I’m surprised at the all the fuss about tariffs. One of the economists I respect and follow said “Trump’s proposed tariffs — or what some are calling ‘Liberation Day — represent a step away from free-market classical economic principles and are harmful taxes during a vulnerable time.”
Normally I read and go on to the next one, but in this case, I had to react because I think strategic tariffs don’t depart from free-market principles: they actually are required for our defense of our sovereignty, security and economic flexibility.
My economist friend’s assertion that tariffs are inherently anti-free-market reflects a narrow interpretation of his beloved classical economics; that point of view fails to account for the realities of 21st-century global trade, especially in an era defined by weaponized interdependence, supply chain fragility, and uneven enforcement of trade rules by foreign powers. His point of view deserves a rebuttal if I may humbly do so.
- Tariffs are Corrective Tools — Not Rejection of Market Principles
Free-market principles are not synonymous with unilateral trade surrender, which is what we’ve been doing (and I think he would agree). Classical economists like Adam Smith supported tariffs in cases where a nation’s industry needed to counteract unfair advantages held by foreign competitors — especially when advantages stemmed from government subsidies, state-owned enterprises, or labor suppression – all which countries use against us.
As Smith wrote in The Wealth of Nations, some tariffs may be “not only defensible, but expedient,” particularly for national security reasons. Tariffs can, in this light, serve as market corrections — tools to rebalance these asymmetrical relationships we find ourselves in which were created not by markets, but by foreign government distortions.
- Global Trade Is Not Free Market Trade — It’s a Patchwork of Stuff like Protectionism
The U.S. is one of the most open markets in the world, and I think economists would agree with that. Many of our competitors — specifically China — heavily subsidize industries, manipulate currencies, and protect domestic markets from competition. Classical economic theory has always presumed (incorrectly) a level playing field. We do not have that. We never had that.
To remove the few tools (like tariffs) that allow the U.S. to push back against state-controlled economies is not free-market idealism. It’s naïveté – and I don’t think my friend the economist is naïve. Tariffs, in this context, are defensive mechanisms — not offensive weapons. They are signals to trading partners: We are not going to tolerate predatory behavior.
- Tariffs Strengthen Domestic Flexibility — Especially in Critical Industries
Calling tariffs a “tax on the economy” oversimplifies their impact and ignores context. And while we can all debate the meaning of words (i.e., The Intended and Unintended Consequences of Words ), are there short-term price impacts? Perhaps. But tariffs:
- Incentivize reshoring and nearshoring
- Reduce reliance on unstable or adversarial foreign sources
- Rebuild critical domestic industries like steel, semiconductors, and pharmaceuticals
In our post-pandemic, geopolitically unstable world, the free market must also be a secure market. Vulnerability, like freedom, isn’t free.
- The Timing of His Argument Ignores the Bigger Picture
Yes, the economy is navigating inflation and global uncertainty. But a vulnerable time is exactly when you need tools to regain control.
Wouldn’t it be worse to allow continued erosion of domestic capacity? How much more of a “service” economy can America become before it implodes entirely? And, wouldn’t it be more inflationary to remain dependent on fragile global supply chains?
Short-term discomfort may be the price of long-term independence. No pain, no gain, remain the same.
- “Liberation Day” is Economic Realignment, Not Isolationism
The phrase “Liberation Day” symbolizes not an abandonment of trade but a redefinition of it. America isn’t retreating from global commerce — it’s attacking the right to trade on fair and reciprocal terms.
Globalization, as currently structured, created fragile dependencies and actually hollowed-out industrial bases like what America once was (shame on us). A strategic reassertion of national economic agency is not anti-market — it’s pro-market, and most assuredly pro classical economic principles.
So in my humble opinion, tariffs, when used strategically, are not a betrayal of economic freedom — they are economic freedom in motion. The real threat to our continued prosperity isn’t a recalibration of trade tools. It’s continued submission to a global trade regime that exploits American openness while protecting foreign state interests. What’s the saying? Blood from a turnip?
One more thing on his comment: “Beginning in September 2024, the Fed began cutting its interest rate targets while increasing its sales of securities. Like 2008, the supply of money is falling sharply while the demand is calling for an increase. The chart below shows the supply measure of money is currently where it was in mid-2020. This shortfall bares a close resemblance to the shortfall leading to the collapse in the fall of 2008. “
This comparison to 2008 doesn’t materially alter the counterargument about tariffs and their strategic value. If anything, it reinforces why the U.S. needs to retain policy tools like tariffs that serve broader strategic and economic goals beyond monetary mechanics.
First, the monetary contraction ≠ the 2008 collapse. My friend is referencing the quantity of money (likely M2 or M1), suggesting it’s contracting sharply again — as it did leading into the 2008 financial crisis. While it’s true that the money supply has been tightening since the Fed began quantitative tightening and raising rates in 2022–2024, the comparison to 2008 is misleading for the following reasons:
- 2008 was a straight banking system crisis. The collapse wasn’t about abstract money supply; it was about frozen credit markets, insolvency in large institutions (poor Lehman Brothers getting caught in the crosshairs), toxic mortgage-backed securities, and a complete loss of trust in interbank lending. None of those dynamics are currently present, are they?
- Today’s contraction is policy-driven. In contrast to 2008, the Fed is deliberately reducing liquidity to combat inflation (why?). This is not a panic-induced credit freeze. It’s a measured, albeit aggressive, and in my humble opinion mis-guided monetary tightening.
- Demand for money is structurally different. The post-COVID economy is more digital, globally integrated, and far less reliant on bank credit creation alone. Cash velocity and the role of reserves have evolved since 2008. Demand for money today reflects realignments in consumption and investment behavior, not panic.
Second, our economy is very different than 2008. For example:
- Unemployment is low
- Corporate balance sheets are relatively healthy
- Household debt service ratios are historically manageable
- Housing prices have held despite rate hikes
In 2008, we saw wholesale destruction of asset values and confidence. Today, we see policy friction and strategic uncertainty — but not collapse. There are vulnerabilities (CRE, regional banks, geopolitical shocks), but nothing systemic in the same sense. Unless of course WWIII happens, in which case all bets are off.
So, the tariff argument still holds true that I made. It strengthens the need for strategic economic autonomy in order to:
- Tighten the monetary environment, domestic resilience becomes more important. Tariffs, used surgically as Trump is doing, help encourage domestic investment (look at the money pouring into our country now from companies building plants here).
- Countering global instability — both financial and geopolitical — makes economic sovereignty more attractive, not less. Most people exaggerate “isolation” as the argument for what he is doing with Tariffs. However, nothing has ever been isolated – we are only getting our just due.
- In our low-growth, high-risk global environment, rebalancing supply chains and reducing dependencies isn’t a tax — it’s insurance. And as we all know, in insurance, the insurer holds “all the cards.”
Thank you for reading. My skepticism comes from my own real-world experience as a businessman who started my company over 30 years ago. I’m not at the level of economists, but in my own niche, well, you try to balance reality with the variables of business. One of our clients just had two price increases two weeks apart: one for 3% and the second for 12%. I’m expecting more because this manufacturer has no strategy that makes sense. They are reactive, not proactive.
In times like these, we can’t afford economic dogma. We need strategy — and the courage to use every tool at our disposal.
What do you think?