Trump’s former commerce secretary: “The chaos was, frankly, pretty much inevitable”

In January, the tariffs the United States charged on foreign-made goods averaged out to about 2.5%. By April, that figure soared to 27% — the highest levels since 1903. Chaos ensued. Markets rollercoastered. Not even islands solely populated by penguins were spared. 

To Wilbur Ross, 87, the billionaire investor who served as the secretary of the Department of Commerce during President Donald Trump’s first administration, it was a clear signal in the noise. 

“He always believes in putting maximum force forward in the beginning,” Ross said in an hour-long interview with Sherwood News. “This is vintage Trump.”

That doesn’t mean he agrees with the entire strategy. 

“It’s very hard to adjust to uncertainty,” he said. 

Trump could have done a lot more to ease investors’ fears and guarantee his own success. A slower, more deliberate tariff rollout might have avoided some of the legal risk, too. 

Trump’s right to implement tariffs with approval from Congress rests on three statutes. The first two — the International Emergency Economic Powers Act and Section 232 of the Trade Expansion Act of 1962 — give the president the right to enact trade levies unilaterally to protect against an “unusual and extraordinary threat” and to preserve national security, respectively. The third, Section 301 of the Trade Act of 1974, can come in response to unfair trade practices. 

Ross has some doubts that federal courts will find there was a sufficient risk to the homeland to invoke the first two and whether a judge will allow Trump to use the second law without going through the typical procedural process of allowing the Commerce Department to first carry out an investigation and make recommendations. 

He also questions whether it was wise to slap major tariffs on US trading partners before Trump and the Republican majorities that control Congress could pass tax cuts to offset the shock to the economy from spiking the cost of imports. 

In the debate among those in MAGA world over whether tariffs are a permanent fixture or a way to drive a hard bargain, Ross is firmly in the second camp. He can see a course through the choppy waters and says the new administration has skilled enough navigators to steer the ship. And, as he explained, much has changed since Trump’s first turn at the helm. 

Sherwood spoke to Ross on April 22. This interview has been lightly edited and condensed for clarity. 

Sherwood: You were involved in negotiating tariffs under the first Trump administration. What’s different this time around? 

Wilbur Ross: First, what’s different is that Trump is much more powerful this time than he was last time. He effectively controls the Republican Party, and while the majority is very slim and not 100% well organized, he generally has control of both houses of Congress. That was not the situation the first time. Mitch McConnell was never very well disposed of toward President Trump, and obviously, the composition of both the House and the Senate was somewhat different. Particularly it was different in that there was quite a number of people, especially the Senate, who believed then in free trade. Those are by and large retired from Congress, so there’s less opposition on the Hill. 

The final thing is that his majority with the public was extremely powerful, and people voted for him presumably knowing that he was going to be tough on tariffs in general, and particularly in terms of China — though I don’t think anybody had any idea that he would go quite as far as he has in fact gone.

Those are all structural changes. There’s one other change. In the first administration, a lot of our time and effort was devoted to figuring out what was the enabling legislation that would let him impose tariffs without having to go to Congress. A couple of relatively archaic and relatively unused measures for that were pretty well tested, especially in the case of steel; they were tested in the Supreme Court, and so he now knows that he has a much more clearly defined legal path to not needing any congressional vote. 

Sherwood: In The Hill last week, you called the tariffs “more expansive” than you had expected. On Fox News, former International Trade Commission Chief Peter Morici called Trump’s current tariff regime “too high” and “too fast.” Is he right? 

Ross: If it weren’t for the IEEPA and 232 and 301 exceptions, fundamentally, Trump wouldn’t have any power to impose tariffs without congressional approval. 

One of the concerns I have this time is that a number of these were put in without any real process: no industry consultation, no public hearings, none of the sort of formal trappings of decision-making that are more typical of a tariff procedure. That may very well increase his legal risks. But they have the merit of letting him put them into effect a lot more quickly.

Sherwood: Aside from the legal standing, do you think the current tariff regime is the right approach? 

Ross: Like all tariff things, this will end up being a negotiation. So the real question is, what will be his end point? Will it be these fairly extreme levels? Or will it be at a lower level? That’s obviously, for the moment, something we just don’t know the answer to.

Sherwood: You called the tariff approach a “high-risk, high reward” play that is “typical Trump.”

Ross: He doesn’t shun risk. But I think the reward he was seeking was to get them out there very, very quickly and get them into effect, so he can accomplish his triple objective of raising more revenue for the government, changing trade practices, and getting other concessions, like contributions to NATO, fentanyl [restrictions], and all that. He’s got a much broader set of purposes than he had the last time.

Personally, I would have tried to get the tax bill through first before the tariffs, because the tariffs are going to be controversial. If he had the tax bill first — given the stimulatory powers of it, with the tax-free Social Security and the reduction in rates — those would be good antidotes to any economic disruption caused by the tariffs, and therefore would have lowered the rhetoric about the danger to the economy.

