Why Restricting International Students Is Trump's $481 Billion Mistake

There are a number of features that make the United States a unique and exceptional country. One of those drivers of American innovation has been that it has attracted ambitious people around the world, which means having an immigration policy open enough to allow them to work and live in the United States. America has historically understood that importing talent is one of the best investments it can make, but the current administration has lost sight of that concept. 

As I pointed out earlier this year, the Trump administration has attacked legal immigration to the United States. One of those foci of attack has been restricting international students to study in U.S. universities. The Trump administration asserted that foreign adversaries have exploited American universities to steal sensitive research and technology and that stricter visa screening was needed to safeguard U.S. interests.

Whether these restrictions ultimately improve national security remains difficult to measure. What is much easier to estimate, however, is their economic cost. A recent study from the Peterson Institute for International Economics estimates that restricting international STEM students could reduce U.S. GDP by as much as $481 billion over the next decade.

The reason for this decline in GDP is intuitive. The mechanism is fairly intuitive. International STEM students don't simply earn degrees. They become part of America's innovation ecosystem. Many stay to work in research labs, high-tech firms, and startups, where they help develop new products, improve existing technologies, and increase productivity throughout the economy. 

By reducing the number of these future innovators, restrictions shrink the pool of human capital that drives long-term economic growth. The projected GDP loss is therefore not an accidental correlation, but the estimated value of the discoveries, companies, and productivity gains that never materialize.

This immigration restriction especially hits hard for the science, technology, engineering, and mathematics (STEM) industry because as the PIIE study points out, 35 percent of all STEM workers with a PhD are foreign-born and U.S.-trained.

Scientists and engineers develop new products, improve manufacturing processes, write software, discover medical treatments, and launch companies that employ thousands of people. These innovations make workers across the economy more productive, which is ultimately what drives rising incomes and long-term economic growth. International STEM graduates have played an outsized role in America's innovation economy for decades. Restricting their numbers reduces the number of future breakthroughs that make the entire U.S. economy more prosperous.

Ironically enough, these restrictions can actually undermine the President's rationale for the restrictions. Economic strength is one of the foundations of national security. A larger, more productive economy generates greater capacity in research, development new technologies, and gives the United States the resources needed to maintain a technological edge over its rivals. 

Policies that reduce innovation therefore carry national security costs of their own. Restricting international STEM students may prevent some security risks, but it also reduces the supply of scientists and engineers who drive economic growth. If America becomes less innovative, it also becomes less capable of sustaining the military and technological superiority that has underpinned its security for decades.

The irony is that policies intended to protect American workers and strengthen American security can end up undermining both. In an effort to protect America, policymakers risk reducing the very economic dynamism that has made America powerful. STEM students do not simply compete for jobs. They create knowledge, launch companies, and develop technologies that make the entire economy more productive. Restricting their ability to study in the United States means fewer innovations, fewer businesses, and less economic growth.

Restricting international STEM students risks sacrificing one of America's greatest strategic assets: its ability to attract talented people who create new ideas and technologies. In addition to economic implications, it harms national security because it risks reducing the innovation and technological leadership that make the United States secure in the first place. This is yet another reminder that protectionist policies have this uncanny ability to limit economic freedom and American prosperity at the same time.

Trump's Golden Dome Is More Costly Than Simply Not Striking Gold

There is something alluring about the idea of a "Golden Dome": a single, encompassing shield that can render a nation like the United States untouchable. Missile defense systems have long made that psychological appeal that enough technology can be a security risk and neutralize all potential risks. Similar to Reagan's "Star Wars" initiative, the result is a cycle of ambition, technical constraints, and spiraling costs. The question is whether Trump's Golden Dome is a sincere military strategy or a political blunder wrapped in a security blanket. 

Trump's recent "Golden Dome" proposal is a multilayered missile defense system intended to shield the U.S. from ballistic, hypersonic, cruise, and potentially space-launched missiles. The most controversial part of this proposal is thinking about missile defense from space because it would place interceptors in orbit. The idea is to technologically be at the cutting edge while expanding the strategic military scope of the United States.

There are a few reasons to question the proposal, one of them being technological feasibility. As the Cato Institute points out in its Golden Dome analysis, this proposal is based on Israel's Iron Dome. Israel only has to worry about covering 8,500 square miles, as opposed to the U.S.' 3.8 million square miles. Also, ballistic missiles are much more difficult to intercept than short-ranged missiles, which is noteworthy because the U.S. would be more likely to be attacked by long-range missiles. 

Furthermore, this report from the American Physical Society details how defending a country even from a few ballistic missiles is a challenge due to timing and geometry limits, as well as the ability for a defense system to discriminate the warhead from the rest of the "threat cloud." Once a missile is launched, a defender only has minutes to track, detect, and intercept the missile. Even under highly simplified scenarios, reliability drops quickly as the number of missiles increases. The challenge is developing a system at scale.

Even if proponents were to bypass the physical limitations, there is the issue of the price tag. According to a recent report from the Congressional Budget Office (CBO), this system will cost $1.2 trillion over a 20-year period, an amount significantly higher than Trump's estimated $175 billion. In terms of composition, up to $540 billion of that $1.2 trillion is due to the deployment and operation of the space-based interceptors.

The price tag also begs the question about opportunity cost. A trillion-dollar-plus commitment to missile defense necessarily crowds out other investments, including conventional force readiness, cyber defense, or a call towards greater fiscal restraint from the government more generally. This goes beyond the actual price tag. It is a question of whether such a large investment is justifiable given other priorities. 

Aside from the costs, a core issue that such a system might actually provoke adversaries to escalate their military behavior. As the Cato Institute argues, the U.S. upping its interception architecture could incentivize other countries to expand missile inventories, more sophisticated decoys, or systems that would be designed to saturate and overwhelm the U.S.' missile system.

We already have seen this escalatory spiral take place. The situation between the U.S. and the USSR became so destabilizing during the Cold War that they needed to create the Anti-Ballistic Missile Treaty of 1972. Similarly, MERV development and Reagan's Star Wars initiative also escalated tensions rather than de-escalating. History "dealt" with these issues through arms control agreements and strategic stabilization to counter the escalatory nature of enhanced defense systems. 

The Golden Dome tries to soothe people by promising the promise that enough technology can help avoid all risk. However, such promises provide a false sense that we can avoid all risk, much like during the COVID pandemic. The truth is that the Golden Dome cannot override the physical limitations, the absurdly high costs, and the escalation dynamics. A golden dome may project strength, but projection is not the same thing as protection of the American people. 

Trump's Tariffs Are Helping Push U.S. Allies into China's Arms and Undermining National Security

Last week, British Prime Minister Keir Starmer visited Chinese President Xi Jinping. This is the first time a British PM visited since 2018. The purpose of this visit was to reset Sino-British relations. One of the topics of discussion at this visit was trade. If this were an isolated incident, that would be one thing. But other Western nations are initiating trade talks with China. Last month, Canada struck a new trade deal with China. Finland, Ireland, and Germany are also re-engaging with China. There are multiple reasons for other Western countries to re-engage with China, whether it is economic development, access to a large consumer market, investment flows, or shifting geopolitics. 

