The free-market argument against tariffs is correct. Tariffs distort price signals, subsidies pick winners badly, and government intervention creates inefficiencies that compound over time. The logic is airtight.
In a vacuum.
We are not in a vacuum. We’re competing against state-backed giants with $300 billion yearly subsidy war chests, in an economy where 40 percent of GDP flows through government hands and zero political appetite exists to unwind it. The preconditions free-market models assume—rational actors, fair competition, sovereign capability—have been systematically dismantled over three decades of globalization. You can’t run the race on a broken leg just to prove you believe in running.
That’s the choice before us. Not perfect markets versus imperfect interventions. The government’s thumb is already on the scale—it never left. The only question is whose interests it serves.
The Sovereignty We Sold
Start with what actually happened.
We offshored semiconductor production to Taiwan, pharmaceutical manufacturing to China and India, entire industrial sectors to Mexico and Asia. We called it efficiency. Commerce Secretary Howard Lutnick, speaking at Davos in January 2026, named it plainly: “You should not be dependent for that which is fundamental to your sovereignty on any other nation.”
We offshored sovereignty itself.
Europe’s net-zero commitment illustrates the trap with clinical precision. They pledged carbon neutrality by 2030. They don’t manufacture batteries. So they chose structural dependency on China, which does—an adversary that controls the inputs to their stated national priority. When Taiwan faces military pressure, who controls Western semiconductors? When trade disputes escalate, who controls American medicine? Pure market theory produces no answer, because it assumes the question can’t arise. That assumption is the fatal flaw.
Ross Perot saw it coming in 1992. In debates against Clinton and Bush, he predicted a “giant sucking sound” of jobs fleeing to Mexico if NAFTA passed—factories chasing dollar-an-hour wages, no benefits, no environmental rules, pure margin capture. He was ridiculed. The Economic Policy Institute estimates NAFTA cost 700,000 U.S. jobs by 2010. Manufacturing collapsed. Wages stagnated. The communities that lost those jobs have spent thirty years waiting for the market to sort it out.
It hasn’t. China now runs a $1.19 trillion trade surplus—a record set in 2025. They pump $300 billion yearly into export subsidies, distorting everything from steel to electric vehicles. BRICS nations build alternative financial architecture, chipping at dollar dominance. Meanwhile, U.S. national debt sits at $38 trillion, with interest payments approaching $1 trillion annually and on pace to outpace Medicare spending.
Lutnick put it simply at Davos: “Globalization has left America behind. It has left the American workers behind.”
The purists want to debate Stage 2 policy—optimal taxation, government’s proper role in a healthy economy. We’re still failing at Stage 1. That’s not principle. That’s rearranging deck chairs.
Why Markets Can’t Fix This Alone
Ask the free-market critic a direct question: How do you reshore semiconductor production without leverage? How do you counter $300 billion in Chinese export subsidies with pure market forces? How do you rebuild a hollowed industrial base when market incentives created the hollowing in the first place?
The framework has no answer, because the framework assumes problems that no longer exist: functioning markets, fair competition, the sovereign capability to compete. We’re not in that world. We’re in a world where rivals weaponized trade policy for decades while we honestly called it free enterprise.
Consider what unrestricted market forces actually delivered: deficits swelling to trillion-dollar peaks, IP theft running $500 billion yearly, manufacturing stagnation, and a China that gained industrial dominance not through superior innovation but through state-directed mercantilism operating under the cover of WTO membership. They didn’t play fair. We played by rules they ignored, and called the results a market outcome.
The correct response isn’t to abandon market principles. It’s to recognize that restoring the conditions for markets to function requires a period of deliberate intervention—emergency medicine before the patient can exercise freely. Recent Democratic administrations grasped this necessity and executed it poorly, funneling billions to politically connected firms while trade deficits swelled, inflation hit 9 percent, and deficits ballooned to 7 percent of GDP. The problem wasn’t the intervention. It was whose interests the intervention served.
The Triage
Trump’s approach shifts the balance. His interventions counter unfair play rather than enable it. That distinction matters.
Tariff pressure—60 percent on China, 25 percent on other trading partners—coincided with 1.2 million manufacturing jobs reshored by mid-2025. Accelerated capital expenditure write-offs let firms deduct equipment costs immediately, spurring $1 trillion in domestic investment commitments. Ford shifted $11 billion in EV production to American plants. TSMC announced $165 billion across three semiconductor fabs, packaging facilities, and an R&D center in Arizona. Apple committed $600 billion in U.S. investment with 450,000 jobs attached.
The broader picture is larger still—and contested. Trump’s tariff pressure is credited with drawing over $9.94 trillion in committed investments through trade deals, including $550 billion from Japan, $1.4 trillion from the UAE, and $350 billion from South Korea. Fact-checkers note that many pledges are nonbinding and timelines uncertain. That caveat matters. But nonbinding commitments still signal directional intent, and the scale of the announcements—even discounted heavily—represents a shift in where capital expects growth to occur.
Energy policy removed drilling restrictions. Output reached 14 million barrels daily—a 20 percent jump—cutting imports 30 percent and gasoline to $2.80 a gallon.
On artificial intelligence, the administration banned advanced chip exports to China and funded $100 billion in R&D. The U.S. now holds 65 percent global market share in AI.
GDP exceeded four percent in 2025. Unemployment held at 3.5 percent. Tariff revenue hit $195 billion, funding priorities without broad tax increases. These are not the outcomes the models predicted.
