Foreign Policy Live How to Navigate the Trade Wars
Aug 13, 2025
Dani Rodrik, a Harvard economist known for his critical views on globalization, dives into the complexities of current trade wars. He discusses the implications of Trump’s tariffs and the need for modern industrial policies to address economic nationalism. The conversation shifts to the role of AI in fostering economic equity and the changing landscape of global trade, emphasizing the diminishing influence of the U.S. Rodrik highlights the necessity for nations to evolve strategically to thrive amidst these turbulent trade dynamics.
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Use Targeted Industrial Policy, Not Broad Tariffs
- Avoid trying to rebuild mass manufacturing as the primary route to a broad middle class; technological change has altered labor's role.
- Pursue targeted industrial policies for strategic sectors instead of blanket tariffs, using conditional subsidies and firm dialogues.
Tariff Policy Harms The U.S. Too
- Trump behaves like a self-harming bully whose tariff swings damage the U.S. economy as well as others.
- His policies create uncertainty and likely slow growth, inflation, and market turmoil.
Europe Should Lead With A Realistic Vision
- Europe should articulate a practical vision for the next global economy tied to domestic reforms and engagement with China.
- Combine domestic investment, green industrial policy, and inclusive strategies to attract partners and counter unilateral U.S. pressure.
