous pressure from the Japanese at the time.

This is when the kind of lower cost, smaller, more fuel efficient Japanese cars were flooding into the US market. And the US negotiated with Japan an actual outright quota. So it wasn’t even a tariff, it was just the number of cars coming from Japan will no longer increase.

Now, did that have an effect on the price of Japanese cars? Yes, the best evidence suggests there’s probably a five to 10% price impact initially. But it also led to all of the Japanese automakers immediately turning around and starting to build factories in the US. And within just a few years, you didn’t even need the quota anymore.

The Japanese were now, initially they were assembling vehicles in the US that were essentially competitive with what they otherwise would have brought from Japan. Then the entire supply chains to feed into those plants came into the US. By the 21st century, the Toyota Camry was actually the single most American car on the road. The Camry had more US-made content in it than any other car.

And so that’s sort of how I think we have to think about the trade-off. Was there a period where Japanese vehicles were a little bit more expensive than they would have been? Yes.

Does anyone look back at that and say, well, that was a mistake? You know, the 1982 Toyota Camry was 8% more expensive. So consumers lost out. So we would be better off if we just never had an auto industry in the American South. I think that’s nonsensical.

Historical Context of American Trade Policy

[WINSTON MARSHALL:] It’s an interesting thing about it in the historical context, as you alluded to at the very beginning of the conversation. Actually, the history of America, I think up until the First World War, the majority of income to the federal government was from tariffs.

And after that, it kind of flipped and became from corporations and US income tax. And actually, as you say, it’s sort of turbocharged over after the Cold War. And then you give this example of the Japanese manufacturing.

Actually, what’s kind of strange about the whole thing is that what Trump’s saying is actually more in keeping with the US historically. So why is it so shocking, I guess? And maybe that’s a practical question, the psychology of those with the ideology against what Trump is saying, because if you look at the media, you look at the press, people are up in awe. They really can’t fathom it.

So do you have any insight into that?

[OREN CASS:] Well, I have a theory. I’ll give you my theory, which is that I actually did a research project on this question last year of where did this free trade ideology come from? Where did we end up with this idea that free trade was always good, tariffs were always bad, given that it had not been the history, and given that if you actually sort of start to dig into it, it doesn’t make that much sense.

And what I found was there was actually a very stark shift after World War II. And so there was nothing resembling free trade up until World War II. And it was in the aftermath of World War II, alongside the creation of the United Nations, this sort of overall horror, pulling back in horror from what had happened and desire to build, also in the face of communism, what became sort of known as the liberal world order, that free trade was seen as a critical component of it.

And so it’s very interesting if you go back to sort of the great economics textbook of the 20th century. It was called “Economics.” It was by Paul Samuelson, Nobel Prize winner. You actually go back, it was published in 1948.

And you go back and read, okay, how does he explain free trade? And he actually very explicitly says in the book, look, can you suffer if other countries are putting tariffs on you and you don’t respond? And can that work out to their benefit? Absolutely. But as the United States, essentially as we are rebuilding the world, surely we can all agree that it would make no sense for us to kind of get into that kind of competition.

And so the U.S. promoted this model not really for economic reasons at all. It was about a much broader liberal ideology. There’s a very famous 1970s essay in Foreign Affairs by one of the sort of leading promoters of free trade. But again, he acknowledges that the case here is not really an economic case at all. It’s a foreign policy case.

And then if you fast forward all the way to 2000 and welcoming China into the WTO, what you find is that overwhelmingly the argument for it was a foreign policy argument. It was about bringing China into the world system. It was about how free trade with China was going to liberalize China. You had the Thomas Friedman type saying, well, countries with McDonald’s will never go to war with each other.

[WINSTON MARSHALL:] This is the nexus of freedom, which is the color in your theory. He was arguing that if you have economic freedom, that will lead to political freedom. He had specific focus on China. And of course, then Nixon goes to China. So this is part of the same thing.

[OREN CASS:] It wasn’t really ever about economics. It was about the second part.

[WINSTON MARSHALL:] That’s right.