Unpredictable U.S. Foreign Policy Adds Fuel

Those shifting geopolitics are particularly notable. In the last month alone, the Trump administration has captured Nicolás Maduro and threatened allies with tariffs in order to chase his dream of annexing Greenland, the latter of which is categorically unwise. Trump's foreign policy unpredictability creates incentives to hedge against an increasingly unreliable ally, which is hardly unsurprising seeing more Western countries gravitate towards China. One major factor that I would like to cover today is Trump's tariff policy and how that is becoming a turnoff for the US' allies. I will caveat by saying tariffs alone do not explain why other countries are re-engaging with China, but it is a major element that is part of the broader drive towards a pivot, as this analysis from the Chatham House details. 

Trade Diversion: Another Form of Tariffs Backfiring

The sad part is that this pivot is wholly predictable. I have talked about trade retaliation before here at Libertarian Jew. There is direct retaliation, which is when a country responds to tariffs by implementing their own tariffs in response. Then there is indirect retaliation, such as trade diversion. Trade diversion is what happens when tariffs or other trade barriers cause countries to shift imports and exports away from the most efficient or preferred trading partner toward alternative countries simply to avoid higher costs. Under trade diversion, the trade does not disappear but rather gets rerouted. 

Historical Evidence of Trade Diversion

Trade diversion has played out in history more than once. During the 1930s with Smoot-Hawley, a National Bureau of Economic Research (NBER) paper shows how U.S. exports to retaliating countries fell by 28-33 percent, and trade diversion also occurred. Another NBER paper discovered trade diversion as a result of US agricultural tariffs from 1990 to 2014. In Trump's first term, tariffs on China caused China to divert $21 billion of trade flows away from the United States to other countries (see below). In its 2025 paper on responses to Trump's tariffs, the International Monetary Fund (IMF) recognizes trade diversion as a response. Additionally, a study from the North American Journal of Economics and Finance shows how the signing of NAFTA and preferential tariff treatment with Mexico and Canada shifted US imports away from Asian sources toward Mexico. 

Trump's Tariff Strategy and Consequences for National Security

Trump's current trade strategy fits within this historical pattern of trade diversion. The problem is that Trump's posture on tariffs will continue to agitate U.S. allies and make it more attractive for some allies to deepen their economic ties with China. What Trump seems to not understand is that national security is not merely about what the U.S. can produce, but also the allies that one can rely on in times of crisis or need. Research shows that economic cooperation lends itself to stronger security cooperation.

Since tariffs make allies economically worse off, they are incentivized to look elsewhere. Having these allies increase trade and investment with China will create increased strategic dependence on China. What is more is that this re-engagement will mean that U.S. allies will invest more in China and Chinese suppliers. This entanglement with the Chinese economy will make U.S. allies less likely to align with U.S. strategic priorities. When allies rely more on China, China gains leverage and the U.S. will have less influence in trade negotiations, diplomacy, and security concerns abroad. This will undermine U.S. influence, which in turn weakens U.S. national security. 

"America First" Becomes "America Alone"

Trump's tariff strategy ultimately defeats its own stated purpose. Trump is not isolating China or strengthening American security. He is weakening the very alliances that give the United States leverage on the global stage. With a tariff-first approach, Trump is treating allies as economic adversaries, which understandably leads allies to diversify their trading partners more, including toward China. As allies partner more with China, the United States loses its global influence. National security is not only about domestic production, but also partners who share risks, supply chains, and strategic goals. By undermining these foundations, Trump is handing China geopolitical leverage. By alienating allies and strengthening a rival, "America first" becomes "America alone" while China has the last laugh. 

From Furniture to Semi-Trucks: When "National Security" Tariffs Go Wild

When you think about a country beefing up its national security, you might think about missiles, tanks, submarines, or cyber defense. For Trump, it looks a little different. Last month, the Trump administration implemented furniture tariffs, including a 25 percent tariff on upholstered furniture and kitchen cabinets (as of January 1, they will increase to 30 and 50 percent, respectively); as well as a 10 percent tariff on softwood lumber. On top of the furniture tariffs, there are the 25 percent tariffs on medium- and heavy-duty trucks that went into effect last Saturday. 

These tariffs were authorized under Section 232 of the Trade Expansion Act of 1962, which allows the president to impose tariffs on imports deemed a threat to national security. In other words, we have to be on the lookout for killer kitchen counters and heat-sinking sofas. Tongue-in-cheek remarks set aside, Trump's manipulation of Section 232 is more than merely about the economic costs of tariffs, as furniture outlet IKEA deciding to hike furniture prices in response to Trump's furniture tariffs illustrates. There are major national security implications for what Trump is doing. 

As the American Trucking Associations pointed out, Trump's truck tariffs will increase costs for carriers, increase operational costs for fleets, reduce freight volumes, and disrupt the integrated North American supply chain. Keep in mind that national security is not solely about militaries. National security depends on robust logistics, well-functioning supply chains, and a healthy economy. When logistical readiness is diminished, supply chain resilience is eroded (see Supply Chain Today chart below), and the weak rationale creates policy uncertainty and subsequent delay in investments. In short, what Trump's tariffs on trucks do is undermine national security. 

While furniture and lumber tariffs do not have the same impact on logistics or the supply chain, they certainly weaken the economy. As the National Association of Home Builders brings up in its analysis, Trump's tariffs will likely raise housing and construction costs (up to an additional $10,000 per home), strain supply chains that already heavily depend on imports, exacerbate a housing shortage, and hamper the domestic building sector when domestic production is unable to meet demand. This is even more nonsensical given that about half of U.S. lumber imports come from Canada, a long-standing ally and trade partner. Similar to the truck tariffs, national security flows from economic strength, resilient supply chains, and robust global ties. What the furniture tariffs do is weaken those essential foundations.  

When all is said and done, Trump is not making the United States safer with tariffs. He is making it weaker. By weaponizing "national security" to justify his blatant protectionism, his administration undermines the very pillars on which true national security rests: a strong economy, reliable supply chains, and trusted alliances. Instead of fortifying our defenses, his tariffs drive up costs, strain critical industries, and alienate long-standing partners. National security is built on openness, cooperation, and resilience, which is similar to what I argued last year about how free trade improves national security. If the actual goal is to keep the United States secure, weakening economic foundations and global partnerships is not strength. It is protectionist stupidity.

Privatize the TSA: Its "Shoes Off" Policy Shows Need to Unite the TSA's Stranglehold on Airport Security

Some good news for Americans traveling by air: the Transportation Security Administration (TSA) announced this Tuesday that the TSA no longer requires travelers to take off their shoes as part of TSA's security checkpoint process. While it is a relief there is one less protocol to follow at U.S. airports, this instance gets at the inanity of TSA's security protocols. 

TSA was created in 2001 in response to the 9/11 attacks. The Aviation and Transportation and Security Act was passed in November 2001 nationalizing passenger screening in the name of national security. Prior to 9/11, airline passenger screening was the responsibility of the airlines. Since private companies had years of experience whereas the U.S. government had no experience in airline passenger screening prior to 9/11, it remains unclear why the TSA thought it would have a better chance of thwarting terrorists. 

