As I write these lines in April 2025 the United States, and the rest of the world as well, is agitated by President Donald Trump’s broadscale imposition of tariffs. One is not sure whether those tariffs are primarily designed to raise revenue, bully other countries into conforming with Trump’s political goals, protect American industries, or what. But whatever may be the seemingly shifting intentions of the President, it makes sense to take a look at the question of tariffs and free trade from the perspective of a distributist understanding of the economy.
Although distributism is committed to promoting economic decentralization and widespread property ownership, these should not be seen primarily as ends in themselves. Rather, a decentralized economy best promotes the goods which an economy is meant to serve, that is, the provision of necessary or useful well-made goods at fair prices, sufficient and (as far as that is possible in this world) fulfilling work with just remuneration, all the while not detracting from our overall social or environmental health. Therefore we should ask whether and how tariffs or free trade contribute towards those goals.
I suggested just now that tariffs might be instituted for different purposes. And as such, they have to be evaluated differently. A tariff simply to raise revenue amounts to a sales tax on imported goods. Importers will almost always raise prices to consumers, and even if they absorb part of the cost added by the tariff, most of it will almost certainly be passed on to the consumer. Sales taxes, particularly on luxury items, are by no means wrong, and it seems that there would be no violation of justice in imposing this additional levy only on imported goods. But circumstances would dictate whether a sales tax openly imposed on both domestic and foreign products would make more sense in any particular instance than a tariff on imports. And if there is no domestic production of a particular good, as when climate makes it impossible to grow certain crops, then a tariff is purely a sales tax, and unless it is a question of a luxury item, such a tariff probably makes no sense.
Another possible reason for a tariff is to retaliate against another country which has imposed a tariff on our exports. This could be a reasonable action, but not if it is done purely for spite and ends up hurting consumers without helping producers. Here, it seems to me, everything depends on the details on what has happened, whether a tariff has been imposed on all or only some products, whether and how much domestic production there is of any particular product, and so on. If a particular product is not produced domestically, then to impose a tariff simply in retaliation would end up hurting consumers at home. Only by carefully examining the specifics of each situation and the likely effect both of the foreign tariffs and of our projected response can one offer a sensible opinion on such a tariff.
A better reason for tariffs can be found in the desire to protect a particular economic sector, often a sector that has important implications beyond the merely economic. But in saying this, one runs into the neoclassical economic doctrine of comparative advantage. This notion is the fundamental reason economists of the neoclassical school almost always oppose tariffs.
The idea of comparative advantage holds that a country will profit if it exports those goods in which it is relatively more efficient in producing. Let us look at Paul Samuelson’s presentation of this idea.
The principle of comparative advantage holds that each country will benefit if it specializes in the production and export of those goods that it can produce at relatively low cost. Conversely, each country will benefit if it imports those good which it produces at relatively high cost.1
So even if a country is relatively more efficient in a range of goods, it still ought to concentrate on those that it is most efficient in producing, relative to the rest of the world.
Say that the United States has higher output per worker (or per unit of input) than the rest of the world in making both computers and grain. But suppose the United States is relatively more efficient in computers than it is in grain. For example, it might be 50 percent more productive in computers and 10 percent more productive in grain. In this case, it would benefit the United States to export that good in which it is relatively more efficient (computers) and import that good in which it is relatively less efficient (grain).2
This presentation of the principle makes perfect sense, but only if we look at economies, and indeed at nations as well, in a peculiar manner, a manner that we have been taught to see as natural, but which in fact is highly suspect. What objections, then, can be brought against Samuelson’s assertations?
The fundamental error of this idea is twofold: first, that the acquisition of more goods at the lowest possible price is the chief aim of life, and second, that nations are pretty much just places where stuff is produced and consumed. These are errors that are based on what has been called by St. John Paul II the principle of economism. In his encyclical Laborem Exercens (no. 13) John Paul spoke of economism as
an error of materialism [which] directly or indirectly includes a conviction of the primacy and superiority of the material, and directly or indirectly places the spiritual and the personal…in a position of subordination to material reality.