[OREN CASS:] And I think particularly from the U.S. point of view, it was about a conception of the U.S. as essentially a sort of benevolent hegemon. That the U.S. was going to, frankly, tie its hands behind its back, certainly with respect to its own economic power, in the interest both of supporting and propping up its allies in the Cold War and then promoting what U.S. policymakers believed would be an international system that ultimately benefited the U.S. as well.

[WINSTON MARSHALL:] But it hasn’t.

[OREN CASS:] That’s right.

[WINSTON MARSHALL:] Because of the trade deficits.

[OREN CASS:] Right.

[WINSTON MARSHALL:] And because China didn’t get freedom in the end anyway. So it didn’t work.

[OREN CASS:] Exactly. And that’s the key point is I do want to give sort of credit to the theory as a theory. It is internally coherent that if this is what we think is going to happen and this is what we’re going for. The problem is that it failed. And China is the most obvious way in which it failed. It is the way in which the failure has been most costly.

And so I think it’s actually a very interesting thought exercise to say, knowing what we know now about China’s trajectory, how China would behave over the 25 years from 2000 to 2025, if you went back to the year 2000 and told people, this is what China is going to do, do you still think free trade with China is a good idea? I think there would be some, I guess, kind of hyper ideologues who would say yes. I mean, you still have people today who say free trade with China has worked out well. You can find them.

[WINSTON MARSHALL:] What would that argument be?

[OREN CASS:] We got a lot of cheap stuff.

[WINSTON MARSHALL:] Right. Yeah.

[OREN CASS:] That’s the argument. And we still get a lot of cheap stuff. And that’s not the only metric to measure these things on.

[WINSTON MARSHALL:] Well, I agree. But technically, if you are using formal economics and the way our government statistics work and so on, it does, in fact, look like as long as you keep getting more and more cheap stuff, you are doing better and better. That is how our economic models are built.

So anyway, all of which, this is all sort of to come back to your question of like, why are people’s heads exploding now? And I think it’s because there’s essentially a cognitive dissonance between the actual kind of robustness of the economic case that people thought they were advancing and the actual foreign policy vision that they were advancing.

And when you tell people, and this even goes to now what we see with JD Vance at the Munich conference and so on. When you tell people that this entire kind of liberal world order model of foreign policy that actually was just entirely built on the U.S. propping up everybody else has not worked.

The Shift in U.S. Economic Policy

[WINSTON MARSHALL:] It has particularly not worked for the U.S. And particularly for the working people of the U.S. So the poor in the U.S. That’s the key thing.

[OREN CASS:] Exactly. And therefore, the U.S. is going to conduct itself differently.

People sort of turn around. They want to grab for, but what about this important economic argument that, in fact, this was for the good of U.S. workers and they find there’s nothing there. They’re grasping at air.

I’ve used the example of Wile E. Coyote, the old cartoons where he was chasing the roadrunner. And there’s always the scene where he’ll sprint off the cliff halfway over the empty canyon. And he just keeps going until he actually looks down.

And it’s when you actually look down and realize there’s nothing underneath you. You’re way out in the middle of nowhere and you’re about to fall to the bottom. I think that’s sort of where people are at this moment.

And it’s obviously a very scary feeling. And the reaction is not typically to say like, “Oh, you’re right. Good point.” It’s to freak out the way people are.

Trump’s Trade Motivations

[WINSTON MARSHALL:] So, Travis, we’ve touched on two of the three motivations of Trump, or at least what I’ve understood to be the motivations of Trump, is that one is the trade deficit, which seems to be the biggest thing. You talked about fentanyl, the drug trafficking.

And we’ve seen with his negotiations with Mexico and Canada, him whacking up the tariffs for both those countries. Both those countries were like, “Yeah, you’re right about those things.” Sorry, right about the drugs thing.

The other third thing was illegal migration, immigration. And so that’s the thing that they’ve said, “Yeah, you’re right. We need to sort that.”

I think that the Mexicans send something like 10,000 of their own troops or I don’t know what aspect of their forces to sort of help with that. So with those being the three aspects, is there anything else we don’t see with his motivations?

[OREN CASS:] Well, I would make a distinction even in there, which is that tariffs are actually in a sense two different things. They are an economic tool. We actually want to have tariffs or in the world as it is existing today, we think tariffs help the U.S. economy and will help to restore domestic industry and so forth. And then there’s tariffs as a negotiating tool. And so I think you’re seeing Trump doing both.

