Breitbart Business Digest: The Case for Strategi…

Trump’s Tariffs Could Pave a Path to Global Prosperity

Donald Trump is convinced that tariffs can make the U.S. a wealthier country with a stronger economy. He may be underestimating just how much his trade policies can accomplish.

Trump’s trade policies could make not only the U.S. economy more prosperous. They can lead us to a more prosperous world.

For centuries, the great economic minds have taught us that free trade is the foundation of prosperity. The case is built on one of the most enduring ideas in economics: comparative advantage. The British economist David Ricardo first laid out the principle in 1817, arguing that even if one nation is better at producing everything, trade can still be mutually beneficial if each country specializes in what it produces at the lowest opportunity cost.

The classic example comes from Ricardo himself: Imagine England produces cloth more efficiently than Portugal, but Portugal can produce wine with less effort than England. Even if Portugal were superior at making both goods, it benefits Portugal more by focusing on wine and trading it for English cloth, and vice versa.

The power of comparative advantage is that it isn’t about absolute strength—it’s about relative efficiency. When each country focuses on its most advantageous industries, trade allows for a more efficient global division of labor, expanding total output and making the world wealthier. For over two centuries, this logic has guided trade policy, convincing free-market thinkers that tariffs and trade barriers do nothing but reduce efficiency and shrink prosperity. In a world where every nation played by the same rules, that argument would be unassailable.

But what happens when trade doesn’t reflect comparative advantage? What if the current structure of global trade isn’t a natural outgrowth of market forces, but rather a consequence of deliberate political distortions? If one country doesn’t allow comparative advantage to operate freely—if it subsidizes its industries, restricts imports, manipulates its currency, and engages in economic warfare—then global trade no longer functions as Ricardo envisioned. When that happens, treating tariffs as an automatic economic loss isn’t just naive. It’s self-destructive.

How to Be a Free Trader in a Mercantilist World

On the chalkboards of an Econ 101 class, tariffs reduce efficiency by artificially redirecting resources toward industries that aren’t the most productive. But in a world where trade is already distorted by foreign government intervention, a tariff isn’t introducing inefficiency—it’s counteracting it.

This is the foundation of the second-best theory in economics: When the conditions for the first-best solution (free trade based on comparative advantage) are absent, then certain interventions—far from making things worse—can actually move us closer to an efficient outcome. A world in which one country dominates key industries not because of natural advantages, but because of mercantilist policies, is a world that is poorer than it should be. A properly structured tariff restores trade to something closer to its true potential, ensuring that resources are allocated according to economic fundamentals rather than government manipulation.

Now, let’s reconsider Ricardo’s famous example. Imagine if Portugal, instead of specializing in wine, used industrial policy to dominate both wine and cloth production by artificially boosting its textile industry with government subsidies, currency manipulation, and trade barriers. The result? England’s textile industry collapses, and its national income falls—not because Portugal was naturally better at cloth, but because it stacked the deck. Meanwhile, global output of both goods declines because resources are not being allocated efficiently. The world is left with less wine and less cloth, and total economic welfare suffers. If England imposes tariffs on Portuguese cloth, not to protect inefficiency but to prevent distortion, it forces Portugal to return to its true comparative advantage—making both countries, and the world, richer.

In other words, it is worth asking: If Ricardo were alive today, would he really be defending a system where one nation rigs the game to crush competitors through state intervention? The argument against tariffs assumes that trade is driven by market forces. But when trade is driven by industrial policy, then tariffs aren’t an interference in a free market. They are a necessary response to its absence.

Reagan’s Reciprocal Tariffs

Throughout history, even nations that championed free trade have understood this principle. Ronald Reagan didn’t hesitate to impose tariffs when Japan used state-backed policies to flood the semiconductor market. In 1986, the Reagan administration imposed 100 percent tariffs on $300 million worth of Japanese semiconductor imports after Japan was found to be dumping chips below market prices. This was part of the U.S.-Japan Semiconductor Agreement, which aimed to stop Japan’s state-backed industrial policy from undermining U.S. semiconductor firms like Intel and Texas Instruments. The agreement also required Japan to open its market to more American-made chips and prevent further price manipulation.

President Ronald Reagan delivers an address from the White House’s Oval Office on October 14, 1987. (Arnie Sachs/CNP/Getty Images)

The British Empire, supposedly the great champion of free markets, repeatedly used selective trade restrictions when facing mercantilist rivals. During the Napoleonic Wars, Britain blockaded French trade and imposed countervailing restrictions in response to Napoleon’s Continental System, which was designed to strangle British commerce.

So, how does this apply today? Consider Apple. The tech giant’s CEO Tim Cook insists that China produces iPhones not because it’s cheap, but because Chinese manufacturers have developed the best expertise. But expertise does not emerge in a vacuum. China’s manufacturing dominance is not the result of free-market competition. It was engineered through decades of state intervention by subsidizing key industries, training specialized workforces, building entire supply chains, and restricting foreign firms from competing on equal footing. This is the same playbook Beijing used to dominate steel, solar panels, and semiconductors. The result? The world’s most valuable consumer technology product is now almost entirely dependent on a geopolitical rival with a long history of economic coercion.

If a country manufactures an industry through state intervention, then trade flows no longer reflect real efficiency. This is the core misunderstanding of today’s free-trade fundamentalists: They assume the global economy is still shaped by market forces when, in reality, it is being manipulated by government policies designed to shift industrial power. When policymakers accept manipulated trade as if it were natural, they surrender strategic industries without even putting up a fight.

None of this is an argument for old-fashioned protectionism. The goal isn’t to wall off domestic industries from competition or prop up inefficient producers indefinitely. It’s to correct distortions that have already skewed global production in an inefficient direction. It is to prevent the deindustrialization of fair-trading nations, not because they lack competitive firms, but because they have been subjected to a strategy of economic conquest. The critics of tariffs fail to understand this. They are fighting the last war, imagining a world where everyone plays fair, refusing to recognize that the game has changed.

Trade is good. Ricardo was right. But he was right only under the right conditions. When those conditions are absent, blindly adhering to free-trade dogma is not just misguided—it is a betrayal of the very principles that made free trade an engine of prosperity in the first place. A properly designed tariff policy is not an attack on trade. It is the only way to save it.