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Dumb And Dumber Leading Us To The Apocalypse
Porter's Journal Issue #40, Volume #2
Porter Stansberry
April 07, 2025
History Shows That Wealth Is Created Through Free Trade, Not Tariffs
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Trump’s tariffs will destroy the global economy… Comparative advantage is what really makes the world go round… They will never cut government spending… Fake news about a tariff pause creates volatility… |
Table of Contents
President Donald Trump’s tariffs, if left in place, will destroy the global economy.
And this wouldn’t be the first time…
It’s painful to watch.
The Democrats (dumb) did their best to destroy our nation over much of the last 20 years. Surely, dear God, the Republicans (dumber) can’t be even worse!
What Trump is doing with tariffs, designed not to match other nations’ tariffs, but with punitive tariffs designed to eliminate trade deficits with every individual nation, will destroy the global economy.
The S&P 500 Index is down 10% since Trump announced the tariffs last Wednesday, while the Nasdaq, the price of oil, and the price of gold have also fallen since then.
Whether this is a bluff or madness is impossible to determine.
One thing is certain: free trade is vitally important to economic growth and to the creation of wealth.
I wanted to take a moment to show you how I know that free trade lies at the root of the modern world and all its wealth.
And I want to show you what happened the last time a Republican administration told Americans that our trading partners would pay for our bloated government spending.
Wealth Is Created Through Trade: Ricardo’s Comparative Advantage
Economists have known, with certainty, since the late 1700s (see Adam Smith’s The Wealth Of Nations) that the accumulation of trade surpluses does not lead to prosperity. Increases to labor productivity are far more important.
Still, it wasn’t until in 1817 that the incredible benefits of free trade were clearly understood. That year a brilliant market economist, David Ricardo, published On The Principles Of Political Economy And Taxation. This book is the foundation of all modern economics. And the centerpiece of that book is Ricardo’s concept of comparative advantage.
Put simply: different people, in different countries, in different climates, with different cultures and habits all have different kinds of comparative advantages. These advantages can be profound when they have existed for a long time. And they can produce enormous amounts of wealth when they serve the entire global market.
Take Hollywood’s movie industry. That “supply chain” of movie studios, technical know-how, talented actors, script writers, producers, etc., is the world’s leading entertainment content creator. But it is vastly more valuable when it serves the entire world’s market than if it merely made movies and TV shows for its audience in the United States.
And, most importantly, Ricardo proved, with extensive data, that even if a country wasn’t the best at producing anything, it could still benefit from trade by focusing on what it did relatively well, while importing goods others produced more efficiently.
This showed that free trade could lift all nations’ wealth, not just the most productive ones.