#19 Trump's Tariffs Make a Bit More Sense if You Think Like a Mafia Boss

A Public Choice interpretation. Well, sort of.

I’ve started teaching a course on rational choice to BA students—my first-ever course taught in Dutch, by the way—and I’m re-reading classic texts on game theory, public choice, and collective action. I used to think this literature wasn’t really my cup of tea, but I’ve been pleasantly surprised. It's actually more nuanced than I expected—especially if you read the classics (Downs, Olson, etc.) in their own words.

This re-reading made me think differently about Trump’s recent announcement of sweeping tariffs on all countries. I’m usually skeptical of the idea that Trump is playing some kind of five-dimensional chess, where every seemingly irrational move is part of a grand strategy. But the decision starts to make more sense if you look at it through the lens of a mafia boss establishing a racket.

From a national economic perspective, the impact of these tariffs is fairly clear: they’re likely to be disastrous with respect to their stated objectives. They won’t bring about a significant reindustrialization of the United States—certainly not within the timeframe of an election cycle. They will cause significant short- and medium-term economic pain, and they won’t raise meaningful revenue. Trump and his allies seem to believe that tariffs could replace income taxes as a revenue stream. While it's true that tariffs made up a large portion of federal revenue in the 19th century, total government spending at that time was a tiny fraction of what it is today. Financial markets have already been rattled, and it’s likely to get worse.

The tariffs make more sense if you shift the unit of analysis from countries or states to individuals. This is where public choice theory becomes useful. It starts from a simple premise: politicians are individuals with their own interests. They don’t necessarily act in the best interest of the country, but in ways that maximize their own power, visibility, and control. This seems particularly accurate in the case of Donald Trump, who was socialized in the New York real estate market, with its mafia-adjacent practices and networks.

Tariffs fall under presidential authority, which means they are essentially a discretionary tool. That discretion enables a favours economy. Trump is placed in a position where he can grant exemptions—either to foreign governments seeking relief or to domestic industries lobbying to have their products exempted. Instead of promoting stable, rules-based trade, Trump deliberately injects uncertainty. He imposes tariffs without warning, targets both allies and rivals, and offers relief only on a case-by-case basis.

This unpredictability isn’t a bug—it’s a feature. By creating chaos, Trump casts himself as the only source of order. Companies, industries, and foreign governments must approach him directly to seek exemptions or negotiate deals. Trade becomes personalized and transactional. The overall economy may shrink, but the role of the regime—and its leader—becomes more central. Every exemption becomes a favour. Every negotiation becomes an opportunity to extract concessions, loyalty, or media coverage.

The goal is dependency and allegiance. In this world, Trump becomes a toll-keeper: deciding who gets access, and who pays. We know from institutional economics that rules and predictability are generally better for trade and growth. But power is easier to wield when discretion lies with a single individual.