On debt, Treasury Secretary Scott Bessent has inherited a mess partly of his predecessor’s making. Janet Yellen favored short-dated debt issuance in her final years—depressing long-term yields to juice the economy before the election, what Bessent called imprudent. He’s stuck with her plan short-term because markets demand predictability. But his target is waste: GAO estimates put fraud at 5 to 10 percent of the federal budget, $233 to $521 billion annually, and Bessent has named it the first line of attack. His projection: tariff revenue offsets new spending, fraud elimination saves hundreds of billions, and 7 to 8 percent growth shrinks the deficit ratio faster than austerity ever could. Whether he succeeds where she failed remains to be seen. But the debt trajectory under the previous four years—deficits at 7 percent of GDP, total debt climbing from $27 to $37 trillion—demanded something different than more of the same.
What the Models Miss
Economists forecast correctly about 23 percent of the time while expressing 53 percent confidence, per a Berkeley Haas study. Irving Fisher called stocks permanently elevated in 1929. The profession missed 2008. It missed Biden’s inflation. It projected Trump’s 2025 tariffs would spike consumer prices; inflation peaked at 4 percent instead, well below forecasts.
The miss is structural, not accidental. Static models isolate a single variable—tariffs raise household costs by $1,500—while ignoring market complexity. Surplus nations don’t simply absorb tariff hits. China weakened its currency, subsidized exports further, and shifted production through proxies like Vietnam to retain U.S. market share. Prices stayed stable because they chose market share over margin. If tariffs were genuinely self-inflicted wounds, our adversaries would celebrate them. Instead, they negotiate.
Behavioral adaptation compounds this: firms reshore, supply chains reroute, consumers switch. Geopolitical leverage generates deals that static models can’t price. The profession hasn’t built models adequate to adversarial trade environments, so it applies peacetime frameworks to wartime conditions and wonders why the predictions fail.
The strongest objections deserve direct answers nonetheless.
Tariffs inflate prices and hurt consumers. Stanford surveys show 93 percent of economists agree tariffs reduce welfare, and Yale projects household hits of $1,900 to $7,600. Short-term costs are real. But 2025 inflation peaked at 4 percent as China compressed margins to hold market share. The question isn’t whether tariffs impose costs—it’s whether the alternative imposes different costs through offshoring and wage suppression, distributed invisibly across decades rather than visibly at the register.
Tariffs fail to reshore jobs. First-term Fed studies showed tariffs raised input costs without net manufacturing gains. Second-term results differ: $800 billion in foreign direct investment, $1 trillion in domestic commitments, TSMC and Ford as proof of concept. The difference is scale, duration, and complementary policy.
Policy uncertainty cuts long-run GDP. Penn Wharton projects a 6 percent GDP drop and 5 percent wage decline. Early 2025 saw volatility. GDP grew 3.2 percent. Markets adapt when signal emerges from noise.
Interventions worsen debt. Deficits persist despite tariff revenue. Bessent’s counter: fraud elimination saves hundreds of billions annually; sustained growth shrinks the deficit ratio more reliably than austerity. The projection is unproven. The debt trajectory it’s trying to correct is not.
The Sequence
Critics treat Trump’s economic nationalism as a permanent governing philosophy. Listen to what the administration actually says instead.
Lutnick at Davos: “Take care of your own and then we will work out wonderful relationships between us.” And the crucial distinction: “Don’t be America alone. But be America first.”
That’s sequencing, not isolationism. The stated vision is: rebuild strength, negotiate from power, establish fair rules, then compete freely. Discussions within the administration of eliminating income tax up to high thresholds, measuring success by median living standards rather than stock indices, and reducing government intervention once existential threats are neutralized—these are moves toward freer markets, not away from them. But from a position of strength, not weakness.
The purists want to skip steps. We’re failing at step one.
I say this as someone who believed for a long time that holding the line on principle was enough—that markets would sort it out if we stayed patient and consistent. They won’t. Not in time. The political will for laissez-faire doesn’t exist and won’t materialize. Waiting for it isn’t principle; it’s martyrdom dressed as conviction.
Without strategic AI policy, China dominates chips and software, costing an estimated $1 trillion in GDP by 2035. Without energy independence, BRICS nations leverage resource control against us. With debt compounding unchecked, interest payments crowd out every other priority. These aren’t theoretical concerns about suboptimal policy. They’re existential vulnerabilities.
Lutnick at Davos asked the audience to close their eyes and imagine a world without American economic and security dominance. “It becomes pretty dark pretty darn quickly,” he said. Despite predictions that tariffs would destroy global markets, the world’s major stock indices are up. Emergency medicine, administered correctly, stabilizes the patient.
The Only Real Choice
The thumb on the economic scale is not going away. Not in a mixed economy with welfare-demanding voters, aggressive state-backed rivals, and thirty years of accumulated vulnerability. The choice isn’t intervention versus no intervention.
It’s intervention that serves American workers, or intervention that drains them.
Trump’s approach—tariffs, reshoring incentives, energy independence, strategic investment in critical industries—tilts toward us. The 2025 outcomes bear this out against the predictions: jobs returning, revenue rising, growth continuing. The globalist consensus created voluntary dependencies that threaten sovereignty. The free-market framework, for all its intellectual coherence, has no tools for adversarial state actors or existential industrial gaps.
Trump’s interventions aren’t the endgame. They’re triage. Critics who can’t distinguish emergency medicine from long-term health policy are worse than wrong—they’re dangerous.
You don’t have to love it. You don’t have to ignore the costs or pretend the inefficiencies don’t exist. But you do have to reckon with the world as it actually is: rigged, adversarial, and unforgiving to nations that unilaterally disarm while their rivals do not.
In that world, Trump’s thumb isn’t the problem.
It’s the precondition for eventually not needing one.
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