Consider TSA's "shoes off" policy as Exhibit A of the TSA's dysfunction. Shortly after 9/11, Richard Reid, also known as the Shoe Bomber, traveled from Paris to Miami. He unsuccessfully tried to ignite 50 grams of pentaerythritol tetranitrate (PNET) that was concealed in his shoes. Reid is serving life in prison, but his attempt inspired the TSA to take on the "shoes off" travel policy. If this policy were so vital to national security, you would think that the TSA would have implemented it right away, right? Not so much. 

As late as August 2006, the TSA was still advising travelers that they did not need to remove shoes before entering a metal detector. It would not have taken five years to implement the policy if it were that urgent, much like it would not have taken two decades to have implemented the REAL ID Act if it a national ID were meant to enhance national security. Second, the TSA has never in its existence caught anyone with a hidden bomb in their shoe, thereby questioning the logic of such a policy. If that were not enough, there are very few instances in which other countries have this airport policy. By and large, the European Union, Australia, Canada, Israel, India, United Kingdom, and Mexico do not have this protocol in place. 

If it were simply a matter of one stupid policy, I would be merely calling for reform on a specific TSA policy. However, "shoes off" is an example of overall TSA incompetency chasing a problem that by and large does not exist. Let us start with that second part first. Last year, the Cato Institute conducted a risk analysis of foreign-born terrorism on U.S. soil looking at terrorist attacks from 1975 to 2023, including 9/11. The probability of a person being killed in terrorist attack on U.S. soil committed by a foreign-born individual is about 1 in 4.5 million. To put that in context, a U.S. citizen is almost 4 times more likely to get struck by lightning than in a terrorist attack.  

I seriously question how safe the TSA keeps passengers. In 2013, I called for the elimination of the TSA because its screening capabilities were so shoddy. In 2015, ABC News was able to conduct an investigation of how the DHS carried out undercover tests to test TSA's competence. It turns out that 95 percent of mock explosives or banned weapons smuggled by DHS during these simulations went unnoticed by the TSA. 

A 2019 report from the Government Accountability Office (GAO) on these TSA simulations shows that the TSA has a long way to go. Repeat incidents plus a lack of reporting showing considerable improvement indicate the TSA remains inept at its screening process. Data on TSA screening failure rates has been kept classified since 2017, so we cannot get a current figure on TSA's incompetence. This should not be a surprise: the "solution" to dealing with poor screening practices is to curtail transparency and sweep the problem under the rug. 

To be fair, we need to ask whether the cost is justifiable. It is a fair question given that the U.S. government spent $9.1 billion on TSA in fiscal year 2024. In 2023, I discussed the value of a statistical life, which is a common practice in cost-benefit analysis to determine the amount one is willing to pay to reduce the probability of a death. Governments have a higher VSL than actuarial practices. Even if you go with the higher amounts, it could not exceed much beyond $12 million. 

The most generous independent estimate is $15 million, which is already beyond standard CBA. However, that $15 million figure assumes 100 percent effectiveness rate. Assuming that the 95 percent failure rate still holds, the estimate is closer to $667 million per life saved. Once adjusted for inflation, that estimate puts the cost at $912 million per life saved. This is public policy speak to say that the TSA is so inefficient that the exceptionally high costs do not justify any purported benefits by any reasonable CBA. 

On top of that, there are other useless TSA practices. As security professional Bruce Schneier points out, liquid bans are arbitrary and unproven, full-body scanners are invasive and ineffective; and the SPOT behavioral screening program lacks evidence of effectiveness. And do not get me started on the TSA not following the science by forcing airplane passengers to wear face masks during the COVID pandemic.

The TSA is talented at feeling up and patting down airline passengers, confiscating items that do not need to be confiscated, and creating a bunch of national security theater, but is efficient at little else. It's American government at its finest because a government monopoly is incapable of properly trading off costs and benefits. The TSA has been far more invasive and costly than terrorism itself. The TSA belongs in a list of U.S. federal government agencies that should be eliminated, including the Department of Education, the U.S. Agency for International Development, the Consumer Financial Protection Bureau, and the Federal Emergency Management Agency (FEMA).   If we care about airport security, fiscal discipline, and national security, the TSA should be abolished and privatized so airplane passengers can go through metal detectors without dealing with the excessive security theater. 

Let's Get Real: The REAL ID Is Unnecessary and an Invasion of Privacy

The September 11 attacks in 2001 left an imprint on the American psyche that had not been as strong as the Pearl Harbor attack in 1941. It ended up shaping how Americans perceive safety and what they were willing to give up for that feeling of safety. It is not only how we got the Patriot Act, but the REAL ID Act. What the REAL ID Act did was set minimum security standards for state-issued driver's licenses and identification cards. 

The premise behind improving the accuracy and reliability of these identification documents was to make it more difficult to obtain fraudulent IDs and prevent terrorists from using them. Yes, the REAL ID Act was passed in 2005. The reason why I bring it up now in 2025? After multiple delays of the deadline, REAL ID is finally here, even though 17 states have less than 50 percent REAL ID compliance. 

Forget for a moment that all but one of the 9-11 hijackers had identification documents and were already in the United States legally. It has been over twenty years since September 11 and yet the United States has not had a terrorist attack remotely close to 9/11's impact since then. The country has been safe from catastrophic terrorists attacks without REAL ID, which was the whole impetus behind creating REAL ID. If the REAL ID were so crucial for the safety of air travelers, it should have been implemented by now. So why exactly do we need REAL ID? 

While it will not protect us from terrorists, REAL ID will certainly infringe upon the freedom of U.S. citizens. REAL ID acts as a de facto national database because it consolidates personal data into linked state databases. While it is not technically one large system, the linkage of the smaller databases make it act as if it were. Because it is a larger system with more data, it becomes more alluring for hackers and identity thieves. REAL ID makes it more harmful to national security by giving criminals another credential to opportunity. 

With all this information centrally accessible, do you think that the federal government is going to stop there? REAL ID is nothing more than an excuse for additional surveillance, as the Electronic Frontier Foundation correctly illustrates. An intuitive reason why REAL ID opens up such mass surveillance is because REAL ID makes the erroneous assumption that treats all citizens as potential terrorists until proven otherwise. In 2013, I expressed similar surveillance concerns with the NSA collecting metadata. Even then-Homeland Security Secretary Michael Chertoff bragged about how REAL ID could be required for such activities as cashing a check or hiring a babysitter. Because that does not reek of mission creep at all!

Then there are the matters of applying a double standard to aviation versus rail, the constitutional issues with prohibiting interstate travel, foreign-born or lower-income individuals having additional hurdles to compliance, or enforcement costs. REAL ID does nothing substantive to improve national security while it results in a serious encroachment on privacy while hindering the right to travel. As such, REAL ID should not be going into effect--it should be abolished.

