One of the more discomforting aspects of Donald Trump’s tariff blitz is finding myself in agreement with people I usually despise — even, at times, nodding along with Tony Blair. Equally and oppositely, I now find myself at odds with those I once considered fellow travellers.

Persecuting former friends while embracing new ones is nothing new for libertarians. Since the fight for a freer world is often a matter of choosing better over worse, temporary tactical support for those in the “better” camp has always been one of our most useful tools. Brexit, for example, was clearly a liberalising movement, even if few of its champions made the case in libertarian terms.

Discerning a coherent rationale behind Trump’s tariff policy is not easy. Are the tariffs intended to raise revenue — perhaps as a substitute for income tax? Are they meant to revive domestic manufacturing? Or are they simply a negotiating tool to push for reciprocal liberalisation worldwide?

Each of these possibilities is plausible, but they’re also mutually exclusive — making a comprehensive response both long and unwieldy.

There is, however, one underlying falsehood that infects all sides of the discussion — one that serves as a springboard to address the issue in distinctly libertarian terms, without simply rehashing textbook economics.

It’s the idea that international trade happens between countries rather than between people — as though the movement of goods across borders is some kind of automated, nation-scale ritual.

In reality, trade — domestic or cross-border — consists of decisions made by individuals and firms according to their preferences. It’s these cumulative decisions that produce aggregate trading volumes.

For instance, the statement “America has a trade deficit with China” means only this:

That individual Americans are buying more from individual Chinese than other Americans are selling to Chinese — and vice versa.

Governments can certainly influence those choices, but trade flows are not imposed from above. They are conscious, voluntary exchanges made by people trying to improve their lives.

The reason this obvious truth often goes unrecognised is that many foundational concepts in international trade were developed in an era that saw countries, not individuals, as the primary economic actors.

The classical economists’ theory of absolute and comparative advantage marked a monumental leap forward, refuting the mercantilist view of trade as a zero-sum extension of political conflict.

Yet even these insights were framed in nation-centric terms. And today, negative, mercantilist concepts like “trade deficits” persist — along with the idea of a “trade war.” But when trade is mutual and voluntary, any war against your trading partners hurts you as much as — if not more than — them. The term is, in that sense, nonsense.

It’s in this light that we can now address the various rationales for the imposition of tariffs.

Raising Revenue

Let’s begin with the idea that tariffs could serve as a replacement for the income tax — a nostalgic favourite among certain economic reformers.

Tax reform has always been riddled with dreams of rejigging the system to reduce its drag on growth. Change the shape, soften the edges, or pluck the goose with fewer hisses, and everyone will still be incentivised to produce.

For instance, Paul Craig Roberts – a Reagan-era Assistant Treasury Secretary – yearns for the days when tariffs were the primary source of federal revenue, before the destructive and invasive arrival of the income tax.

If we were starting from scratch, restoring older tax forms might well be the least bad option. But as I’ve argued before, the most damaging aspect of taxation isn’t usually its form — it’s the size of the confiscation. Whether you pay $10 or $10,000 tends to matter far more than whether the bill shows up as income tax or VAT.

So if the goal is to lessen the burden, the fastest route is to reduce rates — not shuffle around tax types. Swapping one tax for another means overhauling an entire bureaucracy and ensuring rates are actually lowered — a political fantasy in most cases.

More importantly, new taxes rarely replace old ones. They’re almost always stacked on top. If I were a betting man, I’d say the income tax is here to stay — regardless of how many tariffs are tacked on.

The real elephant in the room, however, is the persistent myth that tariffs are a tax on “foreign countries.” They’re not. They’re a tax on your own citizens — the ones who choose to buy from abroad.

Commentators like Roberts may pine for an era when most imports were luxury consumer goods — textiles, tobacco, alcohol, fine china. In that context, tariffs could be sold as taxes on the spending habits of the wealthy.

But today, the U.S. is deeply embedded in global supply chains. Imports now include vast volumes of intermediate goods — semiconductors, auto parts, machinery components — many of which are not just cheaper to import, but in some cases impossible to produce domestically, at least in the short or medium term.

Why? Because the domestic economy may lack the necessary infrastructure, supply chain depth, skills, or environmental permissions.

Taxing these imports doesn’t punish foreign nations — it raises the cost of producing goods that ordinary Americans want to buy. In short, it’s a domestic production tax by another name, one that reduces supply and drives up prices.

Repatriating Domestic Manufacturing

This brings us to the second rationale for tariffs: fostering a resurgence in domestic manufacturing. Advocates of this approach argue that “free trade” and “globalisation” have hollowed out America’s industrial base. A recent example comes from Andrew Torba, CEO of Gab, whose rallying cry begins:

The heart of America has always beat to the rhythm of hammers on steel, the hum of factories, and the pride of craftsmen shaping raw materials into something enduring. For too long, we’ve surrendered that heartbeat to the hollow clatter of foreign assembly lines. We traded our sovereignty, our dignity, and the well-being of our people for the fleeting convenience of cheaply made trinkets. But now, with tariffs reshaping the economic landscape, we stand at the threshold of a rebirth—a return to the essence of what made this nation unstoppable. This isn’t just about economics; it’s about resurrecting the soul of America.

