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The U. S. Treasury secretary misses the point in defending President Trump’ s tariffs. By Glenn Hubbard

. S. PRESIDENT DONALD TRUMP’ S AGGRESSIVE tariff policy has stimulated important debates over rebalancing the U. S. economy at home and in the global economic order. In remarks before the Economic Club of New York on March 6, Treasury Secretary Scott Bessent offered a window on the Trump administration’ s economic-policy approach to“ rebalancing” and re-privatizing America’ s economy. Bessent also observed, as has

Trump, that the“ detox period” as the economy reduces its dependence on federal spending may require short-term“ pain” to deliver longer-term gain.

Exactly what is to be rebalanced is not entirely clear. The tax and regulatory policies being considered by the administration provide routes to increase investment in the United States by both domestic and foreign firms. But the resulting effects on the dollar’ s exchange rate and the current account are not well aligned with the reduction in the U. S. trade deficit that the administration seeks.

As U. S. financial markets and domestic industry register pain from on-again, off-again tariffs, it is worth asking whether the goal of rebalancing is well served by Trump making trade policy his top priority. The short answer is no. For example, tariffs on aluminum and steel, key intermediate inputs in manufacturing, are unlikely to rebalance the U. S. economy toward increased manufacturing. A better approach would emphasize long-needed changes in fiscal policy, though the political steps are more challenging than simply saying“ rebalancing.”

The Trump administration’ s“ America First” objective envisions a global rebalancing of economic activity and production. In addition to U. S. tariffs, considerable discussion in policy making circles, within and outside the government, has centered on rebalancing abroad. In Europe, the prospect of German rearmament and other increases in domestic spending will reduce Germany’ s chronic current-account surplus.

In Asia, China stands out for its pursuit of surpluses, for its often-predatory trading behavior( dumping the products of its excess industrial capacity onto world markets), and for intellectual property theft. An argument can

40 | FINANCIAL ADVISOR MAGAZINE | MAY 2025 WWW. FA-MAG. COM