America's Three Demands

On the importance of knowing what you want, and telling people

President Donald Trump has declared that this Wednesday, April 2, will be “Liberation Day” in honor of the widespread tariffs that his administration is expected to impose. But what those tariffs will be, or what long-term vision they advance, remains anyone’s guess. Numerous media reports indicate ongoing deliberations to determine which kinds of tariffs, calculated how, will be imposed upon whom, to what end, under what authority.

I am broadly supportive of President Trump’s desire to reshape the global trading system, and especially enthusiastic about the quality of the team he has assembled (VP Vance, Rubio at State, Bessent at Treasury, Miran at CEA, Greer at USTR) and the sharp critiques and frameworks they have developed. But the rubber meets the road in the clarity of the administration’s communication about its plans and goals, and in the coherence of the policy agenda actually implemented, and there the first two months have left much to be desired. We shall see what Wednesday brings, but I’ll be looking in particular for discernible principles, applied consistently, on predictable timelines. Continued failure on those fronts risks discrediting the entire project and diminishing its prospects of success.

While we wait on the “what those tariffs will be,” I thought it might be useful to elaborate on the “long-term vision,” which has received less attention in the day-to-day maelstrom of actions threatened, implemented, and put on hold. Any concrete set of means will make sense only in the context of the ends sought, so establishing the latter is crucial to interpreting and assessing the former. What’s more, the American strategy will inevitably rely on not only pursuing certain actions ourselves, but also inducing certain actions by others. We can hope to induce those actions only if we can communicate clearly what we want them to be.

In some respects, this is just basic life-coach advice: to get what you want, you have to know what you want, and tell people what you want.

So while I can’t tell you what exactly the Trump administration wants, I can tell you what they seem to want based on what they’ve said, and I can combine that with my own assessment of what America should want. The result is a quite simple, clear, and compelling new approach to a multipolar world in which the United States anchors a strong economic and security alliance of likeminded allies. I was in Japan two weeks ago, meeting with a range of public officials, academics, and private-sector leaders. On more than one occasion, a speaker challenged me that the United States was being “irrational.” Each time, when I presented the following as a hypothesis for what we wanted and why we were acting so aggressively to disrupt the status quo, the challenger acknowledged that, yes, that would be rational, and yes, that would be better for the United States, and yes, that might even be better for our allies too.

Let’s begin with the premise: The costs to the United States of attempting to maintain the so-called “liberal world order” have come to outweigh the benefits (perhaps they always did). Of course, it was the United States that chose—indeed, largely dictated—the arrangement in the first place. But that does not preclude revisiting those choices as lessons get learned and conditions change. In the emerging multipolar world, in which China will advance its own interests contrary to ours, we can and should ask more of the many allies who would strongly prefer our sphere to China’s. We should treat our allies fairly and respectfully, and our demands should be reasonable, but the time has come to make them. Free access to the American market and partnership with us in national defense should be contingent upon:

1. Balanced Trade. The United States cherishes free markets and welcomes free trade with other market democracies. But the premise of mutually beneficial free trade is that it operates as trade—countries exchanging things they can make and do best for the things others can make and do better. What we will not tolerate is the situation that we have encountered over the past several decades, where things that we once made in the United States move elsewhere:

• not because those places have any genuine advantage in the production, and

• not because we are making more of something else once made elsewhere instead, but rather

• because countries make policy choices to expand their own manufacturing sectors at America’s expense.

Some economists object that trade deficits simply emerge in nature and are no one’s fault, or else that the real fault lies with the United States for running large budget deficits that lead us to borrow from around the world. To be sure, our budget deficit is a problem that we have an obligation to address. But the idea that these other countries don’t want their trade surpluses and have not actively pursued them is absurd. With the United States committed to maintaining the liberal world order and taking bad advice from near-sighted economists, policymakers elsewhere acted secure in the knowledge that we would do nothing to stop them.

