In a recent statement that has sparked discussions across global trade and economic forums, Mark Carney, former Governor of the Bank of England and a leading economic advisor, emphasized that any future trade deal involving the United States is unlikely to be completely free of tariffs. His remarks offer a sobering reality check for those hoping for a return to unbridled globalization and entirely free trade between major economies. Carney’s position reflects the evolving landscape of international commerce, shaped by geopolitical tensions, domestic political pressures, and a rethinking of global supply chain resilience.
The Historical Context
For decades, the United States has championed free trade, supporting institutions like the World Trade Organization (WTO) and signing broad trade agreements such as NAFTA and the more recent USMCA. The philosophy underpinning these moves was that reducing trade barriers would increase economic efficiency, promote innovation, and foster international cooperation.
However, over the past decade, sentiment has shifted. Globalization, once seen as a positive-sum game, is now viewed more critically by various segments of the population and political class. Many American industries, particularly in manufacturing, have suffered due to competition with cheaper imports. The political backlash against globalization culminated in policies introduced during the Trump administration, which saw tariffs placed on Chinese goods, steel, aluminum, and other imported products.
Although the Biden administration has attempted to soften some of these policies, it has not entirely rolled them back. Carney’s statement aligns with this broader trend and signals that future trade deals will likely maintain certain tariffs to protect domestic industries and address strategic concerns.
Strategic and Political Considerations
Carney’s comment points to more than just economic calculation—it acknowledges the deeply political nature of tariffs in modern trade policy. Tariffs are not merely tools to adjust trade balances; they have become instruments of national strategy. In particular, they are used to support domestic employment, maintain technological advantage, and deter perceived economic threats from rivals like China.
For instance, the U.S. has increasingly prioritized protecting its semiconductor industry, clean energy technologies, and critical mineral supply chains. In such sectors, tariffs and subsidies go hand in hand to provide the environment needed for domestic firms to compete globally. This protectionist stance is often justified under the banner of national security, a rationale that both Democrats and Republicans have used.
Carney’s position likely reflects an acknowledgment that even liberal democracies will continue to use tariffs selectively to guard strategic sectors. A completely tariff-free trade agreement may be ideal in classical economic theory, but in the real world of political negotiation and national priorities, such purity is rarely achievable.
Economic Implications
While tariffs may offer short-term protection for certain industries, they also come with broader economic consequences. Economists generally agree that tariffs increase the cost of goods for consumers, reduce trade efficiency, and can lead to retaliatory measures from other countries. Over time, these effects may erode overall economic growth and reduce the benefits that international trade can provide.
However, Carney seems to be suggesting a pragmatic balance. A trade deal that includes some tariffs might still be beneficial if it supports national resilience, protects key industries, and helps achieve broader economic goals like reducing carbon emissions or ensuring labor rights. In other words, modern trade agreements may need to reflect a blend of market efficiency and strategic safeguarding.
A Changing Global Order
Carney’s remarks also come at a time of significant shifts in the global economic order. The rise of China, the reorientation of supply chains due to the COVID-19 pandemic, and geopolitical uncertainties such as the war in Ukraine have all contributed to a more fragmented international landscape. Nations are increasingly prioritizing self-sufficiency and regional trade blocs over global integration.
In this environment, trade deals are becoming more complex and laden with conditions. They no longer focus solely on reducing tariffs but also include rules on digital trade, environmental standards, and labor conditions. Carney’s assertion that tariffs will likely remain a feature in U.S. trade deals aligns with this broader complexity. Rather than pure free trade, what is emerging is “managed trade,” guided as much by political and strategic concerns as by economic efficiency.
The Path Forward
For policymakers, Carney’s comments serve as a reminder that trade negotiations must be grounded in current realities. Expectations for sweeping, tariff-free agreements should be tempered by the need to address legitimate concerns about domestic industry, strategic autonomy, and global competition. It also suggests that the United States will continue to use tariffs tactically, rather than eliminating them altogether.
This stance may not please purists who advocate for unrestricted trade, but it represents a middle path that acknowledges the evolving needs of modern economies. Carney’s view, coming from a seasoned central banker and economic strategist, carries weight and underscores the importance of realism in global trade discussions.
Conclusion
Mark Carney’s observation that a U.S. trade deal without any tariffs is unlikely reflects a nuanced understanding of the modern global economy. His remarks highlight the shift from idealized free trade to a more strategic, selective approach, where tariffs are tools to balance domestic and international priorities. While tariffs may introduce some inefficiencies, they also serve crucial roles in protecting vital industries, responding to geopolitical pressures, and fostering national resilience. As nations continue to navigate a turbulent economic landscape, Carney’s insight offers a valuable guidepost: the future of trade will not be tariff-free, but it can still be fair, strategic, and beneficial if managed wisely.