Sherwood: Who do you think bears the highest risk in this scenario? Is it the president himself bearing political risk? Is it investors? Or is it ordinary Americans facing a recession? 

Ross: No, the risk I’m referring to is mainly that he might get knocked down in court. 

For example, take Section 232. He’s now ordered a 232 investigation by the Commerce [Department] of semiconductors. Well, there’s a whole process under 232 by which Commerce renders its report to him, and then he makes the decision. But here, you have the decisions already in place. So, the question is whether that has any bearing on the legality of those tariffs. 

My guess is that all of these will be tested. If no one else does, I believe Governor Newsom from California has indicated that California will contest them. Whether California even has standing as a state to contest them is an open question itself. 

My point is, by going about it the way that he has, Trump has taken more risk. But his reward is that he gets them in a lot faster.

Sherwood: To what extent are we seeing the administration trying to weaken the dollar without risking its status as the reserve currency? Is that a needle that can be threaded?

Ross: I’m not worried about the dollar losing its status as a reserve currency. The reason I’m not worried is that the essential ingredient for being a reserve currency is that a lot of that currency has to be in the hands of people in all different countries. 

One of the few good things about having a big, persistent negative trade balance is there are a lot of dollars in the hands of people all over the world. There is no other currency that’s nearly as ubiquitous. In terms of foreign exchange trading, something approaching 70% of all FX trades have the dollar on one side or the other of them. There’s no other currency that’s even remotely close to that. 

So that’s one set of reasons why I don’t see it’s risky that it might be displaced. The other set of reasons is, you need a market that’s big enough to absorb all that. I don’t know where China would put its huge reserves, or Japan would put its huge reserves, or others would put their huge reserves. Who else has the market scope to accept those many reserves? 

While the Russians talk about it, occasionally the oil countries talk about it, and China certainly talks about it, I just don’t think it’s very practical to replace the US currency.

Sherwood: What will it take to quell the chaos we’re currently seeing in markets? 

Ross: The chaos was, frankly, pretty much inevitable, given the scale and the scope of these tariffs and given the way that they came in as one big shock wave. 

The biggest fear anybody has about anything is fear of the unknown. The current state of play with these tariffs is that nobody knows where we’re going to end up. It makes it hard for investors or business people or anybody to make a decision. You can adjust to good news. You can adjust to bad news. But it’s very hard to adjust to uncertainty. That’s why I think markets will calm down once he makes a trade deal with one or two of the big countries.

Sherwood: Which countries do you think might go first? 

Ross: Two that sort of self-announced as being particularly eager to make deals are Japan and Vietnam. Vietnam issued a release saying it would even consider going to zero tariffs on American goods if they can get a reciprocal arrangement here. Now, that was a press release; that wasn’t a negotiated settlement. But they both have indicated a great willingness, and both have been very constrained in their reactions to the tariffs. So, I would say those are two pretty good candidates.

Sherwood: I’m sure you saw there was a closed-door meeting at JPMorgan, where Treasury Secretary Scott Bessent called a trade war with China “unsustainable.” Do you agree with those remarks?

Ross: I don’t think the Chinese or any other country really can afford a trade war with us. The reason I think that is several-fold. First of all, they are smaller economies than ours. Even China has only about two-thirds our size. What does that mean? That means that every dollar of trade pain that we inflict on China has 1.5x the impact of dollars of trade pain that they inflict on us. Second, we import so much — much more from them than they import from us — that pretty soon they’ll run out of retaliatory tariffs that they can do. That’s why they’ve fallen back on this rare earth thing: because that doesn’t kill exports for them, but it has a potentially very damaging effect on us.

In the case of Canada and Mexico, it’s even more extreme. Those economies are both more or less 10% our size, so the relative impact on either one of them of one dollar of trade barrier is quite a bit more severe, like 10 for 1.

Sherwood: Is there a risk, though, that the aggressiveness of the tariffs, including on allies, erodes the trust that’s necessary to build a coalition that can align a lot of different trading economies against China — if that’s the goal?

Ross: There’s no empirical evidence that running a trade deficit with the country makes them more of a diplomatic ally. For example, we have a huge trade deficit with China, and that certainly has not made them an ally. In contrast, we have a trade surplus with Australia, which is one of our best allies, and the same with the Netherlands. So the theory that somehow a reason for running a trade deficit was that it helped you diplomatically I don’t think has any evidence of being correct. Countries, at the end of the day, particularly in terms of trade, are going to do what’s in their economic best interest. If their interest lies better with the US than with China, they’ll support us. If their economic interest aligns better with China, they’ll support China. 

The structural problem that China has is this: China keeps saying, “Well, we’ll just find other markets for our goods.” There’s a flaw in that argument, which is very simply that most other countries in the world also have trade deficits with China. The only reason they can afford those deficits is that they may partly make up for them by surpluses with us. If we knock out their surplus with us, they won’t be able to afford to buy more from China. They simply won’t be able to. 