The Movie Industry Needs More Market Competition, Not Trump's Tariffs on Foreign Film Production

Lights, camera, and tariffs! On part of his tariff binge, President Trump has announced a new proposed tariff: a 100 percent tariff on any movies produced in foreign countries that come into the United States. According to Trump's post on Truth Social, the American movie industry is dying. Per Trump's argument, this has become a national security threat because other countries are offering incentives to produce movies. He then ended with "WE WANT MOVIES MADE IN AMERICA, AGAIN!" Where to begin? 

One is that the U.S. movie industry is not dying. Using the country of origin data from Internet Movie Database, blogger Stephen Fellows found that about one third of movies produced since 2000 can be classified as originating from the United States. Being the industry leader in a growing market is not exactly a coup to Hollywood.

Similar to Trump's logic on auto tariffs, Trump does not understand that supply chains in the 21st century are complex and multinational. Goods and services these days are most often a mix between domestic and foreign inputs. Films do not have a single location; they typically have multiple countries of origin. United Kingdom and Canada are the top foreign locations for U.S. studios, with 23.9 percent and 19.4 percent of films, respectively, being shot in those locations.

I would love see the Trump administration try to argue with a straight face that German rom-coms, telenovelas, Amélie, or the latest Bollywood smash hit is a national security threat. I cannot wait to read the report on that investigation!

Then there is the matter of implementing the tariff. Trump's other tariffs have been levied on goods. Movies are an entertainment service. There has not been a moment when tariffs were levied on services. At what point would the government tax the movie? At movie tickets? Would there be a tax on Amazon, Netflix, and other streaming services? Would it be paid by the studio, the producers, or distributors? Plus, how can you assess the value of the movie without knowing how popular it would be or how many views it would create? Streamed services are intangible, which means they would be governed by royalty taxes, not tariffs. Even if you tried to implement a tariff, it would require "customs officers inspecting data or monitoring IP packets at ISPs." Good luck with that!

As is the case with other tariffs, that means fewer imports. As Reason Magazine rightly points out, this would not only be a barrier to goods, but ideas. Forget for a moment that the International Emergency Economic Powers Act explicitly protects "informational materials" such as film as an exemption to regulate or prohibit under a national emergency. Opening Hollywood and other U.S. film producers to competition means greater film quality and appealing to the wide variety of tastes and preferences in film. Since tariffs constrict supply, this would also make it more difficult for domestic independent producers to access financing. This would also have an impact of variety of films. 

With increased production costs induced by the tariffs, domestic producers will most likely play it safe and take fewer risks. It would hit domestic film producers in terms of financial losses. Furthermore, Trump's tariff would translate into fewer incentives to innovate, be efficient, and satisfy customers, which makes sense because that is what happened when the United Kingdom (Cinematograph Act of 1927) and Canada implemented quota laws analogous to Trump's proposal. 

As the Foundation for Economic Education illustrates, "Great cinema is born from talent, innovation, and competition." If Trump actually wants to make the American film industry stronger, he needs to make it more competitive, not stifle it with protectionism. All Trump's film tariff will do is incentivize Hollywood producers to make derivative dribble instead of making American film great again. 

Trump's Tariff Rationales Are As Incoherent As They Are Self-Contradictory

"They left as soon as they came." That is somewhat an accurate depiction of Trump's latest barrage of tariffs. On April 2, what Trump called "Liberation Day," he implemented a two-tier tariff system. In addition to there being a baseline 10 percent tariff on imports, he also imposed so-called "reciprocal" tariffs on 90 countries based on what he purported were other countries' tariff rates. As I pointed out in my critique of Trump's "Liberation Day" tariffs last week, his tariff rates were not calculated based off of other countries' tariff rates (he lied about that part), but rather other countries' trade imbalances. Rather than being taken as liberating news, the stock market ended up crashing to the point of causing the biggest two-day wipeout in U.S. history. 

Last Wednesday (April 9), Trump announced a 90-day pause on that second tier of tariffs (i.e., the ones above 10 percent), with the notable exception of China. The baseline 10 percent tariffs on imports remain intact. The Dow Jones, NASDAQ, and S&P have somewhat recovered from the fall. However, JP Morgan and investment firm Blackrock are still anticipating a recession this year, as are a majority of respondents from the quarterly Chief Financial Officer (CFO) Council Survey. 

I had a piece about how these tariffs could unsurprisingly cause a recession all ready to go, but I had to hold off because of this latest development....at least for now. I might end up publishing it here at a later date if Trump reinstates the second, higher tier of tariffs. In the meantime, I want to point out how incoherent this whole strategy has been. He threatens these high rates and then he rescinds them, at least temporarily, the moment the stock market decides to tank. It is not simply the haphazard, unpredictable modus operandi that bothers me, but also the rationales that Trump uses to justify the tariffs. From what one can gather, the Trump administration has laid out three main rationales for these tariffs.

1. A negotiating tool. On April 4, Trump said that the new trade barriers give the U.S. great power to negotiate better trade terms. This gets to the theme that Trump is trying to rectify what he sees as "injustices of global trade" that the U.S. has had to endure.
2. Increase government revenue. This is the argument particularly used by Trump's lead trade advisor, Peter Navarro. Even Trump himself has floated the idea repeatedly of repealing the income tax and replace it with tariffs. The Tax Foundation explains how that plan would not work, but I digress.
3. Bring manufacturing back to the United States. In a White House fact sheet, the Trump administration claimed that trade deficits are hollowing out the U.S. manufacturing base. He plans on using tariffs to revitalize U.S. manufacturing. 

Forget for a moment that the Trump administration's messaging about whether the tariffs are short-term negotiating tool or a long-term source of government revenue is inconsistent. I take issue with all three of these rationales by themselves. Trade deficits are not bad for the United States. The manufacturing sector is not going to have a revival akin to what it was like in the 1950s, in no small part to technological progress. U.S. tariffs are ultimately a tax on U.S. consumers and producers because that is where most of the tax incidence occurs. That is how it worked with the Trump tariffs from his first term. And as I have explained numerous times, collecting tariffs come with considerable economic harm to the American workers and small businesses that Trump claims to help. 

What makes the Trump administration's rationales for tariffs is that when put together, they make zero sense. They create an impossible trinity because if one of these rationales is true, then the other two cannot be true. How so?

Take the "tariffs as a negotiating tool" argument. If tariffs are merely a negotiating tool to make other countries comply with Trump's demands, then the tariffs are not collecting revenue because they are not ultimately implemented. That also means the tariffs cannot afford domestic manufacturing the protection it would need to rebuild. 

What about the "government revenue" argument? If the government is collecting this tax revenue, it means that the tariffs were more than a negotiating tactic. It also means that if the tariffs are successful in collecting tax revenue, it also means that foreign goods are still crossing the border. So naturally, they are not creating jobs at home because the trade flows have not significantly changed.  

If the tariffs are being used to bring manufacturing back, then they are more than a mere negotiating tool because the taxes have been implemented. However, if manufacturing has indeed come back to the United States because of the tariffs, that means production is taking place in the United States and the United States is exporting. The idea with this rationale is to create a cheaper domestic product, which ideally for Trump would mean avoiding imports. Since the tariffs here are import taxes, the government is not going to be collecting all this wonderful revenue to make government coffers great again. 

