“China has been ripping us off for years, taking advantage of our open markets while they close theirs. They’re not playing fair, and it’s costing us billions.”—Donald Trump, Pennsylvania campaign rally, June 28, 2016
Donald Trump’s economic worldview—rooted in mercantilism—prioritizes exports over imports, protects select industries, and champions self-sufficiency. This perspective—evident since the 1980s—drives his policies, from tariffs to trade wars. Yet mercantilism rests on flawed assumptions: that trade is zero-sum, job destruction harms the economy, and self-sufficiency is desirable. What follows is a critique of these fallacies, highlighting the costs of Trump’s protectionist approach amid a $37 trillion national debt crisis.
Trade: A Win-Win Proposition
Mercantilism views trade as a zero-sum game, but economics teaches otherwise. Voluntary trade benefits both parties, as each exchanges something less valued for something more desired. Prosperity grows when exchange opportunities expand, making it in our self-interest for others to thrive.
The notion of “trade deficits” is an accounting fiction. Individuals and businesses, not nations, trade. Before Trump’s tariffs upended global trade, exchanges between Americans and Chinese exceeded $1 trillion annually. While the US imported $295 billion more than it exported in 2024, American multinationals like Apple, Tesla and Starbucks generated $400-500 billion in China—far surpassing Chinese firms’ US revenue of $100-150 billion. Chinese tourists also spent $6-8 billion annually in the US, double American spending in China.
American consumers reaped significant benefits. In 2023, 78 percent of US smartphones, 65 percent of TVs, and 76 percent of toys came from China, driving deflation in these categories while the Consumer Price Index rose 81 percent since 2000. Cheaper goods freed up income for consumption and investment, spurring job creation.
China’s rise from poverty—real per capita income grew from $1,000 to $13,000 since 1990—made it a global economic powerhouse. Its share of world exports jumped from 6 percent to 32 percent since 2000. US firms capitalized on this growth: fast food outlets in China grew from 1,000 to 30,000, and China became the largest market for semiconductors (29 percent of global sales). Apple and Tesla, generating 17 percent and 24 percent of their revenue from China in 2024, owe much of their success to Chinese workers and consumers. Apple’s valuation soared from $20 billion in 2000 to $3 trillion today, thanks in part to CEO Tim Cook’s expertise in Chinese supply chains, where advanced tooling and skilled labor are unmatched.
Trump’s tariffs, however, disrupted this mutually beneficial relationship. When Tim Cook whispered in the president’s ear that 145 percent tariffs on Chinese goods could triple iPhone prices and risk $3 trillion in stock market wealth, Trump lowered the tariff to 20 percent, showing flexibility, but also favoritism for large, politically-connected companies.
Jobs: Creative Destruction Drives Progress
Mercantilism fixates on preserving jobs, but job destruction is often a sign of progress. Economist Walter Williams argued that innovations like dishwashers eliminate low-value jobs, freeing labor for more productive roles. In their essay, “Free Trade Myths and Realities,” Wayne Winegarden and Rowena Itchon note that trade, like technology, is “creatively destructive,” improving lives by disrupting outdated practices. E-commerce, for example, created 500,000 US jobs from 2007 to 2017, paying 33 percent more than retail jobs, despite closing brick-and-mortar stores.
US manufacturing employment fell 25 percent since 2000, part of a post-World War II trend driven by rising productivity. Manufacturing revenue per employee rose 30 percent in real terms from 2000 to 2024, as lower-paying, polluting jobs shifted to China, per David Ricardo’s law of comparative advantage. As nations industrialize, manufacturing jobs peak and then decline. China’s current 30 percent share of global manufacturing mirrors the US’s historical peak. As China grows richer, low-wage jobs move to Vietnam and India.
Today’s factories are highly automated, requiring fewer workers. Cato Institute trade analyst Scott Lincicome notes 500,000 unfilled US manufacturing jobs due to labor shortages, not trade. Commerce Secretary Howard Lutnick admits future factories will prioritize automation over employment.