So threatening Canada with a tariff, threatening, I think it was Colombia with a tariff when they weren’t accepting initial repatriation flights of illegal immigrants. Nobody thought, “Well, we’re going to tariff Colombia because that’s going to help the American worker.” That was just leverage.

[WINSTON MARSHALL:] And so a bit to my point about the foreign policy side of things. So leverage is a key.

[OREN CASS:] That’s right.

[WINSTON MARSHALL:] And so Trump is doing both and both.

[OREN CASS:] Part of the deal. It’s classic.

Exactly. But it’s important to notice both of those are shocking to the U.S. mindset of “we are not going to use our economic power.” We are going to operate sort of with our hands tied behind our back.

Again, historically, economic power was part of statecraft. And so what you’re seeing is both Trump saying, “Yes, we have a lot of economic power and leverage here, and we are going to use it to advance all sorts of objectives.” And then also within the economic context, free trade has not been working. We want to reorient that.

The China Factor

I think the last piece to keep in mind, and this is sort of, if we’re creating a hierarchy, you’ve got negotiating over on one side. Then within the economic realm, I think you sort of potentially see two different things going on.

One is the trade deficit piece. We just need to reindustrialize. We need to build up domestic industry.

And then the other piece is China specifically, and recognizing that even if we wanted to have a healthy system of free trade, it would be great to have supply chains that do run through Mexico and Canada, and they make things for us and we make things for them. And yes, there are absolutely gains for everybody there. But none of that applies to China.

That China as a strategic adversary, as a country whose economic and political system is just completely incompatible with ours, should never have been integrated with the U.S. market. And that we actually need to decouple them.

And sort of quite sharply in terms of trading goods and services, in terms of investment, create barriers and separation where there wasn’t, even at cost, even when you could say, well, in purely economic terms, why wouldn’t it be beneficial for U.S. venture capitalists investing in Chinese artificial intelligence companies, right? Like, that sounds great.

And the answer is no, actually, it’s not. That’s sort of terrible. And so I think that’s then another piece you’re seeing.

And that’s probably where there’s the most consensus growing. And, you know, you saw the Biden administration carry through some of Trump’s China policies. Now you see Trump picking them up again, recognizing that with China in particular, the idea of a sort of friendly integrated relationship is neither plausible nor desirable.

China as an Adversary

[WINSTON MARSHALL:] Okay, so those of the sort of old liberal order mindset, well, their heads will be exploding again. And they did when Trump was, you know, “China, China, China.” He, again, as with tariffs, reoriented the Americans to see the Chinese as an adversary, as you’ve mentioned.

So I guess you might have to make the case to those people that China is an adversary.

[OREN CASS:] Right. Well, I mean, it’s fascinating. Like at some point you just shrug and say, “If you guys want to think China’s not an adversary, like, go ahead, go do your thing in the corner with no one paying attention to you anymore.”

I mean, it is funny to your point, you know, if you go around a sort of think tank roundtables in Washington, D.C., particularly on the left of center, you can still find people who are talking about how we need to be building close relationships with China. We’re in Britain right now.

[WINSTON MARSHALL:] Keir Starmer, they’re trying to build close relationships. We had a crazy deal with the CCP. And now we’re letting them build this monstrous, ginormous new embassy in Tower Hamlets in London. Like we very… the left in Britain is very much like “China’s no problem.”

[OREN CASS:] Right. And, you know, I always find it especially funny that the things that they seem to want to partner on are the things where China has most aggressively and obviously shown it has zero to impart.

So one is like, “Well, we really need to partner with China on climate.” Right. As China just sort of cranks up as many coal plants as it needs to power its economy.

And then the other one that’s become sort of darkly funny is pandemic preparedness. You’ll hear “for global health reasons,” you know, the country that by increasingly in consensus of the intelligence community literally leaked the last pandemic virus out of its lab, covered it up and so on. Like, “Well, if only we had a closer relationship with China, surely we could work together on public health.”

[WINSTON MARSHALL:] Well, the Americans were working with China on that.

[OREN CASS:] Which perhaps funding, which perhaps was, again, not, you know, maybe we shouldn’t have the federal government sending quite so much funding to such projects in China.