Economism evaluates every action solely or primarily by its effects on quantity of production and consumption. If we look at Samuelson’s example, namely that we should export computers and import grain, he is dismissing an entire economic sector, farming, as relatively inefficient and therefore to be allowed to decay. What he is ignoring is that farming is a notable instance not just of an economic sector but of a way of life, a way of life whose importance goes far beyond those who are actually engaged in agriculture or who even dwell in rural areas. A healthy balance between urban and rural is important for any country, and to discount and disregard rural areas because foreign agricultural products are cheaper is a notable example of economism. So whether or not the agricultural productions of any particular country can compete without tariff protection is a decidedly secondary consideration, for, if a country’s culture is important and worth preserving, the significance of rural life goes far beyond its merely economic role.
This is not even to mention that when a country depends on imported food, in time of war it is suspectible to blockade of its food supply. This happened in World War I in Germany, a fact which contributed to loss of morale in the German population. And of course, the same can be said with regard to any other necessary product, natural or manufactured.
To be fair to Paul Samuelson, he does devote some space to possible negative consequences of free trade. In the first place, he notes that it requires the “classical assumptions [of] a smoothly working competitive economy with flexible prices and wages and no involuntary unemployment.”3 In other words, the textbook presentation of how a capitalist economy is supposed to function, however seldom achieved in the real world. Secondly, he admits that not
every individual, firm, sector, or factor of production will benefit from trade. If free trade increases the supply of goods that are produced by particular factors of production or in particular regions, those factors or regions may end up with lower incomes than under restricted trade.4
But as is usual with neoclassical economists, such unfortunate happenings are ultimately dismissed with the comment that “over long periods of time, those displaced from low-wage sectors eventually gravitate to higher-wage jobs.” This comment displays the typical ignorance of neoclassical economists, since the jobs that are lost on account of free trade are by no means necessarily low-wage, the displaced workers are likely to be dead before they can “gravitate to higher-wage jobs,” and the social environment in which they live will in the meantime tend to deteriorate and create the range of social problems familiar to us from rust-belt cities.
Samuelson also gives a nod to the argument I am making here, that is, to the question of non-economic consequences of free trade. “A nation surely should not sacrifice its liberty, culture and human rights for a few dollars of extra income.” With respect to cultural protection, he writes,
Countries may desire to preserve their cultural traditions…. France recently has argued that its citizens need to be protected from “uncivilized” American movies. The fear is that the French film industry could be drowned by the new wave of stunt-filled, high-budget Hollywood thrillers. As a result, France has maintained strict quotas on the number of U.S. movies and television shows that can be imported, upholding its stance even in the face of strong pressure from the United States in the latest round of trade negotiations.5
In general, however, Samuelson’s view of trade and of tariffs is premised on the idea that free trade should be the norm, that tariffs inhibit economic efficiency, which in effect means that they inhibit the acquisition of more and more stuff, at least on the part of those who are not likely to lose their jobs. Tariffs, in this view, are clearly an exception to an otherwise smoothly functioning system of trade, which will promote increased consumption of more and more stuff.
Of course with this discussion of trade and tariffs I do not mean to justify any and every tariff. Like most things, tariffs can be imposed both wisely and unwisely. When they are imposed to protect an important industry or way of life, then I think that very often they can be justified as contributing to the overall common good of society, but here also they must be well designed to make sure that they accomplish their goal and do not bring about greater unintended negative consequences.
The question of free trade and tariffs highlights the difference between an approach to economics that focuses solely or almost so on purely material benefits and one that recognizes that economic activity is a subordinate part of the complex that makes up human existence, and that economies exist to support family and community life. The Gross Domestic Product is not the measure of the common good, for the latter is made up chiefly of things and activities that cannot be quantified. Sadly, today the vast majority of the economics profession simply assumes “the primacy and superiority of the material, and…places the spiritual and the personal…in a position of subordination to material reality.” Until that changes, discussions of trade, wages, profits, economic regulation, and of every other aspect of economic life will be vitiated by such an erroneous starting point, and instead of clarifying our thinking about these important matters, will merely add to our already confused ideas.
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