In a way, President-elect Donald Trump sees the world the way America’s Founding Fathers did. Like Thomas Jefferson and James Madison, Trump wants to protect American manufacturers by taxing products made overseas and sold in the United States. Alexander Hamilton, the country’s first treasury secretary, wrote to Congress in 1791 in his Report on Manufactures, that “by enhancing the charges on foreign articles, they enable the national manufacturers to undersell all their foreign competitors.” Trump, taking a similar view, said he would slap a 45 percent tariff on imports from China, and a 35 percent tariff on all products that American companies make abroad and try to sell here. “Please be forewarned before making a very expensive mistake!” Trump tweeted last month at American companies considering relocating their factories abroad.
As Trump makes his final picks for positions that will shape the country’s trade policies, it’s clear that he hopes to return the United States to its protectionist past. But the thing is, of course, that the American economy today is far different from Hamilton’s America, which was engaged in a trade war with Britain. Back then, the United States was trying to free itself from a colonial economic relationship with the British monarchy, in which British industries wanted to exploit America’s raw materials, untaxed. The Founding Fathers wanted to encourage their own emerging manufacturing industry, and raising import tariffs provided a way to finance the new government. So the new Congress approved Hamilton’s recommendation to raise taxes on all manufactured steel, iron, and textile imports. The American economy was still small enough that it could grow by focusing inward. The American economy today is a global one, and U.S. companies have had to expand production—and their consumer base—across the world to keep growing.