As I have pointed out since 2016, Trump's love affair with tariffs is a torrid one rife with torment and anguish. The Trump administration's communication with tariffs has been incoherent, showing that impulse is dominating the decisions, not clearly thought out, serious policy decisions. Sometimes tariffs are presented as a short-term negotiation tool used to bludgeon other countries into submitting to Trump's will. On the other hand, Trump says things like "my policies never change." His Commerce Secretary also said that the tariffs will stay in place, which was only three days before Trump announced the pause. So which is it: short-term negotiating tool or long-term government policy? 

An important lesson I remember from my days as a market researcher is that the one of the only things that business owners generally have a bigger issue with than red tape is market uncertainty. Why? Uncertainty is not conducive for businesses to make investment decisions. Businesses make plans months or years in advance in the hopes that investments pay off in terms of increasing profit and equity. Consumers also feel better when purchasing goods or services from businesses and knowing that those businesses have a high likelihood of staying in business. It is hard to maintain that confidence when Trump is being impulsive and making major trade policy decisions "from the heart."

Although the Trump administration is uncertain with how it wants to try to dupe the American people in falsely believing that tariffs are the greatest thing since sliced bread made solely in the US of A, what is certain is that this inordinate amount of trade uncertainty with Trump's tariff nonsense is going to put the American economy in a tumult and the stock market going up and down like a yo-yo until there is clarity. 

Unless Congress can end the president's deceptive "emergency" declarations and retake the tariff power that the Constitution grants it, odds are we will be back here in three months with Trump reinstating the tariffs because he is the one holding all the cards. In the meantime, it will be the American people and businesses who will suffer from this tariff nonsense. 

Trump Didn't Learn From His Steel & Aluminum Tariffs Failures During His First Term

President Trump is not letting up on his trade war. Earlier this month, Trump threatened China, as well as U.S. allies Mexico and Canada, with tariffs. A little over a week ago, Trump decided to implement a 25 percent tariff on all steel and aluminum tariffs, which will take effect in mid-March. 

I roll my eyes not simply because of how unpleasant tariffs are in economic theory. We have already been down this path. At the beginning of Trump's first term, Trump implemented a 10 percent tariff on aluminum and a 25 percent tariff on steel. In 2017, I criticized Trump's steel and aluminum tariffs, scrutinizing his national security argument vis-à-vis Section 232 while pointing out how poorly they worked out when President George W. Bush implemented similar tariffs in 2002. It turns out I was right. 

What was the end result of those steel and aluminum tariffs from Trump's first term? As I detailed last year, less export growth, a lower GDP, the 1,000 steel manufacturing jobs gained caused a reduction in manufacturing employment by 75,000 workers, not to mention more expensive steel and aluminum prices (24 and 31.1 percent, respectively). And guess who paid those higher prices? It was not China, but rather U.S. consumers. Last week, the Cato Institute also highlighted several studies that showed these undesirable effects. Here are some highlights:

• The American Action Forum showed the direct cost of the tariffs ended up being $4.6 billion annually (Lee and Varas, 2022).
• In its 2023 report, the U.S. International Trade Commission calculated that the tariffs caused a) a decline in downstream production of $3.5 billion, and b) that steel and aluminum prices increased an additional 2.4 and 1.6 percent, respectively. 
• The Center for Automotive Research found that his tariffs created a deadweight loss of $4.3 billion, and that the few jobs that the tariffs managed to save cost a whopping $635,000 per annum (Schultz et al., 2019).

Trump does not seem to understand the ripple effect this will have in the U.S. economy. As the Council on Foreign Relations (CFR) shows, there are way many more construction workers that use steel, as well as transportation and packing jobs that use aluminum, than the jobs protected by the tariffs. Reason Magazine reminds us that for every job in aluminum manufacturing, there are 177 jobs in downstream aluminum-consuming industries. 

Reason Magazine also brings up the point that this will harm the energy sector because nuclear power plants are built with steel, carbon steel forges and aluminum tubular products are commonly used to extract oil and gas, steel makes up 69 percent of a wind turbine's mass, and aluminum accounts for 85 percent of solar power components. You want to know what that will mean? Energy prices are going to increase because of these tariffs. 

Right now, Standard and Poor's and the Tax Foundation preliminarily believe that the effects on GDP will be less than 0.1 percent. That might sound like giving Trump a reason to celebrate, but I am not holding my breath. Aside from the lousy history of steel tariffs in this country, there is still concern about how this will affect downstream industries. Standard and Poor's also surmises that the effects will be larger if these tariffs end up triggering trade retaliation, which is certainly plausible given how Canada and Mexico were ready to retaliate with Trump's other tariffs this presidential term. 

There are two reasons to believe the effects of the tariffs will be worse this time around. One, the aluminum tariffs were only 10 percent the first time around. Now, it will be 25 percent. The second one is that the administration has made clear that in contrast to the first term, there will be no exemptions this time around. To emphasize this point, these steel and aluminum tariffs from Trump's first term did not help with national security nor did they boost the economy. How many tariffs will it take for the Tariff Man to finally get the hint that tariffs harm American consumers and businesses?

Trump Revives His Trade War, This Time Under the Guise of Fighting the War on Drugs

The Tariff Man is at it again. Last Saturday, Trump imposed 25 percent tariffs on Canada and Mexico, as well as an additional 10 percent tariff on Chinese imports. The justification Trump used was to address the threat posed by fentanyl, and to use the Emergency Economic Powers Act to do it. So why China, Mexico, and Canada? Because according to Trump, the fentanyl comes from China and passes through Canada and Mexico before it comes to the United States. Granted, he was able to delay the tariffs on Mexico and Canada for a month because he received some concessions about border security as it pertains to fentanyl. Whether they resume in a month remains to be seen. At the same time, here are some reasons why this latest round of tariffs is ridiculous:

• China, Mexico, and Canada will not be paying these taxes. It is not the foreign countries that bear the majority of the tax burden for tariffs, but it will be the American consumers and American businesses. There were a dozen studies showing that tariffs during the first Trump term were almost entirely paid by U.S. consumers and businesses. The fact that U.S. citizens and enterprises will get hit much harder than China, Mexico, or Canada ever will undermines the argument. 
• Trump is undermining his trade agreement from his first term. Trump touted the United States-Canada-Mexico Agreement (USMCA) as the fairest and most balanced trade agreement the United States ever signed into law. This bout of tariffs violate his promise with USMCA, which can make him less trustworthy in future engagements with other countries. 
• This trade war will increase further trade retaliation. Other countries can and do retaliate in response to tariffs. The Federal Reserve concluded that retaliation helps offset what little benefit that tariffs develop. The Peterson Institute for International Economics found that the GDP of all countries involved will lower as a result of the tariffs and subsequent retaliation. 

