On Wednesday, President Trump declared that it was “Liberation Day.” He said this is our economic Declaration of Independence now.
The markets were rocked after the announcement and there’s a reason why, which I will explain.
The president seems to believe that international trade is a zero-sum game. His giant tariff policy is predicated on a few false notions about the American economy. One is that the American economy has been a giant failure for the last 40 years. That is simply not true. This is a myth that is propagated by both parties.
I know, it’s a fun myth. It’s something people like to believe, that yesterday was economically better than today.
But then you look at all the stuff around you, the phone in your pocket, the computer, the fact that you can literally order any product at any time from anywhere on earth and it arrives at your doorstep in two days at a price you can afford, and you think to yourself: Would I rather live in 1980 when the only person with a cell phone was Gordon Gekko on a beach holding a shoe box to his head, when central air conditioning was kind of a rarity? When the cars, if you were lucky, had electric windows? Was that better? Were things better simply on an economic level?
Forget about everything else. You can make a case about the descent on the spiritual level. You can make a case about the dissolution of the family. I agree with many of those cases. But we’re not talking about the life of the spirit within. We’re talking about economics, which is the distribution of goods and services.
America has done well for decades and has not stopped. A myth that all politicians like to tell is that America has not done well, that America has been hollowed out by deindustrialization and we are not actually manufacturing anymore in this country.
That is not true. In 1997, the United States was producing $1.4 trillion in real manufacturing value added. In 2025, we are producing $2.4 trillion. That is an arithmetic increase.
So, if we are manufacturing more, why aren’t there more manufacturing jobs? The answer is technology. We manufacture more because we have better robots and they are doing much of the work that people seem to have a very warm and fuzzy feeling about, but then never want to do themselves.
I notice a lot of people say, “Why can’t I have a factory job just like in 1955 at Ford? Working in a non-air conditioned factory riveting all day?” It’s unlikely that’s your ideal job.
WATCH: The Ben Shapiro Show
We’ve been told the lie that the American middle class has been hollowed out by international trade.
But here is what actually happened to the American middle-class over the course of the last several decades. The American middle-class stayed approximately the same or shrank a little bit. Why did it shrink? Not because people became lower middle-class or poor, but because a huge number of Americans went into the upper middle-class. The number one change in the status of American families in terms of income from just before 1980 to about 2015 was a 16% increase in the upper middle-class.
In other words, people got richer. And by the way, everyone got richer, including the poor, because the stuff you can get as a poor person in America in 2025 is way better than the stuff you could get as a poor person in America in 1980. That’s just a reality.
How about wages? We keep hearing that wages are stagnant and have been stagnant since 1979. According to the Bureau of Labor Statistics, however, there was a steep increase in wages between 1980 and 2025.
I know this cuts against the conventional political wisdom, which says that the American economy sucks and it’s because everybody is cheating us.
One of the things President Trump is predicating his tariff war upon is the idea that trade deficits are inherently bad. A trade deficit is where, in terms of value, we import more stuff than we export. As I have pointed out before, you have a trade deficit with literally every business you do business with unless they’re buying your product.
So, for example, I have a trade deficit with my local grocery store, a huge trade deficit. They have received pretty much nothing from me. But I have bought tens of thousands of dollars worth of groceries over the years from my local grocery. They’re not taking advantage of me; I’m getting value for my dollar in the form of food and supplies.
As the great economist Thomas Sowell points out, “If the goods and services available to the American people are greater as a result of international trade, then Americans are wealthier, not poorer, regardless of whether there is a deficit or a surplus in the international balance of trade.”
In fact, I can name a period in American history where there was a fairly large surplus in America’s balance of trade: the entire Great Depression.
As it turns out, trade deficits have pretty much nothing to do with the health of an economy. They don’t tell you very much.
19th century French economist Frédéric Bastiat once wrote on this topic, essentially saying, “Look, if you’re so worried about trade imbalances, then actually what you should do is you should sink ships filled with your own exports before they ever get to the other side.” So if we’re exporting oranges to Europe and they’re going to send us apples in return, the best way to ensure that no trade imbalance takes place is we should send our oranges out of the country and sink the ship before it ever gets to Europe so they can’t send us apples back. Then we’ll have a large export on our ledger and no imports. Great idea. The economy will be stronger.
So, there is a fundamental misunderstanding of trade deficits. This is not about balance of payments, which is a different thing. Balance of payments is about the flow of gold. We’re no longer in a gold standard, but it’s about currencies.
