Last month, President Donald Trump announced a massive increase in U.S. tariffs. He slapped a blanket 10 percent tax on imports. Countries faced additional ‘reciprocal’ tariffs, ones based on their net trade surplus — in goods, not services — with the United States. Trump branded his announcement as “Liberation Day.” Markets disagreed. Stocks tumbled and investors sold US government bonds.

Trump argues that his trade polices might create some short-term economic pain, but it won’t be long before they make the American economy great again. Leading economists disagree. They warn that companies will pass on some (or all) of the import duties to consumers, leading to increasing prices, declining disposable income, and inflationary pressures. Trump’s inability to settle on a consistent trade policy — whether with respect to overall rates or exemptions — has compounded the damage. Even if Trump abandons his tariffs altogether, he will have still undermined both the U.S. economy and Washington’s international credibility.

How can we explain such self-defeating policy? Trump certainly isn’t responding to public opinion. Increased protrectionism does not seem particularly popular with the electorate. Yes, Trump generated notional public support for trade policy and tariffs in the past. But Trump’s approval ratings have slumped and polls suggest that public opinion on international trade has warmed in recent months. Representatives of influential interest groups, as well as key figures in Trump’s inner circle (most famously, Elon Musk), have denounced the tariffs. Pressure from Trump’s tech entourage likely explains his decision to exempt many electronics — including smartphones and semiconductors — from his most punitive tariff rates.

Trump’s claims that tariffs will force companies to produce their goods in the United States, and thus produce a boom in technology and manufacturing jobs. Key advisors — including trade advisor Peter Navarro and Commerce Secretary Howard Lutnick — share this view, albeit to different degrees. But Trump’s support for high tariffs dates back to the 1980s. Trump has long been fascinated with tariffs. He famously proclaimed himself a ‘Tariff Man.’ In his first term, he initiated a minor trade war with China— albeit one that seemed more about forcing changes in Chinese policy than a long-term commitment to protectionism.

Trump has said that  he ‘learned’ that tariffs could be effective in his first term. He also ‘learned’ how to pre-empt opposition from Congress and the bureaucracy. In his second term, he has removed ‘guardrails’ against his policies by surrounding himself with loyalists. Trump’s tariff policies reflect his decision-making style and his aversion to admitting error. Trump’s leadership style is bold and competitive, impulsive and undisciplined, and norm-defying. These personality characteristics make him a particularly disruptive force in the global economy — especially in his less-constrained, more personalistic second term.

Trump tariffs are a powerful example of the importance of individual leaders. They demonstrate that leaders’ styles, beliefs, and personalities matter to the international economy. Yet theories of international political economy almost completely ignore leaders. They tend to characterise the international economy as a realm of impersonal and ‘invisible’ market forces, ones that drive rational behaviour. Institutions matter in these accounts, but not individuals.

The most prominent explanation of international political relationships are the 3 ‘Is’  — interests, institutions, and ideas. But we must include another ‘I’ – individuals, particularly political leaders with authority to make major economic decisions, including policies on foreign aid, foreign investment, and trade.  In our recent article, “The Profits of Personality”, we show that the personality traits of elected leaders help explain the different windfall taxes introduced in Ecuador and Peru during the 2003-2013 commodities boom. Leader’s personalities shape their willingness to resist market pressure and lobbying by economic interest groups.

Trump may seem like an obvious — and perhaps atypical — example of the importance of personality in global economics. But there are plenty of other ones. UK Prime Minister Liz Truss implemented her economic beliefs with very high, unfunded tax-cutting measures in her ‘mini-budget’ in September 2022.  This prompted a rapid fall in the value of the British pound, market instability, and a rebuke from the International Monetary Fund. 

While Truss eventually changed course, she had a huge economic impact in the short 44 days she was prime minister. The damage was so severe that her own party replaced her. President Recep Tayip Erdoğan of Turkey pursued a highly unorthodox monetary strategy of maintaining low interest rates despite rampant inflation and dwindling foreign reserves. After an intense political backlash, Edroğan began to reverse course in 2023. He allowed the Turkish central bank to increase interests rates, and did so at a time when most countries were starting to reduce rates in order to spur economic growth.

We can integrate leadership into the study of international political economy, or we can treat such cases as sideshows and anomalies — and stick with theoretical frameworks that are at a complete loss to explain the biggest challenge to the international economic order in decades.