• Previous tariffs hurt the American people. When Trump implemented the tariffs in his first term, what happened? Trump's tariffs cost the country $51 billion in economic output, a reduction of wages by 0.14 percent, and employment decreased by 166,000 jobs. Bush Jr.'s tariffs cost 200,000 jobs and $4 billion in lost wages. What about the tariffs of Trump's tariff mentor, William McKinley? They resulted in lower productivity and higher consumer prices.
• Trump's tariffs are likely to hurt the American people again. Last week, Trump justified the tariffs by saying that they will make America rich and very strong. Too bad he is wrong on that front. Not only did tariffs not work in the past. The Tax Foundation estimated that these tariffs would shrink economic output by 0.4 percent over the next decade while amounting to a tax of $800 on the average household. The Peterson Institute for International Economics calculated that it will reduce the average household's purchasing power by $1,200 per year. Trump still has not learned that you cannot tax your way to prosperity. 

• Trump's argument about tariffs and economic prosperity does not hold. If tariffs are so great, why does Trump simply implement them no matter other nations decide to do? Why did he take them off the table instead of go ahead with the tariffs if they are so great? If tariffs are simply tools to threaten other nations with and then Trump removes them upon compliance, then tariffs were never about economic prosperity. 
• Nor does his argument about stopping border crossings. Trump also said that he wanted to implement these tariffs because he wants to "stop the flood of illegal aliens." This is humorous because a tariff is a subpar way of going about it. Why? As the American Enterprise Institute (AEI) brings up, tariffs appreciate the value of the dollar. A dollar with a higher value makes working in the United States more attractive to immigrants, thereby increasing border crossings. 
• And fentanyl will get cheaper. More immigration will not be the only result of the appreciated dollar as a result of the dollar. To quote AEI again, the exchange rate appreciation would lower the dollar price of fentanyl because the fentanyl would not be subject to tariffs. Cheaper fentanyl would mean greater consumption, more substance abuse, and more overdoses, which is exactly what Trump purports to be preventing. 

Conclusion. These tariffs are not about generating prosperity for all, but about inducing fear and compelling behavior. Not only do tariffs harm the economy, but these particular tariffs will undermine Trump's goals of stopping fentanyl consumption and border crossings. Furthermore, Trump's actions effectively gives him the ability to start economic war without notice or oversight. To quote Charles Cooke from National Review, "They [the tariffs] are constitutionally suspect, statutorily usurpative, diplomatically toxic, and culturally chaotic." Instead of making America great again, Trump's tariffs will make all countries involved worse off.

9 Reasons Why Trump Should Not or Does Not Need to Purchase Greenland

Shortly before President Trump assumed the presidency, it felt like he was trolling the American people when it came to foreign policy. Trump wanted to revisit the idea of owning the Panama Canal, in spite of President Carter relinquished it to Panama in 1977. Trump floated the idea of Canada becoming a 51st state of the United States to avoid tariffs. He also presented the idea of buying Greenland. Last Friday, Trump got into a reportedly "fiery" call with Mette Frederiksen, the Danish Prime Minister over the idea. That was after Anders Vistisen, a Danish member of European Parliament for the Right-leaning Danish People's Party, told Trump that Greenland is not for sale and for Trump to "fuck off." The reasons why the Danes' opinion matters in this instance is because Greenland is a self-governing country within the Danish Kingdom. 

This is not the first time that Trump has proposed buying Greenland. He did so in August 2019, which prompted me to write a blog entry on the policy idea. As I brought up in 2019, Greenland has natural resources of interest, particularly the rare earth metals that are necessary for our smartphones, computers, and other electronic goods. As the Arctic sea ice continues to melt, the Arctic Circle will become a more viable alternative for maritime travel than the Panama or Suez Canals. In terms of national security, Russia and China are more interested in that region of the world, which is piquing Trump's interest. 

It is more than the economic and national security implications that do not make the idea crazy. One, this country has purchased land before. In 1803, the United States paid $15 million to France to double the size of the United States. There was the acquisition of Florida in 1819, followed by the purchase of Alaska for $7.2 million in 1867. Although it was considered Seward's Folly, I bet Russia is kicking itself for that transaction because of all the petroleum in Alaska. Two, this is not the first time purchasing Greenland has been a policy question. The United States considered purchasing Greenland in 1868 under President Andrew Johnson and in 1946 under President Truman. 

Three, purchasing Greenland sure beats going to war and trying to conquer it, especially since invading Greenland would likely be the end of NATO. Four, it is possible to be an independent or quasi-independent territory within the United States, as Guam, Puerto Rico, Micronesia, Northern Marina Islands, Palau, and the American Samoa have demonstrated. That being said, I do have objections to Trump's plan:

1) Neither Denmark nor Greenland want to sell Greenland. The Prime Minister of Greenland is trying to push for Greenland's independence. Meanwhile, Denmark is looking to spend $1.5 billion to bolster defense in Greenland. This will not work well if both sides are not on board. 

2) Denmark is a NATO ally. Not only could this upset Denmark, but it could have a ripple effect towards other NATO allies. It could even push Greenland to want to ally itself with Russia and China. 

3) The United States already has a military base in Greenland: the Pituffik Space Base. As the Center for Strategic and International Studies points out, Trump can make progress on U.S. national security priorities with the already-existing engagement strategy that it shares with Greenland and Denmark.

4) It is unlikely that China and Russia would take over Greenland. Russia is already having enough issues with Ukraine. In 2018, Washington and Copenhagen fended off Chinese bids to build airports in Greenland. Even if either country decided to invade, the United States has the advantage of already having a military base on Greenland (see previous point) and proximity relative to Russia and China. I am sure there are more serious national security issues for the U.S. government to address. 

5) Yes, there are rare earth metals in Greenland. Wouldn't it be easier to simply purchase the mineral rights in the open marketplace instead of the entire country? After all, the United States imported $131.9 billion in mineral fuels, oils, and distillation products from Canada without making Canada the 51st of the United States of America. Ownership of Greenland is not a prerequisite to gain access to Greenland's rare earth metals. Plus, making Greenland part of the United States would make it more difficult to extract those rare earth metals due to the National Environmental Protection Act (NEPA).

6) One could argue that Greenland would benefit from an influx of American investment and increased tourism. However, Greenland does not need to be purchased. The goals of increased infrastructure, tourism, and immigration could be accomplished with bilateral trade agreements. 

7) The think-tank American Action Forum estimated the purchase price of Greenland at $2.8 trillion. Given the previous points plus the fact that United States has over $36 trillion in debt, can the United States really afford to add $2.8 trillion to its debt?

8) Given Greenland's remote location and harsh climate, the returns on investment remain uncertain. 

9) Greenland has a distinct cultural heritage, not to mention an indigenous Inuit population. It could prove difficult to integrate Greenland into U.S. society and culture, especially given the geographical and cultural distance between the two entities. 

Postscript. I know Trump gained his fame from being a real estate tycoon. He is known for "Art of the Deal." I am sure his past experience is playing into his desire to acquire Greenland, especially since he know has the backing of the world's most powerful military. The truth is that Trump should not try to acquire Greenland nor does he need to acquire Greenland. 