Self-Sufficiency: A Flawed Ideal
Trump’s “America First” policy seeks self-sufficiency, as Andy Kessler describes: “Make in America. Invest in America. Everything done by Americans.” Yet, as Murray Rothbard argued in 1986, this leads to impoverishment. If tariffs benefit nations, why not cities, neighborhoods or even households? “Why shouldn’t the Jones family issue a decree that from now on, no member of the family can buy any goods or services produced outside the family house? Starvation would quickly wipe out this ludicrous drive for self-sufficiency.”
The division of labor drives wealth creation. Specialization allows individuals and firms to maximize value, trading with others for mutual gain. Self-sufficiency—or vertical integration—has a history of business failure. Kessler explains that vertical models like IBM and AT&T collapsed as horizontal models—“industries organized by layers of expertise, sorted by value added”—emerged. Intel and Microsoft outcompeted IBM’s mainframes, while the internet’s horizontal stack disrupted AT&T. Today, AI relies on Nvidia chips made by Taiwan’s TSMC using equipment made by Dutch firm ASML. TSMC’s dominance (92 percent of advanced chips) stems from specializing in manufacturing, unlike Intel’s attempt to control both design and production.
US firms like Apple—with 34 percent operating margins—thrive by leveraging global supply chains, while China’s Foxconn earns just 3 percent assembling iPhones. High margins, not trade deficits, drive prosperity.
China’s experiment with self-sufficiency, the Great Leap Forward (1958–1962), caused 45 million deaths from starvation and violence. Mao’s policies devastated agriculture, proving closed economies fail. Deng Xiaoping’s market reforms transformed China into a global trade leader, underscoring the perils of isolation.
Protectionism: Privilege and Waste
Murray Rothbard warned that protectionism uses force to restrain trade, harming consumers for the benefit of a privileged few. Trump’s first term tariffs exemplify this inefficiency:
- Washing Machine Tariffs (2016–2018): Obama’s 52.5 percent anti-dumping duties and Trump’s 20-50 percent global tariffs shifted production to South Korea and Vietnam. New US factories added 1,800 jobs but cost consumers $1.5 billion annually—$815,000 per job, according to Douglas Irwin, author of Clashing Over Commerce.
- Steel and Aluminum Tariffs (2018): 25 percent steel and 10 percent aluminum tariffs reduced imports by 25 percent and 30 percent, respectively, but raised US car prices by $300. Retaliatory tariffs from China and others hit US exports like agriculture, whiskey and motorcycles.
- Farmer Aid (2018–2019): China’s tariffs on soybeans caused a 94 percent export drop. Trump’s $28 billion Market Facilitation Program—dubbed “Trump bucks”—offset losses but favored large farms, costing taxpayers dearly.
The CHIPS and Science Act (2022) under Biden further illustrates the waste of government-driven onshoring. Allocating $39 billion for semiconductor manufacturing, it awarded Intel ($7.9 billion), TSMC ($6.6 billion), and Samsung ($6.4 billion). TSMC’s Arizona plants, employing 6,000 workers, cost over $10 million per job. A 25 percent Investment Tax Credit and $5 billion in loans add to the subsidies. TSMC’s additional $100 billion investment, driven by Trump’s tariff threats, faces high US operating costs and a lack of local talent, forcing reliance on foreign workers. As venture investor Derek Au observes, TSMC’s Arizona fab resembles “Little Taipei,” with no comparative advantage for advanced chipmaking in the US.
Conclusion
The political right, like the left, thrives on fear, casting China, immigrants, and progressives as threats to America’s way of life. Trump’s protectionist policies exploit this angst, promising simple solutions to complex problems. Yet his approach ignores economic realities: trade benefits all, job destruction fuels progress, and self-sufficiency breeds inefficiency.
Trump inherited a $37 trillion debt ($8 trillion of which he added in his first term), with $10 trillion resetting in 2025 at 4 percent interest rates, 7 percent-of-GDP deficits, and rising entitlement costs. He has no margin for error. His capricious tariffs flummox entrepreneurs, disrupt markets and burden consumers, while subsidies like the CHIPS Act waste billions.
Blaming global trade and a prospering China for America’s woes misdiagnoses the problem and diverts attention from the elephant in the room—a bloated government and unsustainable debt. By desperately chasing their past—the legacy of the “greatest generation”—Americans gamble their future on a flawed, bygone system. True prosperity lies in free markets, not mercantilist delusions.