If, however, we recall that imports result from Americans choosing to buy foreign goods, a more pointed question emerges: why do they prefer not to buy from fellow Americans? Why is American industry, in the eyes of consumers, so uncompetitive?

As discussed earlier, part of the answer is structural. Gone are the days when one could dismiss China as a giant rice paddy. With the West no longer holding the industrial monopoly, the U.S. — like Britain — may simply be better suited to a service-based economy in the twenty-first century, at least in terms of global comparative advantage. In short, some goods may always be cheaper to import — and for practical purposes, impossible to produce domestically.

Still, when one contrasts the industrial decay of provincial rust belts with the forest of skyscrapers in New York or London, it’s difficult to believe that natural market forces are the whole story. Something more deliberate — or at least more avoidable — may be at work.

One plausible explanation is that the U.S. enjoys the dubious privilege of printing the world’s reserve currency.

Under a “sound” money standard like gold, American importers would ship goods in and pay for them by shipping money out. Over time, this would create a relative shortage of money domestically, causing U.S. prices to fall. Conversely, money accumulating overseas would inflate foreign prices. The result? Foreigners would eventually use that surplus money to buy cheaper American goods, bringing cash back into the U.S. as exports flow out.

In other words, people pay for imports with exports. That’s how trade imbalances self-correct. It’s simply a macro version of what every individual must do: if you want to buy something (“import”), you have to work for the means (“export”) to pay for it.

Even in countries with weak fiat currencies, like Zimbabwe, this dynamic holds. If Zimbabweans import goods using Zimbabwean dollars, those notes quickly return as demand for local exports — because few people abroad have any desire to stockpile Zimbabwean currency.

(The actual picture — involving currency exchange — is slightly more complex, but the mechanics are the same).

But when a country controls the world’s reserve currency, the picture changes.

Because the U.S. dollar is the golden ticket for international trade — used to settle payments across thousands of commodities — foreign governments and institutions are happy to hold onto it as reserves or invest it in U.S. financial markets, rather than use it to buy American goods.

Critically, this undermines the self-correcting price mechanism described earlier. Dollar outflows don’t cause a meaningful contraction in the domestic money supply. As a result, U.S. prices stay high, and exports remain uncompetitive — yet Americans continue to import without facing the usual pressure to “pay” through increased exports.

Put simply, America (and to a lesser extent Britain) has morphed into a giant consumer economy, one where citizens can indefinitely buy what they want from abroad without producing an equivalent value in return. Traditional manufacturing declines, while financial services flourish — not because they’re serving domestic demand, but because the dollar itself has become the country’s most valuable export.

And the cherry on top? Much of the foreign-held dollar supply is recycled into U.S. treasury bonds, giving the federal government a convenient external tap to finance its deficits.

This dynamic gives rise to the so-called Triffin dilemma: a country can either supply the world’s reserve currency or maintain a strong exports sector — but it’s exceedingly difficult to do both. And yet, President Trump has made clear that both are stated goals of his administration.

The second reason for America’s declining industrial base is closer to home: Western governments, unlike industrialising nations such as China, have made domestic production prohibitively expensive.

Whether through environmental mandates, excessive employment costs, or union demands, the cost per unit is typically lower offshore. Layer onto this a mess of zoning laws, permitting delays, corporate tax burdens, rigid labour regulations, and heightened litigation risk — all of which increase both the cost and uncertainty of doing business.

And let’s not forget energy — a fundamental input to all manufacturing — now crippled by carbon taxes, emissions targets, fuel restrictions, and the general march towards a “carbon neutral” future.

If a government were genuinely serious about repatriating manufacturing, it would begin by lifting these burdens. But rather than make it easier for firms to produce, it’s simpler for politicians to just slap artificial costs onto the imports that still meet people’s needs.

Which brings us to a further reality: as consumers, Americans consistently show that they care more about low prices and product quality than they do about union jobs, environmental targets, or patriotic sentiment. If they valued those things — if they possessed genuine longing for that “soul of America” — they could already choose to shun foreign goods and pay more for domestic ones, no matter how costly U.S. policy has made them.

This brings us to a broader fallacy that clouds the tariff debate: the conflation of free, international trade with “globalisation,” and of autarky with localism or nationalism. A typical example is this BBC article, which declared:

[The imposition of tariffs] was not just the US starting a global trade war, or sparking a rout in stock markets. It was the world’s hyper power firmly turning its back on the globalisation process it had championed, and from which it handsomely profited in recent decades.

The implication is clear: rejecting international trade is tantamount to rejecting globalisation itself, while embracing trade is submission to a corporate, globalist order.

Such framing makes sense only if one views states as the primary economic actors. In such a mindset, independent state politicians see borders not just as legal lines, but as psychological barriers. Unsurprisingly, they’re therefore inclined to restrict goods crossing those borders — which, in turn, hampers international trade and shifts the economy inward.

By contrast, when states co-operate or consolidate — especially under supranational bodies like the EU — borders lose relevance. Trade may increase, not because barriers are gone, but because those barriers are now internal to the co-operating bloc: regulations, subsidies, mandates. The EU commissioner doesn’t care if a good crosses a border; he just wants to control the good itself.

