The contemporary challenge of trade with adversarial sovereign states demands a nuanced reading of Adam Smith’s liberalism. While the doctrine of laissez-faire and free trade remains the ultimate goal of maximizing global opulence, its foundation is contingent upon the existence of a stable rule of law and reciprocal commitment to commercial justice. I argue that when this fundamental precondition is systematically violated through practices like currency manipulation and intellectual property (IP) theft, strategic tariffs become a necessary, temporary instrument of economic statecraft—a tool required to compel the adversary to accept the very rules that enable Smith’s system to function. The long-term solution, however, remains firmly within the Smithian mandate: the restoration of institutional justice through non-tariff enforcement.
The Missing Precondition: The Adversary and the Absent Spectator
Smith’s theory of moral and economic order is rooted in The Theory of Moral Sentiments, which posits the “Impartial Spectator”—an internal, moral conscience—as the essential check on self-interest. When an adversarial regime lacks this internal constraint, its economic policy becomes purely transactional and coercive, prioritizing geopolitical advantage over mutual benefit.
This failure of the Spectator manifests in three core justice violations that fundamentally undermine free trade:
Systemic Forced Labor and Human Rights Violations: The utilization of forced labor grants a cost advantage derived from oppression, a moral collapse that the Impartial Spectator condemns unequivocally. The resulting low prices are not a gain from legitimate comparative advantage but a subsidy extracted through coercion.
Currency Manipulation as Systematic Distortion: An adversarial state’s deliberate suppression of its currency’s value acts as a perpetual, hidden export subsidy and a hidden tariff on imports. This is a coercive, non-market distortion that prevents the “invisible hand” from correcting trade imbalances through natural currency appreciation.
Intellectual Property (IP) Theft: The systemic theft of patented technology and trade secrets violates the most fundamental component of the sovereign’s duty: the administration of justice and the protection of property rights. As advanced by Douglass North, secure IP rights are the institutional engine of modern economic growth.
The issue is not that free trade is failing, but that the state committing these actions has chosen to operate outside the rules of justice, thereby suspending the moral contract of free trade.
Strategic Tariffs as Immediate Compulsion and Corrective Justice
In the face of an adversary operating without an internal moral or legal check, immediate, impactful action is required to stop the injury. Strategic tariffs serve this purpose as an external corrective force.
The justification for these tariffs is not protectionist—it is corrective justice. For instance, a tariff precisely calibrated to offset the estimated currency distortion ceases to be a tax and becomes a countervailing duty aimed at neutralizing the competitive advantage gained through injustice. Likewise, tariffs on goods produced with forced labor act as a moral barrier, ensuring the importing nation is not complicit in the adversary’s moral failures. Tariffs, therefore, function as the only tool capable of providing immediate, verifiable economic pain—the necessary leverage to compel the adversary to the negotiating table and halt the continued injury to the trading partner’s economy.
The Smithian Path: Long-Term Institutional Enforcement
While tariffs offer immediate leverage, they are inherently blunt, risky tools susceptible to the political capture warned against by the Man of System critique. The true, long-term adherence to Smith’s principles lies in building and using non-tariff enforcement mechanisms designed to achieve structural justice. This involves a sustained commitment to institutional economic statecraft:
Enhanced Property Rights Enforcement: Rather than imposing tariffs on all goods, the long-term solution focuses on targeted financial sanctions against the specific state-owned enterprises, research institutes, or individuals proven to be responsible for IP theft. This strategy uses financial and legal isolation to impose consequences directly on the perpetrators, enforcing the rule of law without punishing the entire commercial flow.
Multilateral and Rules-Based Litigation: The U.S. must vigorously pursue claims through international bodies like the WTO, but with a renewed focus on challenging adversarial practices not merely as trade barriers, but as systemic violations of foundational rules (e.g., non-discrimination, fair subsidies). This reinforces the concept that the issue is the rule of law, not simply market access.
Sectoral Reciprocity and Investment Screening: Establishing clear, enforceable requirements for market access and investment reciprocity in key strategic sectors (e.g., technology, telecommunications, defense) ensures that the adversary cannot exploit an open system while maintaining its own closed, unjust one. Furthermore, rigorous screening of foreign investment acts as a vital defensive measure to prevent the acquisition of domestic technology through non-market means.
These long-term solutions embody the true Smithian spirit: they focus the sovereign’s power on building a framework of durable justice, making the use of arbitrary, coercive tariffs—the tool of the Man of System—redundant.
Conclusion: Tariffs as the Bridge, Justice as the Destination
Smith remains right: free trade is the most effective generator of national opulence. However, we cannot accept a morally compromised form of “free trade” that relies on the adversary’s injustice. Strategic tariffs are justified as a necessary, temporary bridge—a tool of coercion used to force the conditions of justice into existence. Once the adversary is compelled to accept the rule of law, the tariffs must be entirely removed, allowing the robust, fair, and mutually beneficial system prescribed by Adam Smith to finally prevail.