Uncertainty surrounding the Trump administration’s tariff policy—which has shifted almost daily in recent weeks—has spooked markets, economists and consumers. But it hasn’t rattled Wilbur Ross, who served as Secretary of Commerce during Trump’s first term from 2017 to 2021. Now 87, Ross is well-acquainted with the President’s stance on tariffs, having played a key role in shaping tariffs against China during Trump trade war 1.0.
Though no longer in office, Ross remains a vocal supporter of Trump’s broader goal to revive U.S. manufacturing through tariffs. He argues that any short-term pain for American consumers will be softened as the government negotiates with trade partners. Before his political tenure, Ross built a reputation in finance as a bankruptcy expert, eventually founding the private equity firm WL Ross & Co.
Observer caught up with the now-retired businessman to discuss the current administration’s trade strategy—and the long game behind its latest round of tariffs. The following conversation has been edited for length and clarity.
Observer: How would you characterize the differences in the goals and priorities behind tariffs under Trump’s first administration compared to his second one?
Wilbur Ross: There are some real differences. During the first administration, our most important focus was trying to make sure that we had followed the various legislations carefully enough so that we could withstand challenges if they came to court, because we anticipated that the steel and aluminum tariffs would be litigated. They were, and we prevailed, so that has given the President a lot more confidence about what it is that he can do. Similarly, in a different context, he had used the IEEPA, which is another mechanism, and that too was tested, and that too worked.
Those phenomena, and the fact that he now has much better control over Congress, have led him to expand his targets and objectives for tariffs beyond just trade. Now he’s added the objective of raising revenues big time in order to help offset some of the tax cuts that he wants to make. That was not a particularly big objective in the first administration.
The other thing that he’s broadened it to do is to use it for other diplomatic purposes, like controlling fentanyl, controlling the border, getting countries to increase their contributions for defense. It’s a much more expansive set of tariffs this time than last time. And there’s one whole new concept, which is putting a minimum tariff on everything for the whole world—that was not part of the program during the first term.
What about China? Do you think they will back down, and how long could this trade war stretch on for?
We did have a deal with China, the so-called ‘Phase One‘ during the first Trump administration, but China never lived up to it. So the first thing that will be important in any new deal with China will be: How do we enforce it? What happens if they don’t live up to it? That will be a very big ingredient.
The second thing is it’s clear that the President’s strategy is to kind of isolate China and deal with them as a separate entity. It seems equally clear that his attitude toward them is more punitive than his attitude toward other countries. So those are two characteristics that will make a deal with China both more difficult to achieve and will also have a big impact on how useful the outcome is.
I think it was constructive that China announced publicly that they’ve appointed a special, very senior person as their point person for negotiations with us, and they’ve asked that we do the same. And the only thing that they’ve said as a precondition to negotiations is that we treat them with a little more respect. They’re unhappy with some of the negative things that the President and his cabinet have been saying about them.
Currently, there appears to be a widespread fear of the unknown surrounding these tariffs and how they’re going to end. Do you think that fear is valid, that there could be an outcome that really harms the U.S. economy?
I doubt it—because the other countries fundamentally cannot afford a trade war with us. And the reason they can’t is that they’re smaller than we are. For example, Canada and Mexico are each more or less one-tenth of our size, so $1 of trade pain that we inflict on them is ten times the impact of the same dollar of trade punishment that they inflict on us.
The other thing is that they will run more quickly out of things to tariffs than we will, because they sell us so much more than we sell to them. They just can’t afford it, and I think it’s why you saw some 70 countries immediately say they would like to negotiate mutual downward movement in the tariffs. And I’m hopeful that if the administration can lay out a clear enough path for what these countries have to do to get lower tariffs, that we could eventually end up with lower tariffs overall than we have now.
When it comes to semiconductors, how broad do you think tariffs will be, and what are you hearing from the industry and semiconductor executives on how they’re preparing for them?
Surprisingly, the semiconductor people have been sounding very patriotic to me. They understand that it’s not a tenable situation for us to remain so dependent on foreign suppliers. The only thing that they want is for us to structure the tariffs with other countries so that it doesn’t create a loophole for China. For example, a key component of semiconductors is ceramics, and there are some Japanese companies that probably have the best ceramics for that purpose in the whole world. The Americans would like to see those companies join in on the barriers to China, because what they’re concerned about is if they can’t ship, but the Chinese can get around it by buying the key components elsewhere, which wouldn’t be good for the American companies.
I’m glad that [the Commerce Department] is doing a very detailed study. They’ll have public hearings, they’ll have industry consultation. And while it has a negative in that it postpones things a bit, I think it has a positive in that they will be able to fine-tune it.
Turning to Wall Street, what would you say to business leaders and investors who, in the past few weeks, have expressed alarm over how tariffs are causing economic volatility and market turbulence?
I think the concern that investors have had is really twofold. One, they didn’t think the tariffs would be as broad or as high as they seem to be, so that was a bit of a shock. But I think the main thing is that there’s no clarity as to how all this will end. There’s no clarity on whether it will be a trade war or longer-term, lower tariffs. And so until a few deals are made with a couple of the big players, there will be this confusion. Once a couple of deals are struck, then people will have a clear roadmap, and I believe that will calm the markets.
Do you have any concerns about how Trump’s tariff policy might play out, and is there anything that you would advise to have done differently if you were part of the current administration?
I think it’s very important that the tax bills be passed because that, to me, is the major hurdle to protecting the economy from whatever negatives might come from the tariffs. So, I think it’s important for Trump’s overall economic policy to be implemented, not just the tariff part.