There’s another flaw. They say, “Well, we’ll just get our soybeans somewhere else.” There’s not, as far as I know, a great flood of soybeans in the world. The only way they’re going to be able to buy more from Brazil or Argentina, or any other supplier, will be by raising the price. That will have a further cost to China. In fact, the price of soybeans has gone up. But meanwhile, if Brazilian and Argentinian soybeans are diverted to China, then whoever had been their customer now becomes available to the US as a customer. So, while it may take a little while to do it, I think there’s a high probability that we can replace those products that China did buy from us. 

Sherwood: The New York Times columnist Tom Friedman recently returned from a trip to China and concluded that trade hawks in both parties underestimate how advanced China has become technologically. Rather than decoupling the two economies, he proposed that we should be cautiously partnering with China to gain access to its technological innovations in the same way they once did with us — for example, by requiring its battery innovators to start joint ventures with US companies to import things like their five-minute electric vehicle charging. What do you think Friedman is getting wrong? 

Ross: There are some areas where we depend very much on China. Critical minerals is one area. Electric-storage batteries is an area. Big, powerful electromagnets is an area. Certain pharmaceuticals are an area. There are some areas where we have technological vulnerability.

But that’s not the case in most. It’s not the case, for example, in semiconductors. The semiconductors we buy from China are mostly the commoditized ones that are quite large, running 7, 8, 9, 11 nanometers. That’s opposed to the state-of-the-art ones from Taiwan, which are down around 7 to 5 and heading to 3 nanometers. It really varies quite greatly by the individual product.

Sherwood: What would an ideal deal with China look like? 

Ross: The administration hasn’t made clear its numerical objectives. Directionally, I would say there are three major areas and then the fourth one that they don’t talk about at all. The three major areas would be: reduced tariffs, reduced nontariff trade barriers, and respect for intellectual property. The fourth one — which, to me, in many ways is most important of all — is, how do you enforce whatever agreement you make? What punishment comes to, say, China or any other country if they don’t honor the agreement? 

Remember, back in Trump 1.0, we did have a deal with China. We had the so-called “phase 1.” While it didn’t cover every aspect of trade, it covered a lot, and they never lived up to it, nor did they ever live up to their commitments to the World Trade Organization. The key missing ingredient is enforceability. It doesn’t do you much good to have an unenforceable agreement.

Sherwood: Is there any hope of getting there while maintaining America’s de facto support for Taiwan’s status quo independence?  

Ross: The two don’t have to be intertwined any more than China’s presence in the South China Sea, or any of these other items. They can be as separate as people want them to be, or they can be as linked together as people agree.

Sherwood: Is there a negotiation from earlier in your private-sector career that reminds you of what Trump is doing now? 

Ross: I’ve had quite a bit of business dealings with him, mostly adversarial, when I was doing the distress securities activities. He always believes in putting maximum force forward in the beginning, and he always believes in using the press to push his point of view. So, this is vintage Trump, what he’s doing with the trade thing. He loves big, bold, dramatic activities and announcements. This is totally consistent with them. But he is a good negotiator. Ultimately, what makes a good negotiator is figuring out what the breaking point is beyond which the other side can’t or won’t go, and trying to come in within that range. It remains to be seen if we can figure out how far they will go, and whether how far they’ll go is far enough, from his point of view, that it would lower the tariff.

Sherwood: Who within the administration that you know of do you think has the skills, particularly when it comes to understanding China, to make that judgment in a sound way about what the limits are?

Ross: Trump is obviously the one who will make the ultimate decision, particularly on trade matters. But you have some people there from the prior administration. For example, US trade rep Jamieson Greer had been the assistant US trade rep in Trump 1.0. So he knows very, very well the history of negotiations and every detail in our current agreements with everyone. 

Treasury Secretary Scott Bessent has a lot of knowledge of international trade, particularly currencies, because when he was at Soros, he was one of the people very responsible for the billion dollars of profit that Soros made shorting the British pound. So he has some knowledge. 

There are people in the Treasury and in Commerce from prior administrations who have a big embedded knowledge. Commerce Secretary Howard Lutnick himself has not historically been too involved in international trade. But he’s a very bright guy, a very quick learner, and a very good businessman. 

Then you have Trump himself. Remember, this is not his first time negotiating with a lot of these people.

Sherwood: At the end of this, do you see a true manufacturing renaissance?

Ross: We are fundamentally a service economy, so I don’t see manufacturing becoming a majority of our economy. But it certainly could grow by quite a bit. If it does, it would provide a lot of very high-paying jobs to people. There’s plenty of room for it to grow. Yet we still remain a service economy.

Alexander C. Kaufman is an award-winning journalist whose work has appeared in The Atlantic, Heatmap, Canary Media, and HuffPost, and who writes the Field Notes newsletter.