Counter-revolution postponed. Libertarians and their tariff follies

Ovidiu Tanjala

The Trump administration has just announced the withdrawal of the tariffs adopted a little over a week ago, keeping only the tariffs imposed on China. Of course, Chinese goods will not be affected by tariffs because importers will take care to sneak them through duty-free countries before bringing them into the US. Factories in Mexico and Canada will continue to produce, the US will continue to de-industrialize. The Trump administration has basically backed down completely.

Furthermore, the Trump administration has lost all its credibility in the field of taxation, even if it reintroduces the tariffs, manufacturers will not invest in the US, but will continue to produce in other jurisdictions because they will not trust that their investments will be protected in the long run by consistent and predictable tariffs.

The tariffs imposed by the Trump administration are a difficult subject for the libertarian community, we all know very well that tariffs induce a suboptimal way of organizing, in a free market, in the absence of government intervention, tariffs make us less efficient, they simply impoverish us. The issue was clarified since the first half of the 19th century by Ricardo who showed us that if the English produced only cloth while the Portuguese produced only wine we would all have more wine and more cloth. Then Milton Friedman told us that a lawyer will continue to use the typing services of his secretary even if he himself is a better typist than her, precisely because an hour of typing is cheaper than an hour of legal advice.

Tariffs are not something that a classical liberal/libertarian can justify when government intervention is otherwise absent. And yet we cannot help but notice that the political left is jubilant, that tariffs are criticized by various figures belonging to organizations bought by contemporary cardboard capitalism – from the Cato Institute to The New York Times – and that is precisely why I think it is appropriate to reassess the current situation. Shall we celebrate together with all those Cato and New York Times creatures the defeat of Mr. Trump? What is wrong here? Maybe we are starting from a wrong hypothesis? Are the markets as free as we suppose?

Moreover, libertarians are used to loudly decry the printing press, the creation of money out of nothing. The recent tariff adventure of Mr. Trump wiped out an estimated 6 trillion dollars from Wall Street sending all those money into the same nothingness where they came from. Why are we not celebrating? Why is the creation of money out of thin air wrong while the destruction of the same money in the stratosphere of Wall Street is wrong as well?

In order to answer all the questions above we have to asses the current situation.

Capitalism in 2025

The corporation

I have described the situation of corporations in detail in an another text. In short, the problem of corporations in 2025 is the fact that organizations such as Vanguard, BlackRock or various administratively managed sovereign pension funds are shareholders of most large international corporations. Since the capitalist system is an entrepreneurial one and not a managerial one (von Mises), large corporations listed on the stock exchange are no longer private firms but political vehicles of the managerial class that moves fluidly between pseudo-private and pseudo-governmental administration, corrupting both the modern social and democratic state and the corporate universe. Given the ownership structure, large corporations are deeply inefficient monopolistic structures (Rothbard), hence the need for them to connect to the seemingly limitless budgets managed by the modern social and democratic state.

Above we see that at the beginning of the 21st century corporatism is an economic burden for the society, therefore for a return to a free market system it must be eliminated, we must allow it to find its way to a natural bankruptcy.

The currency and the financial and banking sector

The corruption of currency began with its fractional emission, currency was fully and definitively corrupted/destroyed when the last link between gold and the US dollar was eliminated. If corporations are the cancer that destroys capitalism, then currency is the blood that feeds this cancer. Fractional emission and the Cantillon effect make it possible to oversize the financial sector to the detriment of the real economy, namely the economy that actually produces goods and services. The situation is aggravated in the USA by the reserve currency status of the dollar. The financial and banking sector can produce inflation and might export it unsanctioned to the rest of the world. Moreover, the financial and banking sector has the ability to direct the printed dollars (20% FED and 80% financial and banking sector), they are pumped into various assets inflating their prices (from the real estate market to the stock market, etc) that becomes thus inaccessible to the great mass of the American population, which is thus pushed into poverty. An inexorable welfare pump allows elites to buy assets with newly printed money while the common people are destroyed by inflation.

Above we see that at the beginning of the 21st century the financial and banking sector is an economic burden for the society, therefore for a return to a free market system it must be eliminated, we must allow it to find its way to a natural bankruptcy.