Trade deficits are a different thing.
In reality, I think the Trump administration is likely to try and leverage headlines out of various foreign nations suggesting they’re going to invest in America to the tune of some billions of dollars before lowering the tariff rates again.
I do have faith that President Trump actually responds to headlines and to the news. He lives in the world of reality and won’t simply ignore that the markets hate all of this.
Yesterday, The White House quietly put out a fact sheet that read:
These tariffs will remain in effect until such a time as President Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved, or mitigated. Today’s IEEPA Order also contains modification authority, allowing President Trump to increase the tariff if trading partners retaliate or decrease the tariffs if trading partners take significant steps to remedy non-reciprocal trade arrangements and align with the United States on economic and national security matters.
Now, other countries could say they will invest in the American economy and President Trump gets a huge win. That could happen. I’m hoping that’s what Trump is planning on doing.
Is President Trump going to send out surrogates, like the Treasury Secretary, to walk some of this back and to try to point out where an off-ramp is? Or is he just going to keep doubling down on the theory that it’s short-term pain for long-term gain? If so, he’s going to have to explain how short-term the pain is and what exactly the long-term gain is, because that has not even been spelled out at this point. Is the idea that other countries are going to reshore to the United States to take advantage of our markets in some way, but we will leave tariffs on stuff that they export to us? They could also form trade blocs themselves and then go make time with the Chinese.
There are real-world implications for this sort of stuff. Trade wars are not good and not easy to win, particularly if you don’t actually have a plan. You actually have to have a plan.
So, I want somebody to make the case as to why this is actually excellent policy, why this is going to be salutary for the United States, why this is going to benefit the people of the United States en masse. And if you’re going to call for sacrifice from the American people, the question is, what is the thing on the other side of that sacrifice that is better and good?
What I’ve heard so far is a lot of casting of various aspersions at foreign countries for engaging in trade with us, regardless of whether they are good or bad, because we’re treating Canada the same way we’re treating China.
This is why I think the markets are confused. Investors are confused. Confusion and fear are going to breed sell-off. Less investment, less job growth.
It’s all avoidable. We need to hear an actual narrative, not a bunch of talking points that are generated from a cork board filled with statistics made up by some sort of AI.
[#item_full_content]
[[{“value”:”
On Wednesday, President Trump declared that it was “Liberation Day.” He said this is our economic Declaration of Independence now.
The markets were rocked after the announcement and there’s a reason why, which I will explain.
The president seems to believe that international trade is a zero-sum game. His giant tariff policy is predicated on a few false notions about the American economy. One is that the American economy has been a giant failure for the last 40 years. That is simply not true. This is a myth that is propagated by both parties.
I know, it’s a fun myth. It’s something people like to believe, that yesterday was economically better than today.
But then you look at all the stuff around you, the phone in your pocket, the computer, the fact that you can literally order any product at any time from anywhere on earth and it arrives at your doorstep in two days at a price you can afford, and you think to yourself: Would I rather live in 1980 when the only person with a cell phone was Gordon Gekko on a beach holding a shoe box to his head, when central air conditioning was kind of a rarity? When the cars, if you were lucky, had electric windows? Was that better? Were things better simply on an economic level?
Forget about everything else. You can make a case about the descent on the spiritual level. You can make a case about the dissolution of the family. I agree with many of those cases. But we’re not talking about the life of the spirit within. We’re talking about economics, which is the distribution of goods and services.
America has done well for decades and has not stopped. A myth that all politicians like to tell is that America has not done well, that America has been hollowed out by deindustrialization and we are not actually manufacturing anymore in this country.
That is not true. In 1997, the United States was producing $1.4 trillion in real manufacturing value added. In 2025, we are producing $2.4 trillion. That is an arithmetic increase.
So, if we are manufacturing more, why aren’t there more manufacturing jobs? The answer is technology. We manufacture more because we have better robots and they are doing much of the work that people seem to have a very warm and fuzzy feeling about, but then never want to do themselves.
I notice a lot of people say, “Why can’t I have a factory job just like in 1955 at Ford? Working in a non-air conditioned factory riveting all day?” It’s unlikely that’s your ideal job.
WATCH: The Ben Shapiro Show
We’ve been told the lie that the American middle class has been hollowed out by international trade.
But here is what actually happened to the American middle-class over the course of the last several decades. The American middle-class stayed approximately the same or shrank a little bit. Why did it shrink? Not because people became lower middle-class or poor, but because a huge number of Americans went into the upper middle-class. The number one change in the status of American families in terms of income from just before 1980 to about 2015 was a 16% increase in the upper middle-class.