I do not think that the idea of purchasing a country is prima facie antiquated. Much like with individuals or companies within the private sector, I think these transactions are most successful when mutually beneficial and when there is mutual agreement. Given that the governments of Greenland or Denmark are not on board with this proposal, I think that adds given reason to be against Trump's proposal. Trump can acquire the benefits through other means short of purchasing Greenland, whether that is bilateral trade agreements, mineral rights, or expanding military interests through the current engagement strategy. Let us hope that he can be convinced of those alternatives instead of making a foreign policy faux pas. 

Israel Is Paying Quite the Cost for This Horrid 2025 Gaza Ceasefire "Deal"

Seizing captives for military or financial gain has a long history dating back to Julius Caesar. Unfortunately for Israel, this is a tactic that Hamas understands too well. On October 7, 2023, Hamas terrorists entered Israel and attacked Israeli civilians. Part of Hamas' barbarism entailed kidnapping over 240 civilians. Since that infamous day in Israeli history, Hamas has been using hostages as pawns in its insidious goal to wipe out Jews, much like its cynical ploy to use Gazan civilians as human shields in order to gain international sympathy. This past Sunday began what is meant to be a three-part ceasefire that is intended to put an end to the fighting in Gaza. 

Israel was pressured into this bad deal by the United States. One, President Biden could tout a foreign policy by claiming credit for the ceasefire. Also, Trump threatened that "all hell would break out" if the hostages were not released by the time he became president. It is disheartening to see Trump try to haphazardly put pressure on Israel so he could avoid a foreign policy embarrassment early in his second term. Trump might think the deal is "epic," but it is a capitulation to a relentless terrorist organization.

I criticized the idea of a ceasefire last January and I still stand by the opinion that Israel should not sign a ceasefire. Ceasefires between Israel and Hamas have not worked in the past. If they were meant to be an effective peacemaking mechanism, we would have seen it by now. Whether it was 2009, 2012, 2014, 2019, or 2021, Hamas would take advantage of the ceasefire to regroup, rearm, and eventually attack Israel again. As former Secretary of State Antony Blinken confirmed, Hamas nearly replaced its losses by recruiting new fighters. How long again before Hamas decides to attack Israel again?

Israel's withdrawal from various parts of Gaza were fought with the blood of 400 Israeli soldiers, as well as the blood, sweat, and tears of other Israeli soldiers. The ground Israel gained through this arduous urban warfare has given the Israeli Defense Forces (IDF) the upper hand. Such a withdrawal would give a militaristic advantage to Hamas, especially since Hamas hides in these populated areas from where the IDF would withdraw. It would also mean that those IDF soldiers loss their life for naught. Giving up this ground would most likely perpetuate the conflict, as is reinforced from the previous paragraph. 

Furthermore, there is no one there to replace Hamas, including Fatah. That means if Israel withdraws from Gaza, Hamas remains in charge of the area. Hamas is a terrorist organization hellbent on exterminating Jews and has shown no signs whatsoever that it will be deterred from that mission. Plus, it is not like the Gazans can scream "Occupation" since Israel unilaterally withdrew from Gaza in 2005. Since a ceasefire does not address the Jew-hatred of Hamas and so many of Gaza's citizens, how does a ceasefire ignoring the root causes resolve the conflict in the Middle East? 

Then there is the matter of the ratios are way too lopsided. Israel is expected to trade 30 terrorists for one civilian hostage and 50 terrorists for each female soldier. Some of these prisoners have committed some horrible acts against humanity. It is even more twisted that the hostages will not all be released at once. What do you think these hardened criminals will do? Turn over a new leaf? They will most likely pick up where they left off. Anyone with anything remotely resembling a moral compass knows this arrangement is off-kilter. 

Regrettably, Israel already set the precedent in lopsided hostage-prisoner swaps. In 2011, Israel released over 1,000 Palestinian terrorist prisoners for IDF soldier Gilad Shalit. I was elated to see Shalit released from captivity. Conversely, I have to wonder if it was worth the price. After all, one of those prisoners released in 2011 was Yahya Sinwar, the architect of the October 7 attacks. Although unintended and unforeseeable, Israel's hostage-prisoner swap in 2011 was responsible for hundreds more being murdered about 12 years later. What future butcherer will Israel release from prison if it goes through with the entirety of this latest ceasefire? And how is it justice to release men who have committed heinous crimes, especially for the families of the victims of said crimes? 

I could only imagine the hell the hostages have endured. I wish there was not a hostage situation or that we could live in a world where there could actually be peace in the Middle East. I think it has been way too long that this war and hostage situation has occurred. I do not want to belittle the joy that the families of the hostages will upon seeing their loved ones or the relief that Gazan civilians will feel with a hiatus in the fighting. As 9/11 taught the United States, the sort of political pressure created by the hostages can be immense enough to want the Israeli people to take a deal, no matter what the long-term consequences are. It makes me wonder if the Israeli government is gaining some short-term relief in exchange for another attack as horrific, if not more so, than October 7. 

This subpar ceasefire rewards the terrorists while undermining Israeli national security. As Econ 101 teaches, you get more of what you reward. Incentivizing Hamas to kidnap and torture civilians in the future so they can be used as bargaining chips, much as we have already seen take place. Donald Trump, the man renown for the "Art of the Deal," should be able to do better than pressure a deal that is likely to cause greater instability in the Middle East, thereby being the President's first foreign policy faux pas of his second term. In the meantime, I hope that the hostages come home and that there can be a speedy end to this conflict that can ensure lasting peace in that conflict-ridden region of the world. 

Biden Blocking Nippon's Acquisition of U.S. Steel Undermined National Security Instead of Improving It

In December 2023, Japanese steelmaker Nippon Steel offered to buy U.S. steelmaker U.S. Steel at a 40 percent premium on its stock price. Nippon Steel even offered unprecedented veto power over the merged entity's future U.S. plant closure decisions to allay Biden's concerns, but it was not enough. It also did not matter that 98 percent of the U.S. Steel shareholders approved the $14.9 billion deal in April 2024 or that Biden's Committee on Foreign Investment in the United States (CFIUS) could not find a national security threat from the acquisition.  Biden decided to block the proposed acquisition last week anyway. Why? Biden believes "there is credible evidence" that Nippon Steel "might take action to impair the national security of the United States." Biden does not actually state what credible evidence might exist. That reason for that is because there is no credible evidence. 

As I pointed out in my April 2024 analysis on the acquisition, the acquisition would not have harmed the United States' national security. Forget for a moment that Japan has been a military ally to the U.S. since the 1960s or that Nippon Steel already operates numerous steel plants in the United States. The Pentagon only needs about 3 percent of domestic steel production. Rather than looking to hinder steel production, Nippon Steel was looking to inject money into capital investments ($2.7 billion, to be precise) to produce steel in the United States. The steel industry needs new technology and innovation, which the U.S. has now been deprived of due to Biden's decision. 