21st century capitalism is rotten, corruption has reached its core, both corporations and the financial-banking system are parasitic and bankrupt, both must be thrown overboard in order to return to a free market system.

Mr. Trump is a billionaire, he only benefits indirectly from the financial-banking system, his companies are truly private companies, they are owned by his own family, they do not have nebulous shareholders like big corporations. It is natural for him to feel the breath of the cold monster with fear, it is natural for him to ally with the plebs to preserve his freedom, in order to preserve his properties, his country, the environment in which he was formed, worked and lived. It is natural for him to do this, it is not the first time in history that the plebs ally with an aristocrat against the oligarchy.

Let’s now return to the issue of tariffs. Yes, if the market is free, customs duties will impoverish us. However, in the 21st century the market is not free while customs duties can destroy both large corporations and the financial-banking system, opening the way for the world economy to a sound development based on the free market system. The mechanism is quite simple: tariffs render the current system unable to redistribute inflation worldwide, the system will have to stop printing money, thus bankrupting both large corporations and the financial-banking system, the mechanisms involved are primitive. We already have seen that customs duties make the system implode, trillions of dollars have returned from the nothingness from which they came into the same nothingness. Yes, customs duties are not necessarily the first choice libertarian solution, but at the astronomical levels announced by Mr. Trump they can be used to return to a free market system.

Mrs. Liz Truss lost her position as Prime Minister after the financial markets crashed following Mrs. Truss’ decision to reduce the size of the British government. Should financial markets crash when the government takes steps to reduce intervention in the economy?! Of course, the pseudo-capitalist elites that removed Mrs. Truss from power also forced Mr. Trump to drop the tariffs.

Mr. Trump has lost so far the only important battle with the oligarchs, time is running out against the American president, his path to victory, the path of the common man to freedom is narrowing as the days go by. The attempt to impose tariffs has exposed the soft underbelly of the monster, but Mr. Trump must return to give him the final blow. Yes, although Mr. Trump seems to have lost the first battle, Mr. Trump has not yet lost the war. In order to destroy corporations but also the financial-banking system, Mr. Trump might declare the US bankrupt refusing to honor treasury bonds or, even better, Mr. Trump might declare overnight the dollar convertible into gold at an astronomical price (value of gold reserves divided by the money supply) in the order of tens of thousands of dollars.

Mr. Trump, but also we the plebeians, are the victims of the American president’s vanity, we the plebeians are also the victims of Mr. Trump’s demagogy. If Mr. Millei correctly and honestly told the Argentines that the road to freedom is strewn with work and sacrifice, Mr. Trump promised milk and honey starting the day after his inauguration. However, the path to freedom is hard and difficult, the enemies of freedom are fierce, they are strong, organized, they control state institutions, they control the vast majority of pseudo-private institutions.

The coming weeks will be important. Mr. Trump can passively witness the flow of his second term or he can choose to fight, more precisely he can choose the path of a reactionary revolution. Of course, his conservative friends are reluctant, revolutions rightly scare them, they are afraid of being expelled from the polite society that reads Mrs. Applebaum’s editorials in The Atlantic. On the other hand, we libertarians are psychically fragile, alarmist articles in the Financial Times scare us even though we shall know that they are meant to divert us from the path that leads to truth and freedom, although we should know that we currently do not have a free market, even though we should know that the current economic system is nothing more than a zero-sum game, that the printing press cannot produce economic progress, that the current system it is nothing more than a welfare pump that works inexorably to our detriment and in the favor of the elites, while customs duties might be the grains of sand that, placed in the engine, can cause its seizure and stop it forcing its replacement. Mr. Trump can still rely on populists like Steve Bannon, in the good American tradition they have an acute instinct for freedom, they do not care much about the polite society, they do not care about Mrs. Applebaum, they are not sure that they understand Austrian economic theory very well but they will delve into it as soon as they have some free time, immediately after they have shaken off the tyrants and rebuilt their economy. Let’s hope that Mr. Bannon’s America is still alive, that it has not been agglutinated into the great amorphous mass imported during the years when the US was managed by Mr. Biden and that it is ready to follow him.