This is the true essence of globalisation: not trade across borders, but the centralisation of decision-making power — first among states, then into shared bureaucracies. Add in the corporate goliaths that thrive on state support, and the picture is complete. Localism, by contrast, means decisions made closer to the ground — at the national, regional, or even individual level.

Trump may talk tough on trade and promise a return to American industry, but he is no localist in governance. His enthusiasm for swallowing Greenland, Canada, or Panama shows he’s perfectly content with centralisation — provided he’s in charge of it.

This confusion between trade and globalisation becomes even more absurd once we remember — again — that trade is conducted between individuals. It becomes “international” only when political borders separate the two parties. But what if those borders change?

Today, an Englishman trading with a Scotsman is engaged in domestic commerce. If Scotland were to leave the United Kingdom, that very same transaction would become “international.” Does the moral character of the trade shift accordingly?

Tariffs are “anti-globalist” only in the most superficial sense — in that they’re imposed by nation-states. But take localism to its logical conclusion — the right of each individual to decide for himself whom to trade with, and on what terms — and you’ll find it is entirely compatible with international trade. There are, after all, perfectly good reasons to buy from abroad.

People in Britain, for instance, may share language, culture and pride in national industries. But none of that determines a person’s specific buying decisions. To the average Briton, 99.9% of his countrymen are total strangers. His economic priority, understandably, is the well-being of himself and his family. If their needs are better met by foreign goods, then buying abroad is the rational, moral choice.

Telling him he must “buy British” in the national interest — or forcing him to do so through tariffs — isn’t a call to favour countrymen over foreigners. It’s a demand that he prioritise British strangers over his own family.

So no, tariffs won’t trigger some euphoric industrial rebirth. They’ll just p*ss everyone off. Like all taxes, tariffs serve the state’s priorities — and the handful of vested interests they benefit — while the rest of us pay the price.

Co-operation to Reduce Trade Restrictions

This leads us to the third and final rationale for Trump’s tariffs: the idea that they might incentivise other states to reduce their own trade barriers through mutual agreement.

At first glance, this seems plausible — particularly if one views trade as something conducted between countries. Co-operation between states sounds like a path to freer exchange, right?

But once we remember that trade is conducted between individuals, not states, the picture shifts. Trade flourishes when individuals can transact easily on terms agreeable to them. Tariffs and border restrictions are just one way in which states obstruct this process.

Others include:

• Excessive domestic taxes — such as corporate income tax, VAT, and payroll levies — that directly inflate production costs.
• Complex regulations and licensing regimes that raise artificial barriers to entry.
• Labour laws, minimum wages, and mandated benefits that make hiring prohibitively expensive.
• Zoning and planning restrictions limiting where businesses can operate.
• Poor infrastructure and inefficient public transport systems driving up logistics costs.
• Corporate favouritism, including subsidies and regulatory capture, which distort competition and entrench incumbents.
• Expansive welfare systems that reduce labour supply and discourage entrepreneurial risk.
• Legal uncertainty and bureaucratic red tape that deter new entrants and raise compliance costs.

Trade agreements between states rarely dismantle these burdens. More often, they entrench them — standardising costly restrictions across larger territories. This tends to benefit only two parties: the states themselves and the largest, most politically connected firms, who are best equipped to navigate and shape the resulting frameworks.

The same problem applies to supranational authorities like the EU. Small countries — with limited domestic output and high reliance on global trade — must compete to attract investment. They also face natural pressure to keep their policies disciplined: people and capital can simply leave.

But once those smaller states cede power to larger blocs, that discipline vanishes. Co-ordinated authority means fewer checks on government predation. Regulatory control spreads outward, suppressing competition between jurisdictions. Trade blocs like the EU can then impose sweeping internal distortions — taxes, subsidies, mandates, quotas — all under the harmless-sounding guise of “regulatory alignment.” Yet there’s little benefit in harmonising, say, a 5% tariff here and a trifling non-tariff barrier there into a uniform 50% VAT everywhere.

This is the blind spot in many pro–free trade arguments. They rightly attack border tariffs and quotas but ignore the much larger internal restrictions that persist within so-called “free trade” blocs. They mistake regulatory harmonisation for the easing of trade interference. Yet an IMF study found that regulatory barriers inside the EU are equivalent to tariffs of 45% in manufacturing and 110% in services — effectively shrinking the market in which European firms operate.

This isn’t liberalisation, but cartelisation.

Conclusion

What states should do instead is simple: forget the trade negotiations; forget the treaties; forget the obsession with “following WTO rules”. Just make your country the very best place in the world to do business.

If another country raises tariffs on your exports, don’t retaliate. Don’t punch yourself in the face because someone else kicked you in the shin. Instead, slash every internal tax, regulation and restriction strangling the affected industry.

Better still — do it regardless of what anyone else does. Do it across the board.

Any country that follows this path would become, overnight, a magnet for investment, productivity, rising wages, and sustained prosperity.

A truly strong economy comes not from protecting industries but from protecting liberty.