In other words, people got richer. And by the way, everyone got richer, including the poor, because the stuff you can get as a poor person in America in 2025 is way better than the stuff you could get as a poor person in America in 1980. That’s just a reality.
How about wages? We keep hearing that wages are stagnant and have been stagnant since 1979. According to the Bureau of Labor Statistics, however, there was a steep increase in wages between 1980 and 2025.
I know this cuts against the conventional political wisdom, which says that the American economy sucks and it’s because everybody is cheating us.
One of the things President Trump is predicating his tariff war upon is the idea that trade deficits are inherently bad. A trade deficit is where, in terms of value, we import more stuff than we export. As I have pointed out before, you have a trade deficit with literally every business you do business with unless they’re buying your product.
So, for example, I have a trade deficit with my local grocery store, a huge trade deficit. They have received pretty much nothing from me. But I have bought tens of thousands of dollars worth of groceries over the years from my local grocery. They’re not taking advantage of me; I’m getting value for my dollar in the form of food and supplies.
As the great economist Thomas Sowell points out, “If the goods and services available to the American people are greater as a result of international trade, then Americans are wealthier, not poorer, regardless of whether there is a deficit or a surplus in the international balance of trade.”
In fact, I can name a period in American history where there was a fairly large surplus in America’s balance of trade: the entire Great Depression.
As it turns out, trade deficits have pretty much nothing to do with the health of an economy. They don’t tell you very much.
19th century French economist Frédéric Bastiat once wrote on this topic, essentially saying, “Look, if you’re so worried about trade imbalances, then actually what you should do is you should sink ships filled with your own exports before they ever get to the other side.” So if we’re exporting oranges to Europe and they’re going to send us apples in return, the best way to ensure that no trade imbalance takes place is we should send our oranges out of the country and sink the ship before it ever gets to Europe so they can’t send us apples back. Then we’ll have a large export on our ledger and no imports. Great idea. The economy will be stronger.
So, there is a fundamental misunderstanding of trade deficits. This is not about balance of payments, which is a different thing. Balance of payments is about the flow of gold. We’re no longer in a gold standard, but it’s about currencies.
Trade deficits are a different thing.
In reality, I think the Trump administration is likely to try and leverage headlines out of various foreign nations suggesting they’re going to invest in America to the tune of some billions of dollars before lowering the tariff rates again.
I do have faith that President Trump actually responds to headlines and to the news. He lives in the world of reality and won’t simply ignore that the markets hate all of this.
Yesterday, The White House quietly put out a fact sheet that read:
These tariffs will remain in effect until such a time as President Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved, or mitigated. Today’s IEEPA Order also contains modification authority, allowing President Trump to increase the tariff if trading partners retaliate or decrease the tariffs if trading partners take significant steps to remedy non-reciprocal trade arrangements and align with the United States on economic and national security matters.
Now, other countries could say they will invest in the American economy and President Trump gets a huge win. That could happen. I’m hoping that’s what Trump is planning on doing.
Is President Trump going to send out surrogates, like the Treasury Secretary, to walk some of this back and to try to point out where an off-ramp is? Or is he just going to keep doubling down on the theory that it’s short-term pain for long-term gain? If so, he’s going to have to explain how short-term the pain is and what exactly the long-term gain is, because that has not even been spelled out at this point. Is the idea that other countries are going to reshore to the United States to take advantage of our markets in some way, but we will leave tariffs on stuff that they export to us? They could also form trade blocs themselves and then go make time with the Chinese.
There are real-world implications for this sort of stuff. Trade wars are not good and not easy to win, particularly if you don’t actually have a plan. You actually have to have a plan.
So, I want somebody to make the case as to why this is actually excellent policy, why this is going to be salutary for the United States, why this is going to benefit the people of the United States en masse. And if you’re going to call for sacrifice from the American people, the question is, what is the thing on the other side of that sacrifice that is better and good?
What I’ve heard so far is a lot of casting of various aspersions at foreign countries for engaging in trade with us, regardless of whether they are good or bad, because we’re treating Canada the same way we’re treating China.
This is why I think the markets are confused. Investors are confused. Confusion and fear are going to breed sell-off. Less investment, less job growth.
It’s all avoidable. We need to hear an actual narrative, not a bunch of talking points that are generated from a cork board filled with statistics made up by some sort of AI.
“}]]
