President Trump has deemed April 2 to be ‘Liberation Day’ for America. He is set to impose sweeping reciprocal tariffs on America’s trading partners, which are hoped to level the playing field between America’s free enterprise and foreign state-backed rivals.
Liberation Day ought to be celebrated alongside Independence Day. Why? Money and power are two sides of the same coin. Without economic independence, such as the ability to manufacture steel, automobiles, and computers, we cannot long defend our political independence.
Tariffs are not simply a tax, they are necessary for America’s industrial policy and national security.
Throwing the baby out with the bathwater
America’s Founding Fathers were well-aware that political freedom rests upon economic autarky. For example, George Washington himself wrote:
A free people ought not only to be armed, but disciplined; to which end a uniform and well-digested plan is requisite; and their safety and interest require that they should promote such manufactories as tend to render them independent of others for essential, particularly military, supplies…
These sentiments were fleshed out in Alexander Hamilton’s Report on Manufactures — the founding document of the American System of trade and industrial policy, which the U.S. followed until the 1970s.
Beginning in the 1973, America’s leaders made a radical and experimental departure from two centuries of protectionism. Economic globalism — sold under the guise of free trade — became the name of the game. Over the next 50 years, American industry was subjected to competition with low-cost markets in developing countries like China. In order to compete, factories offshored at an alarming pace.
Consider that America’s cumulative trade deficit since 1974 works out to over $25 trillion, adjusted for inflation. This is $147,058 for every American currently in the labor force. How did America pay for this deficit? By selling assets and debt. Not only did this have dire economic consequences, economic globalism puts America’s national security in jeopardy.
Beggers Cannot be Choosers
In 2024, America’s trade deficit in goods topped $1.2 trillion. The majority of this deficit was in manufactured goods — including technologically sophisticated production like automobiles and computer chips. This has left America dependent on foreign suppliers to provide the necessities of a modern economy.
7% of the world’s machine tools. For comparison, Italy produces 8%, while China makes 29%. This puts America at risk because it limits our ability to scale-up our own economic production if a global conflict were to break out.
Worse still is the fact that America relies on foreign suppliers for ships and vehicles — the arteries and veins of the economy. For example, America’s Merchant Marine is entirely reliant on imported ships. In 2023 America produced just 0.1% of commercial ships, compared to China’s 50.2%.
America also imports a sizeable portion of its automobiles. In 2023 America produced 10.6 million motor vehicles. Meanwhile, we purchased 15.5 million. That is to say that about one-third of our motor vehicle industry has been offshored.
Finally, America’s most critical dependence respects silicon chips. There is little doubt that computers run the world, and America does not manufacture enough silicon chips to sustain the economy. In fact, America does not even manufacture the photolithography machines necessary to manufacture advanced microchips — a Dutch company has a near-monopoly on these machines.
All this is to say that America’s economy is incredibly fragile. Relatively minor supply chain issues could not just disrupt the economy in a big way — they could have catastrophic consequences in the case of disputes with America’s erstwhile suppliers.
Consider what would occur if conflict erupted between America and China. Presumably, America would need to scale-up its industrial production to build more weapons, vehicles, and computers. There is just one problem: scaling-up is just not possible — at least not immediately. Why?
In order to manufacture more equipment, America would need to build more factories. However, America imports almost all of its industrial components and machine tools. That is, America does not even manufacture the things it would need to use to manufacture more things.
Worse yet, America’s workforce lacks the training and experience to manufacture critical goods. What would happen, for example, if Taiwan stopped selling microchips? Even if we assume that America has the tools to manufacture microchips — which we do not — we do not have the human capital to manufacture microchips on a large scale. That is, very few Americans know how to build microchips. Very few Americans even have the skills to build the factories themselves.
The debate over tariffs is being fought over economic lines. This is a mistake. National security is extremely valuable, and this value is not being quantified by many who reflexively oppose tariffs for ideological reasons. Tariffs are not simply a tax, they are a critical component of every nation’s industrial and national security policies. America is no exception.
Image: Defense Visual Information Distribution Service
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