Trump’s Tariffs Seek a Return to Mercantilism, the Abandonment of Adam Smith
Our founding fathers revolted against a British tax on imported tea to the then colonies. That led to the American Revolution, the founding of the United States of America and the adoption eventually of the US Constitution.
The Constitution is quite specific that Congress, not the President, has the sole authority to raise tariffs and regulate foreign commerce.
· “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.” US Constitution, Section 8
· “No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.” US Constitution Section 10
President Trump has just imposed a wide variety of new extremely onerous tariffs on imports by a Presidential decree. They have so far caused widespread economic turmoil, including huge losses on Wall Street, a heightened risk of severe recession, and a destruction of international trading arrangements and the potential to disrupt global supply chains. A lawsuit filed in Florida by the New Civil Liberties Alliance, an organization created by the Kochs and Leonard Leo, claims that there is no authority to impose tariffs under the statute International Emergency Economic Powers Act undergirding the President’s Actions. https://www.forbes.com/sites/stuartanderson/2025/04/06/lawsuit-could-end-trump-tariffs-and-stock-market-rout/ We’ll have to see how that plays out, as certain members of the Supreme Court may be suffering from Stockholm Syndrome.
Our founders and the very framework of the US Constitution were highly influenced by the Enlightenment thinkers of the 18th Century. https://www.usconstitution.net/enlightenments-impact-on-u-s-democracy/ The issues of natural rights, democratic governments chosen by citizens, checks and balances among the three branches of government that are embedded in the US Constitution derive from some of the greatest thinkers of the Enlightenment. On the other hand, economic policies (other than the slavery protections which precipitated the Civil War and free commerce among the states) were not built into the US Constitution.
In later years, however, Justices tried to import their own economic predilections into the Constitution (e.g. the commerce clause and substantive due process line of cases), transforming their economic/political beliefs and those of their peers into constitutional writ. President Trump now seeks to impose his quite extreme economic views on the nation (it’s a return to mercantilism) without first first debating the wisdom of his proposed policies and then securing Congressional approval for their implementation. That is not what our founders envisaged or allowed. Here is a little background.
After the adoption of the Constitution and the first national elections won by George Washington, governing and opposition parties emerged. The Federalists, led by Alexander Hamilton, embraced high tariffs to protect the emerging manufacturing economy of the Northeast then the Midwest; they created a national bank to assure adequate finance, and they embraced government spending to build the nation’s infrastructure (rivers, canals, roads and bridges, then railroads, eventually the interstate highway system). These policies were the economic underpinnings of the Federalists, their successors, the Whigs, and then after mid-century the 19th Century Republicans. High tariffs were primarily used to finance the federal government’s expenditures until the passage of the progressive federal income tax in 1913. The high tariffs protected the American manufacturers from price competition primarily from England, the first nation to industrialize, but the American consumers paid elevated prices for domestic manufactures.
The farmers and the merchant traders who relied on the import/export trade, primarily with Europe, opposed high tariffs. The Democrats, led initially by Jefferson and Jackson, embraced low tariffs. This was a winning formula for elections, but less so for governance as the federal government needed the tariff revenues to finance it. The low tariff position advanced the interests of Southern, Midwestern, and then Western agriculture who were heavily dependent on selling their goods to Europe and then to Asia. The nation came to a major crisis point when South Carolina Senator John Calhoun and allies proposed the nullification doctrine so that South Carolinian residents would not have to pay the high protective tariffs that President John Quincy Adams had endorsed and secured Congressional approval. This is the same state, same doctrine and same Calhoun influence that less than 30 years later precipitated the Civil War. The Jeffersonian and Jacksonian Democrats of this era strongly opposed a National Bank (the 19th Century precursor) of the Federal Reserve until they changed and evolved on this issue. Their favorite archetype was the independent yeoman farmer, but they were often protecting the big, slave owning, cotton growing plantation owners. They favored infrastructure spending to get their goods to domestic and foreign markets.
Until Ronald Reagan and George Bush I, the Republican party was the party of high tariffs and protectionism, while the Democratic party was the party of low tariffs and free trade. Throughout the 19th and early 20th Century, tariffs ebbed and flowed depending on which party controlled the White House and Congress. For example, McKinley increased them; Wilson cut them; Harding and Hoover increased them; the Great Depression ensued; then FDR cut them.
