Here’s a note to a new correspondent.
Mr. Lee:
Thanks for alerting me, a Twitterless economist, to Larry Elder’s mention of my essay in which I discuss Adam Smith’s exceptions to the case for a policy of free trade. I’m afraid, however, that you misinterpret that essay.
Contrary to your impression, I most certainly do not believe that “Smith generally would approve of President Trump’s tariffs.” Indeed, I’m quite sure that Smith would strongly oppose these tariffs.
First, Smith insisted with crystal clarity that trade balances are no cause for government obstruction of trade. “Nothing, however,” Smith declared, “can be more absurd than this whole doctrine of the balance of trade.” Yet U.S. trade ‘imbalances’ have long been, and remain, the principal phenomena that Trump points to as justifying protective tariffs.
Second, if you read my essay you’ll discover that two of the four supposed ‘exceptions’ aren’t really exceptions. In one case, Smith argued simply for taxing imports at the same rate as domestically produced good are taxed. In a second case, Smith suggested that, in order to give workers time to adjust, tariffs should sometimes be removed gradually rather than immediately – but nevertheless removed and, better yet according to Smith, never imposed in the first place.
A third exception is imposing tariffs to pressure foreign governments to lower their tariffs. Smith treated this possibility as largely theoretical – as maneuvers inevitably to be carried out in each case by what he described as an “insidious and crafty animal, vulgarly called a statesman or politician,” and highly unlikely in practice to promote domestic economic growth.
The fourth and strongest exception is the one for national security. But even here Smith was clear that, however appropriate protection might be in some cases to strengthen national security, such protection imposes a cost on the economy.
For more on Smith’s exceptions, I recommend this short essay by my former student Caleb Petitt.
There’s no doubt in my mind that Adam Smith would find Trump’s protectionism to be horrifying.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
