Adam Smith Would Not Approve: The Evidence

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Are U.S. Tariffs Aligned with Adam Smith’s Principles?

Back in April, the “Liberation Day” tariffs were announced, sparking a debate on whether Adam Smith, the renowned economist, would approve of these tariffs. Janet Bufton and others argued that these tariffs did not align with Smith’s principles as outlined in “The Wealth of Nations.”

Now, six months later, we have gathered evidence that further supports the notion that U.S. tariffs may not meet Smith’s approval.

Evidence Against U.S. Tariffs

Firstly, the current tariff rates are not based on restrictions imposed by foreign nations on U.S. exports but rather on trade deficits and unclear motivations of the executive branch.

Secondly, the few trade deals negotiated under these tariffs have actually led to higher tariffs instead of lower ones, contradicting Smith’s principles.

In “The Wealth of Nations,” Smith discusses reciprocal tariffs and highlights two key conditions for them to be considered good policy:

The tariffs should result in the repeal of foreign nations’ tariffs.

The domestic tariffs should be temporary and repealed once the foreign nation’s reductions take effect.

While some trade deals have resulted in lower tariffs on U.S. exports, they have also led to permanent higher tariffs on foreign goods, failing to meet the second condition.

Additionally, the Trump Administration has often justified these tariffs using mercantilist arguments, which Smith deemed as “absurd.” The focus on tariff revenue for decades indicates that these tariffs are not temporary negotiation tools.

Adam Smith’s Disapproval

Adam Smith would likely disapprove of these tariffs as they go against his principles. Smith rejected mercantilist grounds and emphasized that taxes should not be arbitrary, a principle violated by the unpredictable nature of these tariffs.

There is a tendency to justify tariffs using Smithian principles retrospectively, but it is clear that the current administration’s mercantilist approach does not align with Smith’s teachings.