When the topic of trade surfaces, it often evokes a unified chorus from both right-leaning free traders and left-leaning neoliberals: “All economists agree that tariffs are disastrous!” Perhaps there is some truth to this, as the majority likely hold this view. Economists argue that trade barriers are inefficient, suggesting a loss of economic welfare, and that they contradict David Ricardo’s esteemed 19th-century theory of comparative advantage. It’s also quite plausible that restricting the free movement of goods harms consumer surplus.
However, this stands as textbook theory. Economics, often labeled the “dismal science,” doesn’t always translate neatly into real-world scenarios.
After the Berlin Wall fell, U.S. leaders from both parties, buoyed by the apparent triumph of Western openness over the Soviet “Evil Empire,” rushed to implement a global agenda of trade liberalization—removing the targeted Reagan-era trade restrictions, like those on Japanese cars. In a memorable quip from 1990, an advisor to President George H.W. Bush remarked: “Potato chips, semiconductor chips, what’s the difference? They are all chips.”
But such analogies belong more to the realm of theoretical economics, not the realm of reality. Practically speaking, there’s a vast difference: no conflict would erupt over potato chips, yet semiconductors, especially from Taiwan, could indeed lead to serious geopolitical tensions, considering China’s interest.
Broadly speaking, while free trade indeed lowers consumer prices and boosts consumption—as apt in today’s consumption-driven Western economies since the Cold War—it may cause us to overlook vital economic considerations like production capacity and supply chain resilience.
Historically, American figures understood this dual focus. Take Alexander Hamilton’s 1791 “Report on Manufactures.” He posited that unfettered trade is sometimes an illusion: “If perfect liberty to industry and commerce prevailed among nations, the arguments against vigorous manufacturing pursuits by a country like the U.S. would hold sway… But that is far from the norm in global policies.” Decades later, Abraham Lincoln, destined to be the first Republican president, echoed this sentiment in 1832: “My politics are short and sweet, like the old woman’s dance. I am in favor of a national bank. I am in favor of the internal improvements system and a higher protective tariff.”
This Hamiltonian-Lincolnian vision contributed greatly to America’s rise as an industrial leader, powering the Union against the Confederacy in the 19th century and overcoming Nazi forces in the 20th century.
This celebrated vision appears to be the driving force behind President Trump’s bold tariff initiatives in 2025—an aggressive campaign unseen in recent decades. Financial markets, often anchored in economic theory, have not reacted well, leaving this approach an open question as the initial stages unfold.
We very well might not grasp its full impact for some time. Nevertheless, there are budding signs that Trump’s strategy might just be bearing fruit. For instance, Apple, the globe’s top company by market value, announced a $500 billion U.S. investment over four years back in February. Similarly, Johnson & Johnson committed to a $55 billion investment within U.S. borders, and Nvidia reportedly plans investments in the hundreds of billions for electronics manufacturing. Such instances suggest a continuing trend.
This isn’t to overlook the flaws in Trump’s tariff strategy, however. The tariffs heralded in his second term—culminating in the recent “Liberation Day” Rose Garden announcement—are perhaps too broad. Notably, while penalizing tariffs on China are understandable given its long history of exploiting the U.S., placing similar tariffs on Canada raises questions. Our close ally to the north poses no such similar threat, and such measures reflect poorly on U.S.-Canada relations, even damaging Canada’s Conservative Party’s political standing ahead of key elections.
Furthermore, consistency is another concern. The administration’s rollout feels erratic, lacking uniformity and careful planning. Investors prize stability and foresight, so it may well be that this unpredictability, more than the tariffs themselves, has rattled entities on Wall Street.
The United States doesn’t select economists to lead us into the theoretical pursuit of mere efficiency. Thankfully, our leaders are chosen based on their wisdom, discernment, and judgment to advance the common good. Tariffs definitely have their place. However, while hefty policy changes can be tempting, sometimes a more nuanced approach suffices.
Josh Hammer’s most recent work is “Israel and Civilization: The Fate of the Jewish Nation and the Destiny of the West.” This article was crafted with Creators Syndicate. @josh_hammer