Fundamental Differences in Values

The point is that all of this stuff is a bizarre pipe dream that I think if you go to the most fundamental differences between the left and the right in the traditional sense goes to what I think is just a failure of imagination on the left to realize that no, there is no common universal set of values that guide all people and will shape all relationships.

If only we can hug tightly enough. In fact, the Chinese economic and political system is completely different than ours. They are oriented toward a different set of priorities. They made a different set of tradeoffs. Should we aspire to them liberalizing someday? Absolutely. Should we also recognize how little power we have over how that happens? Yes.

And so, what I think is really interesting to recognize, and this goes back to the great point that you were making about the freedom obsession as the way of framing all of this, is that within western market democracies, yes, a lot of free trade, a lot of openness can expand freedom and prosperity and do all sorts of great things. When you open your market up to a country like China and try to integrate your market with the Chinese market, your free market ideology is no longer aligned with your free trade ideology.

In fact, the more you pursue free trade, the more you are harming your free market. There is no world in which a market integrated with one dominated by the Chinese Communist Party is freer than a market that’s insulated from the Chinese market.

Historical Context

And in fact, again, before this attempt with China, at no time in history, in human history, had there been some effort to integrate economies and societies that had such basic differences in their structure. The obvious example is the Soviet Union.

Nobody thought, “Well, sure, we have a Cold War going on, but it would also be really great for American consumers if we had free trade with the Soviet Union.” That would have been just a catastrophically idiotic idea that nobody would have advanced. And it’s really funny to go back and look at just how little interaction was allowed.

I mean, you start to find news stories in the 1980s of the pilot program of a few Soviet students coming to American universities. And then you contrast that with what we’ve done with China, where we’ve just said, essentially, we are just going to have China subsidize our universities by sending hundreds of thousands of students into them.

[WINSTON MARSHALL:] Black eyes with trade. PepsiCo spent like a decade laying the groundwork to finally bring the first Western bottling plant to the Soviet Union to sell Pepsi there. And when they finally got it done in the 1970s, the Soviets couldn’t even pay for the equipment because the currencies weren’t even convertible.

[OREN CASS:] Then they ended up doing a trade for vodka. Because there was, again, this idea like, “Let’s integrate the U.S. and Soviet economy.” This was not a thing.

The Fundamental Disconnect

And where the rubber meets the road, I think the best way to understand why this doesn’t work is that the U.S. capitalist system and Western capitalism generally is premised on an assumption that businesses pursuing profit are actually going to advance the common good. Now, there are all sorts of ways that’s breaking down anyway that we spend all our time working on at American Compass.

But at least fundamentally, there’s an idea that, well, look, we are sort of going to leave the private sector alone to make decisions with an economic rationale. As soon as you tell a business, “Actually your biggest profit opportunity is opening up in China. And to be successful in China, you have to do whatever the Chinese Communist Party wants.”

You have not just distorted, but I would say destroyed the incentives as they operate on American business leaders. And you end up with these just humiliating situations.

This isn’t even about the economics anymore, where you have the NBA just walking around with their “end racism” signs and whatever. And also like, “But we can’t say anything about human rights in China.” Or you have Jamie Dimon apologizing repeatedly for making a joke about the Chinese Communist Party and saying, “Actually, we should never make fun of the leaders of a country” because his job is to try to earn profits for JPMorgan. It just doesn’t work.

And those, one is like, “Well, those are like, who cares what LeBron James says,” but those are the symptoms of a fundamental disconnect in our systems that I don’t think Western democracies can accommodate.

The Shifting Political Landscape

[WINSTON MARSHALL:] I want to touch on, one last time, on this sort of what seems odd to me, but a lot of what you’re saying used to be a left-wing position, certainly in America. And I think it’s relevant because of the sort of populist age that we’re in, or I believe we’re in a populist age.

You know, I know that you work for Mitt Romney, but it seems that you could just as easily have worked for Bernie Sanders or here in Britain for Maurice Glassman and Blue Labour. I think your case would be supported by someone like Steve Bannon on the populist right as much as the populist left.

