Here’s a letter to a new correspondent.
Mr. Brennick:
Thanks for your email. I’m sorry that you find my letter in today’s Wall Street Journal “thoroughly unconvincing.”
No one can really know how Alexander Hamilton, were he alive, would judge Trump’s tariffs. The best we can do is to consult his writings on trade, the most famous of which is his 1791 “Report on the Subject of Manufactures.” In that “Report,” Hamilton’s clear purpose is to prompt government to use both subsidies and tariffs to foster fledgling manufacturing in the fledgling United States. His belief was that manufacturers in Europe, being well-established and capitalized, would out-compete upstart manufacturers in the U.S. Hamilton argued that U.S. manufacturers could grow to maturity only if they’re protected in their infancy.
I’m confident that Hamilton was mistaken to believe in the need for infant-industry protection – a protectionist belief that reveals that Hamilton’s understanding of the case for free trade was deficient. Hamilton’s sympathy for protectionism, therefore, does indeed lend some credence to the case that he would support Trump’s tariffs. But on the other side, Hamilton also understood that government protection of infant industries can go too far. He wrote:
The continuance of bounties on manufactures long established must almost always be of questionable policy: Because a presumption would arise in every such Case, that there were natural and inherent impediments to success. But in new undertakings, they are as justifiable, as they are oftentimes necessary.
Although he here explicitly mentions only bounties (what we today call “subsidies”), elsewhere in the “Report” Hamilton describes a protective tariff as “a virtual bounty” for protected industries. His reasoning therefore provides good grounds for extending his warning about prolonged subsidies to prolonged protection through tariffs.
Unlike Trump, Hamilton would never have called himself “Tariff Man,” or scribbled in the margins of a speech that “TRADE IS BAD.” Also unlike Trump, Hamilton did not believe that Americans are harmed by U.S. trade deficits – quite the opposite. This latter difference is especially significant because the single trade ‘fact’ mentioned most often by Trump as justification for his tariffs – and as the justification for his “Liberation Day” tariffs – is that the U.S. regularly runs trade deficits. On this matter especially, Trump is completely bonkers – an assessment with which Hamilton would surely agree.
Because nearly all U.S. industries covered by Trump’s tariffs are long-established and have access to the world’s most efficient capital market, it’s impossible to conclude from Hamilton’s writings that he would support Trump’s tariffs. Nevertheless, because Hamilton, for all of his brilliance, ultimately did not adequately appreciate how free markets work, he very well might, were he resurrected, endorse Trump’s tariffs. Any such endorsement, however, would reflect Hamilton’s weak grasp of economics rather than any specific policy that he endorsed while alive.
Sincerely,
Donald J. Boudreaux
Professor of Economics
andMartha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
