Since Hamilton can’t defend himself, we’d like to defend him against the claim that he would support Mr. Trump’s protectionism. In Hamilton’s 1791 Report on the Subject of Manufactures, he made the case for government encouragement of American manufacturing in a world dominated by European powers that, he worried, could easily refuse to export their manufactured goods to America in exchange for American agricultural products. As Hamilton explained, “if Europe will not take from us the products of our soil, upon terms consistent with our interest, . . . there is no other expedient, than to promote manufacturing establishments” at home. Promotion of U.S. manufacturers could be provided by protective tariffs or, even better in Hamilton’s view, by subsidies.
Messrs. Bessent and Greer claim that the Trump administration is simply reviving the Hamiltonian trade policy that created the American economic colossus. But in the 21st century, when the average trade-weighted tariff rate of Organization for Economic Cooperation and Development member countries was below 3% and almost identical to that of the U.S., and the OECD found that the nontariff barriers of U.S. trading partners aren’t significantly higher than America’s nontariff barriers, it’s highly doubtful that Hamilton would support Trump policies. Hamilton in essence rejected Mr. Trump’s tariffs when he argued in his report that “if the system of perfect liberty to industry and commerce were the prevailing system of nations, the arguments which dissuade a country in the predicament of the United States, from the zealous pursuits of manufactures would doubtless have great force.”
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Especially noteworthy is Hamilton’s conviction that among the greatest forces fostering U.S. industrialization was its trade deficit and resulting capital surplus, while Mr. Trump sees the U.S. trade deficit as a crisis and net foreign lending and investment in the U.S. as a “hemorrhaging of America’s lifeblood.” Hamilton described net inbound foreign capital as “a precious acquisition . . . a most valuable auxiliary, conducing to put in Motion a greater Quantity of productive labour, and a greater portion of useful enterprise than could exist without it.” During the country’s first century, we routinely ran trade deficits as the British and Dutch invested heavily in America. They grew wealthy on those investments, and so did America.
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