Adam Smith had published “The Wealth of Nations” in 1776. His theories of free trade, competitive markets, efficiency and productivity greatly influenced Thomas Jefferson and other Democrats as they sought to build the Southern agrarian economy of the new nation through low tariffs, They were focused on promoting tariff-free agricultural trade with Europe. https://www.adamsmithworks.org/documents/1776-and-all-that-thomas-jefferson-on-adam-smith-1
Hamilton and the Federalists took the opposite tack of protecting American manufactures with high tariffs; they may have been proved right at the time, as the US infant industries grew, and the US eventually became a great manufacturing powerhouse. https://allthingsliberty.com/2022/08/alexander-hamilton-was-right-true-liberty-demands-economic-independence/ American industrial prowess might have grown regardless of tariff levels because of the enormous national advantages of ample natural resources, a large internal domestic market, and high levels of immigration of skilled European workers attracted to democratic liberties and economic opportunities offered in the new nation. The fight for democratic freedoms and liberties from the millennium long rule of kings and nobles and their respective religious allies who still governed most of Europe during the 19th Century and into the early 20th Century was not complete until after the First World War when the Russian Empire, Ottoman Empire and Austro-Hungarian Empires collapsed, only to then be replaced by homicidal tyrants like Hitler and Stalin in the aftermath.
By the 1890’s the US was a manufacturing powerhouse; its infant industries had grown into industrial giants no longer needing protection; many were now cartels, run by robber barons who controlled state and federal governments. Its giant industries attracted immigrants from all over the world – China, Japan, Italy, Greece, Poland, Russia, the Balkans, Central Europe, and the Baltics. Immigrants also encountered the underbelly of the American dream – slums, nativist violence, long hours and hazardous working conditions, and law enforcement and judges aligned with the big employers, the Pinkertons, and their lawyers all arrayed against the “little guy.” They joined and formed unions that fought back and won the right to unionize, the 40-hour work week, minimum wage, better safety conditions at work, safer food, and the end to quack medicines. The Progressive Era broke up the giant industrial cartels and monopolies, regulated food safety, regulated monopolistic utility and train prices, gave women their long denied right to vote, adopted the progressive income tax, cracked down on government corruption, and provided for direct election of the US Senate.
From FDR until Trump in 2017, the US embraced a “free and fair-trade” policy of low tariffs, and widespread reciprocal trade agreements – an end to protectionism. The Reagan-Bush era policies on trade and tariffs were quite similar to the Clinton Obama trade, tariff and treaty policies. This helped create and ignite the growth of a global economy in which nations’ trade and economic development policies were interconnected. It also promoted a more peaceful world among trading partners.
Trump has upended them and is trying to move us back into the era of mercantilism. We may give him too much credit, as this strain dates back to the opposition to the NAFTA trade agreements, and further back to the development of a thriving Japanese car industry that upended Detroit’s dominance of automobile manufacturing in our country. The era of mercantilism preceded the economic understandings of the benefits of free trade developed by the economists Adam Smith and David Ricardo in the late 18th and early 19th Centuries. Mercantilism had been the prevailing policy of both France and England, the two greatest European powers the 1600’s until the mid 19th century, before that Spain had been the principal mercantilist nation, while the Dutch in their heyday were both free traders and also protectionists of their monopoly in the spice trade. Trade with a nation’s colonies was encouraged with the profits of trade flowing to the principal; in other words, the colonies supplied the raw materials to France or England, these were made into finished goods and exported back to the colonies at high prices; colonies were discouraged from trading with anyone but their principal. The desired end goal of trade during the mercantilist era was a positive balance of payments -- the antithesis of Adam Smith.
Trump is and has been fixated on “balance of payments”. The absurd mathematical formula adopted for the Trump tariffs mimics the mercantilist ideal. Look only to the example of Vietnam which has a 1% tariff on imports into Vietnam, but under the Trump formula, Vietnam would face a 46% tariff on its exports to the US.
Trump also seeks to acquire or take over Greenland, the Panama Canal, and Canada – the very sort of colonial trading and natural resources empire favored by the long-outdated mercantilists, which, it should be noted, also encouraged perpetual war between and among the English and French and Spanish and Dutch over the extent of their colonial empires. Bad idea!! Very bad ideas!!!