Higgledy-piggledy US tariff policies: Is there a method to the madness?

Just when the global business community had started adapting to the unpredictability of US trade policy, the Trump administration – true to form – threw a monkey wrench into the mix.

Within 24 hours after President Donald Trump announced tariff exemptions on 20 categories of electronic products, from laptops and Apple Watches to semiconductors, administration officials said the exemptions were only temporary and would soon be followed by a new set of "sector-specific tariffs."

To many observers, it feels like watching a drama scripted by a roomful of improvisation actors who never rehearse. Is there a strategy here or is chaos the strategy?

What's clear is that Trump's tariff policy is no longer a matter of economic orthodoxy, or even basic cause-and-effect logic. It is now a political spectacle.

One day, tariffs are the righteous tools of economic nationalism. The next, they're quietly shelved in the name of market stability, before being revived under a different name. The rest of the world watches on, confused, jittery and increasingly skeptical.

Within the administration, aides must perform a bewildering triple act: lavishing praise on the "Art of the Deal," maintaining the illusion of consistent policy in public and cleaning up adverse fallout behind the scenes. It's as if someone revived "The Emperor's New Clothes" tale as a Beltway reality show, with less wardrobe and more spreadsheets.

But behind the drama lies a real and serious question: Is there an economic logic to the madness?

The answer is yes – and no.

A strategy of trial balloons

Trump's approach to tariffs is, above all, experimental. Think of it as a giant stress test. What can the market handle? What will consumers tolerate? At what point do inflation and bond market tremors become unacceptable? When the pressure rises, tariff policy seems to recede; when things stabilize, the trade saber-rattling resumes.

This cycle is not incidental. Trump boasts of his negotiating prowess in real time, with live audiences. Unlike traditional presidents who make policies based on careful analysis and consultation, Trump throws spaghetti at the wall to see what sticks. It's the deal that matters, not the spreadsheet. If inflation ticks up, he pivots. If Wall Street panics, he reassures. The goal seems to be: keep markets and adversaries off-balance.

Yet even amid this chaos, Trump's policy gestures often contain a grain of long-term ambition. He genuinely believes that certain industries – especially high-value manufacturing like semiconductors, automobiles and electronics – should return to American soil. In this vision, tariffs are not only a bargaining chip but also a kind of industrial policy – painful in the short term but deemed necessary to rebalance America's economic foundation.

The selective logic of industrial policy

Let's give credit where credit is due. The idea of shoring up critical manufacturing is not without merit. A country that cannot produce its own chips or medical supplies leaves itself vulnerable in crises. And there's a growing bipartisan consensus that America should reduce its strategic dependency on any one nation – especially China.

But that's where the logic starts to fray. Trump's tariffs have been scattershot, applied to everything from steel to children's toys, with little regard for which industries might realistically return to American soil.

There's a reason no one in the administration ever champions coaxing toy and textile manufacturing back to the US. Those sectors aren't coming back. The US simply lacks the infrastructure, labor force and cost structure to compete in low-margin goods. Tariffs on such products serve no purpose. They are symbolic at best, counterproductive at worst.

High-value sectors like semiconductors are a different story, but even there, progress depends on consistency. Building a factory takes five to 10 years. No company will commit to investing billions of dollars based on a policy that might be reversed with the next tweet or by the next president.

The time horizon problem

This is the Achilles' heel of Trump's tariff strategy. To change corporate behavior, businesses need policy certainty. But tariffs have been applied – and withdrawn – willy-nilly. If the goal is to nudge multinationals into building factories in Arizona instead of assembling parts in Southeast Asia, companies must believe that tariff structures will hold – not for months, but for a decade or more.

So far, they don't. And understandably so. A four-year presidential term is a blink in corporate investment cycles. And with the US now flipping between protectionism and globalization in every election cycle, the rational move for most corporate executives is to hedge their bets, wait and ride out the storm.

The limits of tariffs alone

Even assuming tariffs do stick around, they are a blunt instrument. A sustainable industrial restructuring strategy requires far more: workforce development, infrastructure upgrades and a regulatory environment that rewards risk-taking.

American manufacturers routinely complain not about foreign competitors, but about finding domestic workers who are reliable enough to operate precision machinery on a continuing basis. This is not a trivial concern; it's a reflection on a deeper labor market dysfunction.

Moreover, tariffs alone do not create jobs. They merely shift supply chains, often away from China, but not to the US. Instead, production migrates to low-cost countries like Vietnam, Mexico or India. American firms do what they've always done: optimize globally.

As long as tariffs are narrowly targeted – like hitting China but sparing others – the net effect is not shoring up but diversification. That may be good geopolitics, but it's not an industrial renaissance.

If the US were serious, it would need to apply industry-wide tariffs across all countries, not just one, and commit to them for decades, not months. That's a tall order in a political system where even quarterly economic pain becomes a political liability.

Lessons for global business

For multinational companies, the Trump tariff drama offers a few hard-earned lessons.

First, patience is a virtue. With almost three-and-a-half years left in Trump's last term in office, the wisest move may be to hunker down and avoid irreversible commitments.

Second, presidential tweets should not be taken as investment guidance. Reactionary decisions based on campaign trail rhetoric are a recipe for regret.

Third, smart firms are building resilience by producing in markets they serve, cultivating strong ties with local governments, customers and talent pools. In China, that means deeper localization, not only in manufacturing but in research and development, branding and product strategy.

China isn't just a market, it's a global innovation hub. Ignore that, and you are out of the game.

Companies that treat China only as a final assembly line miss the point. The next decade's breakthroughs in technology, green energy and digital ecosystems may well emerge from Hangzhou or Shenzhen, not Cupertino or Munich.

Finally, companies should rethink the role of local leadership. Country managers must be more than sales reps. They need to serve as strategic intelligence assets, helping headquarters understand the fast-changing realities on the ground. Competitive monitoring, once an optional side hustle, should become a formalized responsibility, feeding insights back into global strategy.

Toward a post-tariff mentality

If there's one enduring lesson from the Trump tariff fiasco, it's this: Long-term industrial strategy cannot be conducted by megaphone. It demands patience, clarity and, above all, credibility. Without that, tariffs are not tools, they're noise.

In the meantime, other countries are trying to calibrate their responses to an ever-shifting environment. China, for its part, is doubling down on policies to increase domestic consumer spending and diversify export markets. Europe is becoming more wary of US policy swings. Canada has come out with reciprocal tariffs. Even smaller economies are seizing the opportunity to attract the supply chains that America is chasing but hasn't yet firmly gripped.

The irony? In trying to make America self-sufficient, tariffs may be hastening the rest of the world's independence from the US.

As the curtain rises on the next act of this trade theater, one thing is certain. The audience is rapt but no one is applauding.

(The author is an adjunct research fellow at the Research Center for Global Public Opinion of China, Shanghai International Studies University, and founding partner of 3am Consulting, a consultancy specializing in global communications.)