I remember, well, I don’t actually remember, but I will remind you of the Battle for Seattle, 1999. And if you look at those who were protesting China’s, this new trade agreement, it was actually majority lefties. It was the anarchist left. And I even believe the sort of more traditional center-left, like I think Pelosi was there.

Nancy Pelosi might have been there. If not, I think she would have supported the movement generally. And those were arguing against free trade because they thought it would help the corporates and big money.

Now, there was the right there. I think Pat Buchanan was there. And perhaps there’s a sort of line through Buchanan and the reactionaries to Trump just as much.

But it’s striking to me now that the left are up in arms about this. I wonder, as an American, if you had insight into why they are behaving like this, when actually a lot of them have been supporting, historically supporting these sort of decisions or at least the motivation.

[OREN CASS:] Well, I think the elements of the left that used to think this way still do think this way.

The Left’s Disconnect from the Working Class

[WINSTON MARSHALL:] So, you know, when you’re describing those, you know, those are the left who, even resisted NAFTA, North American Free Trade Agreement in the early 90s. It was the labor left. What has happened, though, is that the left in the United States and the Democratic Party has become almost entirely disconnected from the working class and the interests of workers and become essentially a progressive social movement dominated by a sort of highly educated, high income, post-industrial population of knowledge workers.

[OREN CASS:] And you see this certainly within the labor movement, even in the disconnect between labor leaders and labor workers, right? The leaders of the movement, the sort of professional organizers are of the modern left. They’re people who have somehow even twisted around to think that high levels of low wage immigration is something that labor unions should be fighting for. That this kind of global liberal world order is their top priority and so forth.

Whereas, as you noted earlier, that is not at all the view of the majority of the workers they’re supposed to be representing. Now, part of this, of course, is that if you take the labor movement as an example, the labor movement isn’t even really a private sector phenomenon anymore. So in the US, the labor movement is overwhelmingly now representing public sector workers.

In fact, union members are more likely to have college degrees than non-union members in the United States. So what you’ve seen is this sort of cycling out of who actually is the left of center coalition to be a group that both itself benefits from and is ideologically very much aligned with the global, liberal world order vision. And a lot of those folks who once upon a time might have identified with a left that were defending their interests are now in the Republican Party.

They’re on the right of center. And I think that actually fits quite well with a more kind of conventionally conservative view. Because the other piece to ask—

[WINSTON MARSHALL:] —Conventionally conservative, but not neoconservative.

Redefining Conservatism

[OREN CASS:] —Exactly. And I should say sort of traditionally or conservative because, in the 1990s, 2000s, what we call conservative in the U.S., I think probably in the U.K. as well, became this kind of very libertarian mantra of tax cuts, free trade, deregulation, union busting, and so forth. It’s worth asking, like, what about any of that is conservative? I mean, certainly conservatives for a whole host of reasons prefer more limited government.

But the idea that sort of a global regime of free trade and embracing communist China is like, well, obviously, that’s what conservatives think is ludicrous. It’s a function of how the right of center evolved, especially during the Cold War, to have this very libertarian, free market ethos. And so I think what you’re seeing is two things at once.

You’re seeing a left of center that has become very focused on this narrow, upper-class, progressive set of concerns, driving a lot of workers and folks with more conventional concerns to the right of center, and a right of center that is reclaiming and rediscovering its own conservative commitments and kind of casting out a lot of the more hyper-free market, libertarian folks who just take lack of constraint to be their guiding principle.

Looking Forward: Trade Wars and Global Realignment

[WINSTON MARSHALL:] I would like to finish by looking forward. So although there’s been some progress with Canada and Mexico and Colombia saying that they’ll sort out the various issues that Trump has, China have responded with retaliatory tariffs, and there’s rumors of some sort of tariffs for Europe and with Britain.

We’re not sure. There’s like, does Trump like us and say no? Or there are others, you know, he might not be happy with the Chagos deal that we’re doing where Diego Garcia, the American base, he said, could he possibly use tariffs against us for other motivations? What insight do you have? What intel, what scoops might you have about what we can expect of this trade? So quite a war yet, these sort of mini trade battles as we look ahead.

