He worked in the White House alongside two prominent US presidents, Richard Nixon and Ronald Reagan. Lawyer, economist, and educator Christopher DeMuth is currently a Distinguished Fellow in American Thought and AWC Family Foundation Fellow at the Heritage Foundation in Washington. He visited Prague for a conference organized by Patriots for Europe.
You are, among other professions, an economist – what do you think about the tariff intentions of President Trump? Are tariffs really such an important tool in shaping the US economy?
President Trump was elected on a platform of restoring the American economy, especially for working-class people. People in the media, academics, entertainment, and finance, and at the top levels of business, have done very well in recent years. Average working people have not done so well – their wages have not kept pace with inflation, many of them are facing serious social problems, and many working-age men are not even looking for work. President Trump believes that reimporting certain kinds of jobs and manufacturing is an important part of solving these problems. Tariffs cannot bring back 1950s America, but they can have some effect in building up manufacturing capacity and improving the economy for some. Free trade is good for a nation as a whole, but not necessarily for everybody in it. The old neoliberal consensus was to have maximum free trade, which would make America richer on the whole, and then to use some of the proceeds to retrain or otherwise help those who are losers from free trade. But we never got around to the second part of the program. I think that President Trump wants an American tariff regime that is more like those of other nations. But it will only be effective in reviving the American economy for the good of working people if it is coupled with tax reform, deregulation, revival of the fossil fuel economy, and getting rid of a lot of impositions on starting businesses. We've got complicated problems, and trade reform is just one aspect of trying to find our way out.
What are your thoughts on the way Donald Trump has communicated his intentions on tariffs?
So far it has not been a model of effective statesmanship. When I was working for Presidents Richard Nixon and Ronald Reagan, we had many robust policy disagreements on the inside but few knew about them on the outside. These days, with social media and reporters listening in on everything, the disagreements are exposed to everyone, often hour-by-hour. The initial tariff initiative was obviously announced with insufficient consideration for its shocking effect on the financial markets. The President of the United States is very powerful but, when he overreaches, private markets can be even more powerful. So Donald Trump had to react and adjust. The initial proposals should have been more moderate, phased, and negotiable, and not announced the week before they were to be applied. But he has reacted to the markets pretty well.
How do you see the economic outlook for the United States in the months and years ahead?
If you ask the forecasters, they will say that the tariff initiatives have increased the chance of a recession in the United States, and maybe in Europe and beyond. It's easy to say “increased the chances” because a recession still might happen or might not happen. I would say that the economic outlook will depend on the steps that people take in the future. A 10% tariff on imports, if you look just at America, applies to only 10% of our economy. We are very rich and have an enormous amount of internal trade, just as in Europe. I would say that the markets are concerned as much with the manner of the tariff decisions as with the decisions themselves. President Trump’s first administration was a model of policy stability – and was so even after COVID came along, compared to most European and Asian nations. That stability was an important reason for the administration’s economic success. Now we have seen seen a radically new policy announced on Tuesday, then fundamentally revised on Thursday, then revised again before the end of the week. If this sort of thing continues, it will be very bad for economic performance. I hope and expect that we will see more stability and predictability.
Do you think we are in the middle of a trade war as purported by some political commentators?
The United States is certainly in a trade war with China, and while there are many confident forecasts of how it will turn out, the ultimate results are mostly unknowable at this point. I think the base 10% US tariff will hold, and note that it is similar to the tariffs that the EU and many Asian and Latin American nations impose on foreign goods from America and elsewhere. So we are starting with a more reciprocal situation. I would like to see a healthy resolution of potentially higher tariffs on goods from countries that are most important to the United States, such as India, other Asian nations along the perimeter of China, Europe, and of course Israel and Taiwan.
What would a “healthy resolution” entail?
I think that if the EU or India actually reduced their tariffs on American goods to zero, President Trump would reciprocate. But the chances they would do that are themselves zero, because their tariffs are a result of demands from powerful domestic economic interests and cannot simply be negotiated down by diplomats in a conference room. But that’s the world that we live in, and it’s going to be an exciting several months.
You mentioned working in the Reagan and Nixon administrations – could you briefly compare how “times have changed” in politics?
American society has changed, our political parties have changed, and of course every president has his own characteristics. Yet I am struck by the continuities. When I was working in the Nixon White House, our major domestic issues were welfare reform, environmental policy, and healthcare – issues very similar to today's. President Nixon was responsible for an economic shock in August 1971 which, among other things, added new 10% tariffs! A lot of people are now saying that President Trump’s tariffs are going to be as catastrophic as Nixon’s – but Nixon’s were combined with wage-and-price controls and taking America off the international gold standard. President Reagan was widely reviled in Europe, and his early initiative to base US missles in Europe provoked demonstrations and denunciations across the continent. But his policy of peace through strength in confronting the Russians proved highly successful, and by the end of his second term US-European relations were on a much more even keel. If you’ve been through many administrations and seen some crises melt away, while other decisions nobody was paying attention to turned out to be hugely important, you tend to be a little more philosophical about developments such as President Trump’s tariff initiatives. I enjoyed working for Richard Nixon and Ronald Reagan very much. They were great bosses – they expected you to make hard decisions, and when you found yourself in the middle of a controversy, they stood with you.
CV BOX
Christopher DeMuth (born 1946 in Illinois) grew up in Kenilworth, a Chicago suburb. He is a graduate of Harvard College (1968) and the University of Chicago Law School (1973).
He was staff assistant to President Richard Nixon (1969–1970) and was responsible for regulatory policy during President Ronald Reagan’s first term (1981–1984).
He has taught at the Harvard Kennedy School of Government, practiced law, been a consulting economist, and was publisher and editor-in-chief of Regulation magazine.
He is currently Distinguished Fellow in American Thought and AWC Family Foundation Fellow at The Heritage Foundation in Washington, D.C. He was president of the American Enterprise Institute for Public Policy Research from 1986 to 2008, D.C. Searle Senior Fellow at AEI from 2008–2011, and a Distinguished Fellow at Hudson Institute from 2012–2023.
He and his wife reside in McLean, Virginia. They have three children and twelve grandchildren.
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