On Thursday, President Trump revealed a new customs transaction which marks the first significant agreement after the “liberation date” tariffs with the UK. This move has prompted 90 nations to revisit negotiations.
Earlier this week, India proposed a favorable deal involving zero tariffs on pharmaceuticals, steel, and automotive parts. However, Trump turned it down.
Some argue that America requires tariffs not only for job protection but also to maintain its sovereignty.
Critics of free trade quickly labeled the US-UK deal as “controlled trade,” implying it benefits consumers less than the Indian offer would. It seems their perspective is a bit misguided.
In contrast, Trump’s “controlled trade” arrangement with the UK is viewed as advantageous for the US economy and American workers, especially compared to the free trade agreement with India. This is largely because developing countries operate under different economic conditions, and a universal trade policy just doesn’t fit.
The Illusion of Free Trade
This might frustrate some economists who adhere strictly to consumer models, but various countries are just… different. Their unique characteristics significantly alter the trade dynamics, making genuine free trade unlikely—maybe even impossible.
Consider wages: in 2024, the median income for American workers was around $61,984, while in the UK it sat at $47,162. Both figures utilize the same currency for straightforward comparison. While the UK trails slightly, it isn’t by a huge margin. If it were a US state, it would rank somewhat in the middle. Thus, free trade with the UK doesn’t lead to significant job offshoring because their labor market is relatively comparable.
India’s scenario is quite different. The median income for Indian workers last year was only $3,925. With what one American could earn, a company could hire about 16 workers in India. This stark wage disparity almost guarantees that labor-intensive jobs would shift to India. Lower labor costs prevail.
But it’s not just about wages. Factors like legal frameworks, tax systems, geography, infrastructure, language, and cultural norms altogether create imbalances that can’t easily be resolved by domestic policies.
Take China as an example. American companies there frequently encounter issues with intellectual property theft. Many assume the legal system will manage fraud and theft, but in reality, cultural attitudes often curb deceitful behaviors before they even reach a courtroom.
China’s cultural perspective on property rights, especially regarding outsiders, can be quite different from America’s. It’s estimated that since 2001, the country has appropriated around $5 trillion worth of American intellectual property, with Chinese courts rarely holding anyone accountable for such actions. Unfortunately, that has become the norm.
Conducting business in China diverges significantly from working in the US, Canada, Australia, or Europe. In those regions, shared values and legal protections tend to create a more level playing field.
Even if proponents of free trade manage to lower tariffs and unify regulations, they can’t rectify these deeper structural inequalities. You can’t simply alter culture or root out corruption; these systemic disparities genuinely distort free trade.
Recognizing the Disparities
In my book, “Reshore: How tariffs take our work back and revive our American dreams,” I emphasize that American workers are among the most productive globally.
That’s why the US often runs trade surpluses or modest deficits in developed nations like the Netherlands, Australia, and the UK.
But if American factories are closing and moving production to places like China, Mexico, or India, why the disconnect?
Simply put, productivity isn’t the only factor at play.
The cost of a product involves more than just labor. If a Chinese firm can steal technology rather than innovate, it gives them an unfair edge against American businesses that have invested heavily in research and development over the years.
This isn’t a free market. It’s a skewed one.
Tariffs and Protection
The notion of free trade is largely illusory. True equality in trade isn’t achievable as long as market disparities exist. To reach genuine parity, we’d have to unify the world’s economic, legal, cultural, and political systems. This is essentially what organizations like the European Union and the World Trade Organization aim for—though it seems a long way from realization.
America doesn’t merely need tariffs to safeguard jobs and industries; they are crucial for preserving its sovereignty. Globalism doesn’t equalize chances—it often sells them to the lowest bidder.
