The Economist Who Made the MAGA Case on Tariffs—in 1945

Plus, new anti-Israel vandalism attacks at Harvard site

A package from China to the United States. Photo: The Editors

“Among the economic determinants of power, foreign trade plays an important part….Foreign trade has two main effects upon the power position of a country. The first effect is certain to be positive: By providing a more plentiful supply of goods or by replacing goods wanted less by goods wanted more (from the power standpoint), foreign trade enhances the potential military force of a country. This we may call the supply effect of foreign trade. It not only serves to strengthen the war machine of a country, but it uses the threat of war as a weapon of diplomacy…The attempt to trade more with neighboring, friendly, or subject countries is largely inspired by this consideration, and it has been one of the most powerful motive forces behind the policies of regionalism and empire trade….

The second effect of foreign trade from the power standpoint is that it may become a direct source of power. It has often been hopefully pointed out that commerce, considered as a means of obtaining a share in the wealth of another country, can supersede war. But commerce can become an alternative to war also—and this leads to a less optimistic outlook—by providing a method of coercion of its own in the relations between sovereign nations. Economic warfare can take the place of bombardments, economic pressure that of saber rattling. It can indeed be shown that even if war could be eliminated, foreign trade would lead to relationships of dependence and influence between nations. Let us call this the influence effect of foreign trade…Thus the power to interrupt commercial or financial relations with any country, considered as an attribute of national sovereignty, is the root cause of the influence or power position which a country acquires in other countries…..”

—Albert Hirschman, National Power and the Structure of Foreign Trade, 1945

I was familiar with Hirschman for his “Exit, Voice, and Loyalty” framework, outlined in Hirschman’s 1970 book of that name and mentioned here at The Editors in posts such as “The Talmud on Moving Out of a City to Avoid Taxes,” July 4, 2024, and “Prairie State spending soars,” April 1, 2024, and in a series of posts at our predecessor site FutureOfCapitalism.com, including “Exit, Voice, and Loyalty,” December 2, 2018.

Hirschman’s work on trade, though, only now is getting on my radar screen.

It’s timely, because President Trump himself has been posting to social media on this topic in the early morning hours as the Supreme Court considers a case that could potentially strike down the $4 trillion (over ten years) in tariffs Trump has imposed under the International Emergency Economic Powers Act of 1977. “Because of Tariffs, easily and quickly applied, our National Security has been greatly enhanced, and we have become the financially strongest Country, by far, anywhere in the World. Only dark and sinister forces would want to see that end!!!” Trump posted this morning. Trump also posted, “The biggest threat in history to United States National Security would be a negative decision on Tariffs by the U.S. Supreme Court. We would be financially defenseless. Now Europe is going to Tariffs against China, as they already do against others. We would not be allowed to do what others already do!”

A few other sources have pointed to Hirschman’s ideas as an inspiration for the Trump policy.