Janet Bufton recently shared an insightful post regarding Adam Smith’s views on tariffs, and I feel compelled to contribute my own reflections on the matter.
Bufton aptly highlights that Smith would vehemently oppose the current tariffs, criticizing them as a misguided focus on the trade deficit, which he deemed âabsurd.â Smithâs unwavering commitment to free trade is evident:
âAll systems of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, order of man. The sovereign is completely discharged fromâŠthe duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the societyâ (Wealth of Nations pg 687, Book IV, Chapter ix, Paragraph 51).
Smith would likely take issue with the so-called âretaliatoryâ tariffs, arguing that they are not truly retaliatory at all. Moreover, he would question the validity of the negotiations purportedly taking place, especially given the current administration’s reluctance to disclose the list of countries involved. It appears that Trumpâs focus is not on fostering free or even “fair” trade, but rather on an obsession with trade deficits. If we assume Trumpâs intentions are genuine, the negotiations would be oriented towards mitigating the trade deficit rather than nurturing that âsimple system of natural libertyâ that Smith championed.
Let me clarify: Iâm relieved that Trump has momentarily backed down in this perilous game of economic chicken. Although a 90-day delay and blanket tariffs are still problematic, itâs a step back from the brink we faced on April 3. However, I harbor little optimism that any negotiations will lead to genuine progress toward free markets. It seems more plausible that these discussions are merely an attempt by Trump to âdirect the industry of private people.â
Adam Smith embodied the principles of classical liberalism, positing that government should fulfill three primary functions:
- Protecting society from external threats and violence
- Administering justice fairly
- Facilitating public goods and institutions that cannot be effectively provided by private individuals (i.e., collective-consumption goods)
In none of these roles would Smith endorse the current tariff measures. Were he alive today, one can imagine him exclaiming at Trump: âHaven’t we already learned from this mistake?â