And so the question becomes, what if those countries wanted something different? Or, more precisely, what if those countries found it in their best interest to pursue something different, because staying on their current course would mean losing access to the American market and defense commitments? In all of those areas where they have used policy to boost their own manufacturing sectors—currency valuation, industrial subsidies, government procurement, regulatory barriers, wage suppression, and so on—they could instead use their policy to boost ours.

Is it so outlandish that Japan would cap its export of vehicles to the U.S. market and tell Honda and Toyota to go make it in America instead? Trick question—that’s exactly what Japan did when threatened with tariffs in the early 1980s, and we have the booming auto sector in the American South as a result.

The notion of a “Mar-a-Lago Accord,” based on the 1980s “Plaza Accord,” fits squarely within this framework: bring U.S. allies to the table to agree upon a revaluation of currencies that would help to rebalance trade, backed by the threat of tariffs or other trade actions against countries that fail to participate. Even absent a gathering at any one of the many fine Palm Beach resorts, a U.S. shift from a market open by default to one protected by default puts the ball in our allies’ court to adopt policies that solve the problem if they want to come back inside a free-market zone.

2. Burden Owning. The extent to which U.S. allies have under-invested in their own defense capabilities, and relied instead upon the United States to lead and underwrite all military actions and deterrence around the world, should be deeply humiliating to them. But mostly, it is deeply humiliating to us. We accuse those nations of being “naïve” in their failure to maintain adequate defense, but they have been laughing all the way to the bank, or at least all the way to the more generous social welfare spending they can afford as a result. The United States has been the naïve one, having compliantly footed the bill year after year, its exhortations for greater burden sharing having elicited only smirks.

Lectures, unsurprisingly, have not worked. What may finally be starting to work, as I discussed with the UK’s Michael Gove earlier this month, is the United States in fact refusing to go along with the charade any longer. In the UK, Germany, and Japan, a reorientation may finally be underway.

But the United States must emphasize that there is no magic number for countries to spend that proves they are “doing enough.” The goal should not be burden sharing but burden owning. Japan’s goal should not be to spend 2% of GDP on defense, at which point the U.S. promises to defend it from China. Germany will not have done its part by bringing the size of its armed forces up from 180,000 to 200,000—a goal it has already pushed back from 2025 to 2031, and which moved further away as enlistment managed to shrink last year. No, Japan’s defense spending will be sufficient when it feels secure from China. Germany’s spending will be sufficient when it can successfully deter Russia.

The model here should be Israel, the American ally that generally asks us to stay home, it can handle its own business, thank you very much. Israel allocates an enormous share of GDP to its defense (more than 5% annually, even absent ongoing conflicts) and has universal conscription, not because that’s what’s necessary to pass some political test, but because that’s what’s necessary to defend Israel. Of course, the U.S. also provides Israel with military aid, mostly in the form of weapons systems, but that represents a small fraction of Israel’s total spending (less than $4 billion versus more than $20 billion), and basically nothing compared to what the U.S. spends on its own military commitments on behalf of its allies in Europe and the Pacific. Israel is also an invaluable intelligence and technology partner.

Could Japan and Taiwan face off against China in the same way Israel holds its own in the Middle East, with the United States playing a comparably complementary role? The only reason they cannot is that they have never had to and never tried.

3. China Out. The third requirement of participation in a U.S.-led economic and security alliance should be the maintenance of a collective perimeter that excludes China. Partners should agree on common tariff barriers, investment restrictions, export controls, and immigration policies. As AI-dominated information networks continue to develop, the technology ecosystem of the free world may also need to be kept apart from the Chinese-dominated one.

In some respects, a requirement of balanced trade would already push countries in this direction. If Mexico is committed to balanced trade with the United States, Mexico-based BYD factories could not flood the American market with subsidized EVs. But the United States has, and its allies should have, concerns about China that go far beyond trade deficits. The Chinese Communist Party has an explicit strategy of dominating critical links in supply chains and absorbing key technologies vital to military progress. It also uses foreign investment into China to gain leverage over the companies seeking profit there, and investment out of China to gain leverage over governments hungry for capital and infrastructure. While each individual country and each of its corporations will find endless situations where working with China seems attractive, an alliance will only be secure and its markets free if all have disavowed that course.

