Previously (see here), I explained why Adam Smith’s so-called “humanitarian” exception to free trade does not apply to President Donald Trump’s despotic “liberation day” anti-trade decree. Simply put, Smith’s humanitarian argument applies only to tariffs that are already in place, not to new ones (like Trump’s). But Smith makes two additional departures from the “freedom of trade” in The Wealth of Nations: one is national defense; the other, revenge. Let’s take a closer look at each of these Smithian loopholes to see if either exception applies to the case at hand: Trump’s across-the-board 10% tariff on most foreign imports.

Let’s start with Adam Smith’s national security exception. In Book IV, Chapter 2 of The Wealth of Nations, Smith defends trade barriers that are designed to protect certain sensitive industries (like shipping in Smith’s day) that are essential to or indispensable for national defense, i.e. a country’s ability to protect her borders and her people from foreign invasion. (Sound familiar?) The Scottish philosopher-economist illustrates this exception with the Navigation Acts, a series of draconian mercantilist laws designed to restrict England’s cargo trade to English ships. (Among other things, these onerous laws prohibited the use of foreign ships and required the employment of English and colonial mariners for 75% of the crews.) For Smith, “defence … is of much more importance than opulence” (WN, IV.ii.30). Why? Because without protection from foreign invasion — as well as law and order at home, I might add — free and fair exchange would be difficult, if not impossible. National defense is the sine qua non of trade. [*]

Nevertheless, although the ambit of “national defense” is no doubt a broad and elastic one (see, for example, the infographic below), common sense tells us that we cannot employ Smith’s national security argument to justify the Trump administration’s despotic decision to impose a new round of blanket and indiscriminate tariffs on almost all imports or to flout our free trade treaty with our longstanding North American allies, Canada and Mexico. At most, Smith’s exception for national defense might justify specific and targeted export controls on such sensitive goods as computer chips, fighter jets, and telecommunications equipment. But this still leaves one last Smithian exception to free trade: reciprocal or tit-for-tat tariffs, or what I prefer to call revenge tariffs. In brief, if we accept the Trumpian premise that our trading partners (China especially) have “ripped us off” through their nefarious currency manipulation schemes and other non-tariff barriers, then President Trump and his MAGA accolytes are indeed on much stronger footing!

Stay tuned, for I will further discuss Smith’s defense of “revenge tariffs” in my next post …

[*] As an aside, I would argue that Smith’s exception for national defense is part of his more general “state capacity” argument in Book V of The Wealth of Nations. In a word, we cannot have prosperity without peace, and we cannot have peace without a strong national government.