In today’s complex global economy, the U.S. tariffs against China have stirred debate. Often labeled as protectionist, these tariffs of up to 145% can find justification in the insights of Adam Smith, a giant of liberal economic thought. Surprisingly, Smith’s nuanced approach in his seminal work, The Wealth of Nations (1776), offers a perspective aligning with current Republican strategies.
CHINA CLOSED
The intent behind U.S. tariffs is to correct a skewed trade relationship with China, characterized by a massive trade deficit—$400 billion back in 2018 before tariffs—and systematic intellectual property theft by Beijing. The dependence on China for vital sectors like steel and semiconductors raises strategic concerns.
Critics of these tariffs often cite free trade principles. However, Adam Smith’s viewpoint is worth noting. Smith opposed unnecessary trade restrictions, arguing that market distortions harm both competition and consumers. Yet, he acknowledged the drawbacks of tariffs, as they increased consumer costs and impacted GDP by 0.2% in 2019.
FIRST EXCEPTION: NATIONAL DEFENSE
Smith did recognize exceptions, particularly concerning national defense—a principle echoed in U.S. rhetoric. Citing the Navigation Acts, Smith highlighted the importance of strategic regulation over mere wealth accumulation. In taxing Chinese steel, the Trump administration aimed to reduce reliance on a geopolitical rival. With China producing half of the world’s steel, often with subsidies, America’s strategic production capabilities could be compromised—an argument Smith would understand.
Moreover, trade requires reciprocity. China’s non-tariff barriers have effectively closed its market to Western companies, leaving the West to finance its rise. This is not a fair exchange, but a one-sided benefit favoring China.
SECOND EXCEPTION: RETALIATION AGAINST CLOSED COUNTRIES
Smith supported retaliation against uncooperative trade partners. He argued that such measures could prompt the removal of prohibitive barriers, ultimately benefiting trade. The goal of American tariffs was to push China into negotiations. The resulting Phase 1 agreement in 2020 saw China promise greater market openness and intellectual property protection, although with limited follow-through. Nonetheless, Smith would have approved the effort to level the playing field.
THIRD REALITY: SMITH’S HATRED OF NON-TARIFF BARRIERS
Smith detested non-tariff barriers, which he saw as underhanded tactics to stifle competition. As Politico noted, China’s strategic use of technical trade barriers exemplifies this issue. Such practices, cloaked as legitimate policy, serve dual purposes: plausible deniability and significant impact.
CONCLUSION: U.S. TARIFFS IN LINE WITH ADAM SMITH’S THINKING
Faced with a restrictive China, the fragility of strict free-trade ideals becomes apparent. With its tariffs, the U.S. breaks traditional norms to address unfair trade practices. While Smith might criticize the collateral damage, he would recognize the necessity of a robust response to a non-compliant adversary.
Drieu Godefridi provides this analysis. A jurist and philosopher, he is an entrepreneur and the author of The Green Reich. Follow him on X.