Third, the Pentagon does not procure steel from U.S. Steel, making the national security argument all the more tenuous. More to the point, I illustrated how the acquisition could actually help with national security. By making U.S. Steel more efficient, the acquisition could have bolstered the U.S.-Japanese alliance. Here are a few additional points to consider on how Biden actually made matters worse:

• U.S. Steel was unprofitable for most of the past fifteen years. Even if the Pentagon procured steel from U.S. Steel, how exactly does allowing for a steel producer to continue flailing help national security?
• The Right-leaning Hudson Institute, which is known for its national security expertise, concluded in its report on the Nippon Steel-U.S. Steel proposal "that this proposed transaction would advance American economic, national security, and political interests at a time when the needs for secure domestic steel production and supply chains are paramount."
• As the authors pointed out, Japan is the leading foreign direct investor in the United States. The Nippon Steel acquisition was meant to be a sign of goodwill to bolster that alliance. 
• Nippon Steel's injection of capital would have better empowered the United States to withstand the dumping of excess Chinese steel into U.S. markets. 
• Economic and industrial competitiveness is what has historically been helpful to U.S. national security. Strengthening the U.S. steel in the capacity, quality, and cost-effectiveness that would have come with the U.S. Steel acquisition would have put the U.S.' national security on better footing in the future. 
• In December 2023, the bipartisan Select Committee on the Chinese Communist Party recommended that Japan be added to a whitelist of allies to received fast-track investment approval precisely because Japan has been such a good ally (see page 32 of the report). That hardly sounds like the consideration one would give a national security threat. 
• Blocking the acquisition contradicts the Biden administration's own articulation of national security assessments. As the Atlantic Council brings up, this precedent could "justify interventions into transactions for broader economic competitiveness reasons or to favor domestic political allies." No kidding! Biden caved into the influences of steelmaker Cleveland Cliffs, much like Biden acquiesced to the American Federation of Teachers with school closures in the pandemic era (see p. 415 of this House Oversight Committee report). This sort of politicization has the real potential to undermine national security in the future.
• The acquisition could have helped advance such elements of national security as friend shoring and de-risking from China. 

The aforementioned arguments should make it evidently clear that Nippon Steel acquiring U.S. Steel is not a national security threat. By Biden erroneously labeling it one, it makes it more difficult for allies and partners to trust the United States, which also undermines national security because it erodes trust in the U.S.' allies while abusing the law out of political gain. Giving into these protectionist instincts to prohibit the investment and operation in the U.S. also means less foreign investment which, you guessed it, undermines national security. Economic logic are legal arguments go to the back burner when politicking is involved. Biden has tarnished his political career and made his reputation more disgraceful by making the national security of the United States worse off with his decision to block the acquisition. 

Why Free Trade Is Good for National Security

One of the aspects that has made the United States a prosperous nation was its embrace of freer trade. In spite of becoming an economic powerhouse, the question of national security has been intertwined with free trade. Even Adam Smith recognized that national security could arguably be an exception to the free trade norm. 

Those who advocate for these protectionist or neo-mercantilist policies on the national security argument assume that we as a nation should have economic independence and self-sufficiency. This self-sufficiency, which is known as autarky, would allow us to have necessary supplies to fight or keep the economy going in the event of wartime. If autarky was such an easy and viable option during wartime, then blockades would be pointless. Yet blockades are an effective military and economic tactic precisely because that economic self-sufficiency is not feasible in practice. Tangentially, this zero-sum mentality explains why economic nationalists erroneously worry about trade deficits.

But I digress because I have to question the dichotomy between free trade and national security. It is instances such as these that make me feel despairingly about national security becoming a guise for such subpar economic policy as tariffs. But maybe I should not despair. This research paper from the American Institute for Economic Research (AIER), entitled A Free, Prosperous and Secure America, made me think that trade and national security are not such rivals. 

Much like with the "environment versus economy" argument, the two do not need to be at war with one another (pun intended). Rather, freer trade could improve national security. The AIER paper makes two arguments. One, enhancing economic growth allows the United States to resource its national security needs effectively. Second, it facilitates (but does not guarantee) more peaceful relations between other nations. While I was reading the AIER paper, I came across a research paper from the American Security project highlights five benefits of free trade to national security (Day, 2014): 

1. Signaling commitment to allies: Not only does the free trade with the country show a favorable relationship, but that it symbolizes commitment. While free trade agreements are not perfect, they are still better than having soldiers in another country. 

2. Secure access to military technology: By using comparative advantage, militaries can keep production costs low and within budget. Free trade also helps ensure a diverse, stabler market in case a certain region experiences instability. Contrary to what nationalists believe, renationalizing international supply chains does not increase a country's resilience in the wake of severe disruptions (e.g., Bonadio et al., 2020).

3. Promoting global stability: As we have seen during the Great Depression, the oil crisis in the 1970s, and the 2007-08 global financial meltdown, not working together economically causes more instability. As I am fond of saying, "Those who trade together stay together." Why? Because with established economic ties and cross-border investment, they are less likely to metaphorically shoot themselves in the foot by going to war. This article from Law & Liberty highlights the "substantial empirical evidence indicating that growing trade between nations lowers the odds of serious military conflicts with other countries." 

4. Setting a free trade precedent: The ball really got rolling after World War II with the International Monetary Fund, the World Bank, and the General Agreement on Tariffs and Trade (GATT). Setting this precedent will allow for more stable and predictable trade relations and investment opportunities, which also stabilizes national security. 

5. Enhanced global influence. In the 21st century, we measure power by military strength (hard power) as much as we do economic prowess, the latter of which is a form of soft power. Whether it is economic, social, or cultural in nature, soft power lends international legitimacy to a country. As developing countries continue to economically develop, the United States contributing with soft power can develop more stable relations, thereby solidifying the country's national security for decades to come. 

Example to Counter Protectionism. I could select multiple examples, but I will select President Trump using Section 232 to impose tariffs on steel. I criticized the tariffs in 2017 because there was no national security rationale and I was right to criticize the tariffs. It turns out that the Section 232 steel tariffs have done a bad enough of a job that raw steel production sank to a level lower than when the tariffs were imposed. In the meantime, the numerous amount of goods and services that require steel have gotten more expensive thanks to Trump's tariffs. I pointed out this past May how Trump's steel tariffs lowered export growth, decreased the GDP, caused a net loss of 75,000 jobs, and increased consumer prices because U.S. consumers were the ones who paid the price for Trump's folly. This example serves to show the overall trend of how protectionism harms the economy while doing nothing positive for national security (or even harming national security).

Conclusion. Since the days of ancient Greece, there has been government interference in trade policy. There are certain countries that are not going to play nice or adhere to the standards set in international relations, as is the case with China. Geopolitical rivalries do exist and there are times in which at least some benefits of trade have to be traded off for national security considerations. As this article from Econlib shows, many of those arguments are flimsy and tenuous. 

As such, it is generally true that freer trade is better for national security. It is a benefit of free trade we can add to the list of benefits along with the economic arguments, moral arguments and social welfare arguments. While I do not see either presidential candidate or either major political party in the United States clamoring for freer trade, I do hope that we get ourselves out of this protectionist rut so that we can implement international trade policy that is both good for the economy and national security.