As Nicholas Phillips observed in an excellent essay for Commonplace last week, Canada and Mexico may be coming under so much early fire because they have traditionally had such close trading relationships with the United States, not despite those relationships. As written, USMCA does little to exclude China from North American supply chains and, as recently as December, the Financial Times was reporting on “How China Is Setting Up Shop in Mexico.” Just a few months later, after Trump’s initial actions, Reuters was reporting that “U.S. Treasury Secretary Scott Bessent said … Mexico has proposed matching U.S. tariffs on China in a move that he described as ‘very interesting’ and one that Canada should match.” Bloomberg said “Trump’s Tariff Threats Freeze Out BYD and Other Chinese Firms.”

North America is the obvious core of a U.S.-led bloc, and USMCA provides the basic framework for trading relationships therein. The renegotiation of USMCA, initially scheduled for next year and already moved up in response to the Trump administration’s actions, provides an obvious inflection point for the American approach to economic alliances. Clearly conveying the unattractive alternative to accepting American terms will be an important step in that process.

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All three of these demands are dramatic departures from the status quo and therefore engender yawps of outrage from allies abroad and liberal-world-order defenders at home. And yet, one cannot help notice, they’re all eminently reasonable elements of a fair and well-functioning alliance—indeed, they’re mostly expectations to which the United States has already been held, and certainly all ones to which the United States would hold itself going forward.

We do not try to run trade surpluses at the expense of other countries, and if we did they would scream bloody murder. We do not underspend on defense and then try to shame other countries for not fighting our wars for us, indeed it’s hard to envision how that would even look. We have already begun efforts to decouple from China and certainly would not ask other countries to go any faster than we go.

And while this may sound condescending, I would even suggest that these policy changes would be good for our allies too. Both Germany and Japan are facing significant economic struggles of their own, caused in part by their overreliance on exports and lack of domestic demand. Reducing their savings rates and trade surpluses could help stimulate much-needed growth. There is nothing contradictory in observing that persistent imbalances can be unhealthy on both sides of the ledger. Countries that have abdicated responsibility for their own defense might find themselves much happier, if slightly poorer, if they reclaimed their own agency. As for China, the United States will do our allies a great favor if we leave them no choice but to abandon the temptations of the CCP. An alliance built around balanced trade, burden owning, and China out would also afford all its members better opportunities to reindustrialize their own economies and counter China’s scale; but only if all three commitments are present.

The best that could be said of the Trump administration’s actions to date is that in their speed, severity, and unpredictability, they have been effective in disrupting the cognitive entrenchment that afflicts a global elite fully committed to the model constructed and defended over the past 30 years. People have a hard time thinking clearly about the options ahead of them until they understand that the one behind them, which they may have liked better, is really and truly gone. Colloquially, we might call this “burning the boats.” Clearly, this goal is being accomplished, insofar as our allies really do seem to believe that the old free-trade and defense paradigms are gone.

But most generals don’t burn the boats, with good reason. Doing so is really expensive and destroys a lot of good boats that you might still want to use at some point. Nor is it the best motivational strategy, insofar as it infuriates a lot of the people you ultimately do need on your side. In the present case, the costs may prove quite high and the fury of our allies is surely very real.

Most importantly, if you are going to burn the boats, you had better have a very clear plan toward which you can rally your troops. Burning the boats and then leaving everyone milling aimlessly on the beach is the worst of all worlds. Members of the Trump administration have made various comments consistent with each of the three demands, but the administration has yet to articulate them as a coherent package, or establish their connection to the actions being taken, in a way that provides either domestic constituents and producers or foreign allies a roadmap to understand and follow.

It's not too late to do that, but it is getting late. Wednesday will be interesting.

- Oren