Looking through the mainstream economical thought of the 20th century — whether it be John Maynard Keynes or free marketers like Milton Friedman — specified tariffs seem strangely self-sabotaging. Indeed, the alleged liberation day declared by Trump casts specified economical madness that it may seem better explained by psychologists than economists.
Nevertheless, I insist that there is 1 economist whose work is very crucial at this point: Albert Hirschman, author of a landmark book published in 1945, National Power and the Structure of abroad Trade .
In fresh decades, this work has been mostly ignored, as pointed out by Jeremy Adelman, a Princeton historian who wrote Hirschman's biography. No wonder. German-Jewish economist suffered specified trauma during the Spanish civilian War and during Nazi times Germany that erstwhile he arrived at the University of California in Berkeley as an economist, he decided to survey autary.
In particular, he took advantage of the disastrous protectionism of the 1930s. The 20th century to make a framework for measuring economical coercion and hegemonic power (this is an academic word for intimidation). However, this analysis was mostly ignored by trade economists as it was contrary to both Keynesian and neoliberal economical concepts.
Instead, the main influence of the book was on antitrust analysis. Economist Orris Herfindahl later utilized Hirschman's ideas to make an index measuring the concentration of companies, which was adopted, among others, by the American Department of Justice.
But if Hirschman were alive and watching how Trump reveals its tariff strategy In the White home Rose Garden this week, he wouldn't be surprised. Neoliberal thinkers frequently see politics as a derivative of economics. But Hirschman saw it the another way round, arguing that "as long as a sovereign nation can halt trading with any country at its own will, rivalry for greater national power permeates trade relations."
U.S. president Donald Trump signs an executive regulation introducing fresh common customs tariffs to US trading partners in the White home Rose Garden, Washington, USA, April 2, 2025.EPA/JIM LO SCALZO / POOL / PAP
And he saw ‘trade as ... a model of imperialism that did not require “conquest” in order to subjugate weaker trading partners’, as Adelman says. This is close to how Trump advisers analyse economics. But it is very different from how Adam Smith and David Ricardo viewed trade flows (which they assumed included comparable powerful players).
Some economists are inclined towards this change. Just after Trump’s speech, a trio of American economists — Christopher Clayton, Matteo Maggiori, and Jesse Schreger — published an article depicting the increasing field of “geoeconomics”, inspired by Hirschman.
When the trio first started this investigation programme, 4 long years ago, “a tiny 1 seemed interested” in these ideas, due to the fact that they were contrary to the current framework, Maggiori admits. However, it says that the interest is now growing, predicting an upcoming intellectual change comparable to that which occurred after the global financial crisis. For example, this year's American Finance Association held an innovative geoeconomic session, during which Maurice Obstfeld, erstwhile head economist of the global Monetary Fund (and Hirschman's fan), gave a strong speech.
This work has already resulted in 3 topics that investors should pay attention to. Firstly, and most clearly, the analysis of the trio shows that besides much dependence of tiny countries on any large trading partner is dangerous and offers tools to measurement specified vulnerability.
Secondly, they argue that the origin of America's hegemonic power is not production (because China controls key supply chains) but alternatively the finances and structure based on the dollar system.
Trump's tariffs are so fundamentally a example to challenge another hegemon (China), but his financial policy is an effort to defend existing dominance (hegemony in terms of technological power, as I claim, is inactive being questioned). This discrimination is crucial for another countries trying to react.
Thirdly, the trio argues that hegemonic power does not act symmetrically. If the tormentor has, say, an 80-percent marketplace share, it usually has 100-percent control; but if the marketplace share falls to 70 percent, hegemonic power breaks down faster due to the fact that the weaker see alternatives.
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This explains why the US failed to control Russia with financial sanctions. This model may be more common if another countries respond to Trump's aggressive duties, imagining and developing alternatives to the dollar-based financial system. The tormentors seem invincible — until they stop.
Is this analysis depressing? Yeah. But you shouldn't ignore her. And if shocked investors and decision-makers want to comfort themselves, they may see something else: against all odds, Hirschman was an optimist throughout his life — or “consistent” as he preferred to say. He felt that people could learn from past to improve the future.
Trump now ignores this lesson, with grim consequences. But no 1 else should.
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