Comparing Economic Philosophies: Adam Smith vs. Trump's Economic Nationalism

Adam Smith's The Wealth of Nations and Donald Trump's economic nationalism represent two fundamentally opposed philosophies on trade and the role of government. Smith championed free markets and international cooperation, while Trump's approach is characterized by protectionism and nationalistic competition.

Aspect	Adam Smith's The Wealth of Nations	Trump's Economic Nationalism
Core Principle	Free markets, voluntary exchange, and limited government intervention.	"America First" protectionism, using tariffs and government action to shield domestic industries.
View of Trade	A positive-sum game where all participating nations gain; trade deficits are not inherently problematic.	A zero-sum game where one country's gain is another's loss; trade deficits are a sign of exploitation and weakness.
Role of Tariffs	Largely counterproductive; should be minimal. Retaliatory tariffs are only briefly justifiable as a tactical tool to lower another country's barriers.	A primary tool to protect U.S. jobs, punish "unfair" practices, and reduce trade deficits. Tariffs are seen as beneficial and a source of government revenue.
Role of Government	Limited to national defense, administration of justice, and public works that enable commerce (e.g., infrastructure, education).	Active in directing the economy, owning equity in private companies (e.g., CHIPS Act), and using subsidies to pick winners.
Definition of Wealth	The stream of goods and services a nation produces (akin to GDP), driven by capital accumulation, division of labor, and productivity.	Prioritizes trade balances (surpluses over deficits) and the reshoring of manufacturing capacity, often framed in terms of national power.

Contrasting Views on Trade Deficits

A key point of contention is the interpretation of trade deficits. Smith argued that the entire "doctrine of the balance of trade" was "absurd," believing that voluntary trade is mutually beneficial regardless of the balance. He explained that a trade deficit is offset by a capital account surplus, meaning foreign countries reinvest the money they earn back into the U.S. economy (e.g., by purchasing property or stocks), which is also beneficial.

In contrast, President Trump consistently viewed trade deficits as a major problem that signifies other countries are "winning" at America's expense, making their reduction a primary policy goal.

Deeper Context and Lasting Influence

Smith's work was a direct critique of mercantilism, the 18th-century doctrine that advocated for hoarding gold and silver through strict trade controls. His ideas provided the theoretical foundation for classical liberalism and modern free-market capitalism. Trump's policies, however, draw parallels with the ideas of Friedrich List, who later argued for protectionism to help developing nations industrialize, though Trump applied them from a position of established economic power. A master's thesis on the topic concludes that while the U.S. has long had a mix of mercantilist and liberal policies, the Trump administration shifted the balance further toward economic nationalism.