Trade beyond tariffs

Much has been written about the puts and takes of President Donald Trump’s tariff policy, but ten months into this grand experiment, it’s useful to take a step back and look at the broader picture. When one does, the contours of a trade strategy beyond tariffs may be coming into focus.

If you take a close look at the recent deals struck with Australia and Malaysia, for example, it’s clear the administration has been open to negotiating lower tariff rates for key trading partners (below the levels announced on Liberation Day) as part of agreements that address non-tariff barriers and advance national security priorities.

Malaysia’s framework agreement is the closest deal the Trump administration has negotiated to a traditional trade agreement. It includes market access—reducing Malaysia’s tariffs on U.S. exports and lowering tariffs on Malaysia’s exports from 24 percent (announced on Liberation Day) to 19 percent, bringing Malaysia in line with Cambodia and Thailand at 19 percent and slightly lower than Vietnam at 20 percent. (It turns out our trading partners are equally, if not more, focused on how the U.S. tariffs they face compare to those of their competitors as they are about the nominal rate itself.) It also streamlines several non-tariff barriers and establishes more predictable treatment for U.S. digital services, intellectual property, and investment.

But the heart of the deal is elsewhere. Article 5 commits Malaysia to adopt “equivalent restrictive” measures whenever the United States imposes tariffs, quotas, or other import restrictions on third countries (read, China) on national-security grounds. That obligation is reinforced by companion provisions on export control alignment, tightened rules-of-origin enforcement, and consideration of a CFIUS-style investment screening regime. This allows Washington to project parts of its tariff, technology, and security strategy onto a partner’s foreign policy.

The administration, for its part, appears to see the Malaysia framework as a template to patch holes in unilateral implementation of U.S. export controls and tariffs by enlisting willing partners as co-custodians of a common set of national-security trade tools. If even a handful of countries accept similar terms, Washington could assemble through a network of similar bilateral agreements to form a wall of tariffs and technology restrictions around countries of concern, including and especially China. Indeed, just after Liberation Day, Treasury Secretary Scott Bessent hinted at this very approach. The recent deals announced with four Latin American countries seem to be following this pattern as well.

The Australia framework is squarely focused on securing the minerals and metals that underpin advanced manufacturing and defense, and builds on the administration’s August decision to apply lower and narrower tariffs on Australian exports, including a generous carveout for selected Australian-origin industrial inputs and processed minerals, such as battery precursors, specialty metals, and midstream mineral products that otherwise would have faced higher Liberation Day tariff tiers. The administration’s decision to carve out preferential treatment here is meaningful in that it demonstrates flexibility on tariffs and preserves the competitiveness of Australian producers inside U.S. supply chains precisely where China has been most dominant.

In exchange, President Trump secured commitments by Canberra to accelerate projects that will anchor non-Chinese mineral supply. The framework guarantees at least $1 billion in joint financing within six months, backed by seven Export-Import Bank letters of interest totaling $2.2 billion, with the potential to mobilize up to $5 billion in total investment. These funds support priority segments—copper, zinc, manganese, gallium, and both heavy and light rare earths. The agreement also calls explicitly for expanding non-Chinese refining and separation capacity, including heavy rare earth processing and an advanced gallium refinery in western Australia, as well as supporting major upstream projects. With eighty-nine rare earth exploration projects underway and more than forty U.S.-designated critical minerals within its borders, Australia offers a meaningful opportunity to rewire global supply chains, though it is likely to take years not months to do so.

Strategically, the framework aims to fill the gaps Beijing has long exploited. It commits Washington and Canberra to coordinated investment screening to curb Chinese acquisition of new mines; establishes joint tools to counter Chinese price manipulation, including standards-based trading systems and potential price-floor mechanisms; and directs both governments to expand strategic stockpiles and streamline permitting for new projects. By implicitly linking modest tariff stability to deeper mineral integration measures, the administration has effectively begun treating Australian-origin critical minerals as a privileged input to U.S. defense and industrial production. Where the Malaysia agreement ties another country’s tariff wall to U.S. national security measures, the Australia deal binds one of the world’s richest mineral endowments to U.S. industrial strategy. In both cases, tariff adjustments are the lubricant for a broader design: a world in which access to the U.S. market is coupled with participation in a coordinated economic security architecture.

Add to these agreements the accords Trump struck with Japan and South Korea (not to mention efforts to secure critical minerals from the Democratic Republic of the Congo and the Central Asian nations of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan) and we are beginning to see a concerted effort to pull countries together around a common set of high standards and secure supply chains.

One thing is clear: In the context of the unprecedented competition the United States finds itself in with China, trade policy is no longer just about economics. Economics and national security have converged. Economic security is now the north star of U.S. policy. Economic efficiency remains one objective, but it is balanced by the objectives of diversification, resilience, and national security. That means we are likely to be heading toward a less efficient, more expensive global economy in order to address national security interests. It is, therefore, important to understand when, how, and to what extent national security should trump economics.

Analyzing and balancing these tradeoffs was precisely the mandate of a bipartisan CFR Task Force on Economic Security, which yesterday released its flagship report. Chaired by Gina Raimondo, former Secretary of Commerce and Distinguished Fellow here at CFR; Justin Muzinich, former Deputy Secretary of the Treasury under Trump; and Jim Taiclet, Chairman, President, and CEO of Lockheed Martin, the report lays out actionable steps to assure economic security by enhancing U.S. competitiveness in artificial intelligence, quantum computing, and biotechnology. It’s worth a read and is well suited to inform agreements on the horizon with the rest of our trading partners in Asia and beyond.

Let me know what you think about the future of economic security and what this column should cover next by replying to president@cfr.org.

What I’m tuning into this week:

• CFR’s video takeaways from the task force report “U.S. Economic Security: Winning the Race for Tomorrow’s Technologies” with Gina Raimondo
  

• Rebecca Lissner’s article for Foreign Affairs, “America’s Quasi Alliances: How Washington Should Manage Its Most Complicated Relationships”
  

• Anthropic’s sobering report on “Disrupting the First Reported AI-Orchestrated Cyber Espionage Campaign”
  

• The latest iteration of the “How I Got My Career in Foreign Policy” series featuring Heidi Crebo-Rediker
  

• Dwarkesh Patel and Dylan Patel’s interview with Satya Nadella on “How Microsoft is Preparing for AGI”
  

• Erin Dumbacher, Mike Horowitz, and Lauren Kahn’s analysis “Time to Accept Risk in Defense Acquisitions”