[OREN CASS:] Well, I don’t know if I can provide any useful intel. I can provide maybe a framework for thinking about it and making sense of what might happen going forward. And so one piece is the one we already talked about, which is the sort of negotiating versus economic. So I think anytime you see action coming out of the US, it’s going to be very important to ask, is this an effort to use leverage because we have some demand? Or is this actually an effort to reorder things on a permanent basis? And so it will always be important to think in those terms first and foremost.

Once you’re thinking about the reordering, what does the US actually want to see change? I think it’s important to recognize that. And this is where I think a lot of J.D. Vance’s recent remarks are really important. This is where, you know, Trump going so aggressively, even after an ally like Canada is really indicative that the Trump administration really is focused on reorienting the assumptions of the global system away from this model in which the US was sort of supposed to be this benevolent hegemon that kind of oversaw and floated above a liberal world order toward a system in which, frankly, there are blocks.

And I think this is where, even more so than Vance, Marco Rubio, the Secretary of State, he’s been doing work on this for a long time. He’s spoken very articulately about it in the last month. Has emphasized that it’s not about what the US wants. It’s about reality. And I think a real problem of the liberal model of foreign policy is you build it around what you wish were the case.

And what you are now seeing the US acknowledging is that the US is no longer the global hegemon. In fact, you have in China a near peer adversary that has its own power and priorities and influence and affect things regardless of what the US might want. And what that means is we’re going to have to move to a system in which there is a US-centered block with countries that are aligned with the US and playing by one set of rules. And there is a China-centered block that is going to be countries that either chose to be there or that China can assert domination over.

And that’s going to operate very differently. And a lot of, I think, the sort of disruption that the US is generating right now is in a sense an intermediate step, right? How do you get from today’s broken system to a new, better one? It is very much the Trump administration model to sort of flip over the chessboard and then go from there. And so I think the big question is, OK, who is going to be in that US block going forward? And I think your distinction between the UK and Europe is very perceptive in that respect.

[WINSTON MARSHALL:] Well, I hope Americans recognize that distinction.

The Future of Global Alliances

[OREN CASS:] I think so. I think and, you know, certainly how I talk about it and how I allocate my own time is very much toward believing that, you know, the old Anglosphere, and I would count India as part of that. I would count, I think Japan is probably a very natural part of it, is going to be oriented around the US system. The US wants them as allies. They want to be US allies.

I think you’ll see the US focus a lot more in the Western Hemisphere, right? It’s not a coincidence that the US is also picking a fight about the Panama Canal, talking about Greenland. There’s kind of the 55th thing, the whole Canada thing. It’s not fun.

[WINSTON MARSHALL:] What a time to be alive.

[OREN CASS:] Gulf of America, right? Like there’s a very real way in which what the Trump administration is saying is the Western Hemisphere matters a lot. China is the adversary.

And then to your question, Europe is kind of just the question mark. There’s a world in which, and I think this is the best way to understand J.D. Vance’s comments at Munich, is Europe is finally going to be put to a choice. It can get its act together, or it can slide into sort of decline and irrelevance.

And I think the US wants, and the US would be better off if Europe gets its act together. But the US can’t make Europe get its act together. And that is something that will be very interesting to see.

[WINSTON MARSHALL:] Well, on that note, Oren Cass, a pleasure speaking with you. Where can listeners find more of your work? Find you.

[OREN CASS:] I have too many things to plug now. But American Compass is the organization. Americancompass.org has all of our research.

[WINSTON MARSHALL:] And that’s a think tank.

[OREN CASS:] That’s a think tank. We’ve just launched a magazine called Commonplace, commonplace.org, which is…

[WINSTON MARSHALL:] Thank you.

[OREN CASS:] It’s going very well. Ton of good stuff there every day, pretty much. And then I write my own substack, Understanding America, understandingamerica.co. And that’s twice a week.

[WINSTON MARSHALL:] Fantastic. Oren Cass, a pleasure speaking with you. We’ll do it again next time. I hope this was awesome.

[OREN CASS:] Thanks so much.

[WINSTON MARSHALL:] Thanks for watching the Winston Marshall Show with Oren Cass. If you want to support this show, I remind you, all you have to do is press subscribe. If you do that, I can have more phenomenal guests like Oren Cass exploring the issues you want to hear about and that the mainstream media won’t touch. But until next time, be well.

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