Adam Smith Warned of (Almost) Everything Wrong with U.S. Trade Politics Today

On Tuesday, I had the privilege of delivering the 2026 Lev Dobriansky Distinguished Lecture in Political Economy at George Mason University. In commemoration of the 250^th anniversary of both the Declaration of Independence and Adam Smith’s seminal book, The Wealth of Nations, the hosts asked me to speak on Smith’s continued influence on U.S. public policy, especially trade and protectionism. Today’s column will be an essay version of that talk.

This year marks the 250^th anniversary of both the nation and a foundational book for America’s incredible free-market economy: Adam Smith’s The Wealth of Nations. Most people know it as an economics book—covering fundamental concepts like the “invisible hand,” comparative advantage, the gains from specialization, the perils of mercantilism, the trade balance, and much more. And those lessons, many of which we’ve covered here at The Dispatch, are certainly important. Yet as I skimmed through the book in preparation for my talk this week, I was repeatedly struck by how The Wealth of Nations is also a deeply, savagely political book, with practical insights into how commercial policy really gets made—insights that found a home in modern public choice theory and are evident across generations of U.S. trade politics.

Three quotes from the book capture some of Smith’s most salient political ideas—ones that show him not as an 18^th-century economist but as a keen political theorist and someone who could be describing Washington today, not Scotland 250 years ago.

‘A conspiracy against the publick.’

The first quote may be Smith’s most famous line about politics and policy, though it’s frequently misunderstood. In Book I of The Wealth of Nations, he wrote:

The oft-ignored second half of this quote makes clear that, contrary to many modern claims, Smith isn’t here calling for government antitrust cops to break up meetings among private businesses. Instead, he’s making a political economy point: Because industry naturally gravitates toward enriching itself at consumers’ expense (via higher prices), government policy shouldn’t facilitate or encourage such meetings.

Yet this is precisely what U.S. trade policy does—and has done for centuries now.

In the early days of the republic (back when government was really small), tariffs were the primary means of both raising revenue and doling out “rents” to businesses that organized and lobbied for them. The wonderfully named Tariff of Abominations (1828) was heavily influenced by Northern textile and iron producers. The post-Civil War decades were a golden age of tariff rent-seeking, with the U.S. iron, steel, wool, and sugar industries essentially writing U.S. tariff schedules. As I’ve documented at Cato and as Dartmouth economic historian Douglas Irwin thoroughly chronicles in his great book, Clashing Over Commerce, 19^th-century tariff lobbying was in many respects an incubator for the entire U.S. lobbying and interest-group machine that exists today. And it began because American trade policy was openly auctioned off to the highest bidder.

Offer the rents, and the rents get sought.

The pinnacle of 20^th-century congressional tariff cronyism is the infamous Smoot-Hawley Tariff Act of 1930. As economic historian Phillip Magness has documented, tariff-loving congressional Republicans gave industry lobbyists an opportunity for even more price-hiking import protection, and the latter descended on Congress en masse: “Special interests flooded committee rooms, exchanging cash under the table for favorable rates to insulate themselves from foreign competitors amid the unfolding [economic] downturn.” Almost everyone got his own tariff line item, and average tariff rates on dutiable imports hit almost 50 percent, triggering a retaliatory spiral that deepened the Great Depression.

The Reciprocal Trade Agreements Act of 1934 (RTAA) was Congress’ institutional attempt to restrain itself by delegating trade negotiations and tariff authority to the executive, and it was a move Adam Smith would likely have applauded. The idea was to reduce corporate rent-seeking in Congress by taking tariff rate-setting out of legislators’ hands and by getting U.S. exporters to balance protectionist interest groups by conditioning new market access abroad on continued openness to imports.

That reform worked—for a while. Legislated tariff rates declined, and 19^th-century tariff corruption abated. But America’s protectionist lobbying machine didn’t disappear; it adapted to match the new kinds of protectionism that the government was offering up. And in the 1960s it got a powerful legal backstop: the Noerr-Pennington doctrine. Established by a series of Supreme Court decisions, it held that joint corporate lobbying for policy—even explicitly anticompetitive (price-hiking) policy—is constitutionally protected First Amendment activity and thus immune from antitrust liability. The doctrine is certainly defensible on First Amendment grounds (and, arguably, Smith’s own sense of “liberty and justice”), but it effectively blessed companies’ organized “conspiracy against the publick”—as long they conspired in Washington instead of a corporate boardroom.

The modern trade lobbying complex that Noerr-Pennington enabled is vast and effective. As Cato’s Clark Packard and Alfredo Carrillo Obregon documented in a paper last year, “Big Steel”—through the American Iron and Steel Institute, union groups, and even certain industry-run “think tanks”—has probably won more protective measures than any other U.S. industry. And, far from satiating the industry, each tariff, subsidy, or mandate simply spawned Big Steel’s demands for more. Over the last decade, former steel executives and lawyers have populated numerous high-level offices across the U.S. government.

Then there’s “Big Sugar,” a textbook legal cartel enabled by government price supports and quotas. Everyone in Washington knows that the U.S. sugar program is a costly debacle, but sugar cane and beet growers are concentrated in a handful of electoral swing states, and they’ve organized with U.S. corn growers who benefit from the sugar alternative high-fructose corn syrup. As former House Speaker John Boehner thus memorably put it in his book, members of Congress quickly learn that sugar policy is terrible, but they also learn not to “f—k with” Big Sugar.

These groups certainly aren’t alone. Big Dairy has lobbied successfully for tariff-rate quotas and marketing orders that ring-fence the domestic market and helped cause the 2022 infant formula crisis. Big Ship—a coalition of unions, shippers, and shipbuilders—has prevented meaningful reform of the Jones Act for over a century, even as building vessels here costs four to five times world market prices and as U.S. refineries import crude from Saudi Arabia and Nigeria instead of Texas. Scratch almost any product protected by special import barriers today—textiles and apparel, shrimp, catfish, tomatoes, aluminum, lumber, kitchen cabinets, whatever—and you’ll find an organized interest group underneath, doing exactly what Smith observed in 1776.

And, far from hiding their “conspiracy against the publick,” the organizations openly flaunt it:

‘The most suspicious attention.’

The second Smith quote continues the theme of corporate influence but also considers the public’s reaction. It’s also from Book I:

Here, Smith is implicitly addressing the policy challenge of “rational ignorance”: Voters and consumers have little incentive to learn the details of complex commercial legislation because the per-person cost of any single policy is small, while the cost of becoming informed is high. Industry insiders (“dealers”), by contrast, know every comma of every relevant law and work actively to bury protectionism in legislation that nobody has time to read. Elected officials—interested in reelection instead of the “public interest”—are therefore highly likely to craft commercial legislation benefiting the latter and ignoring the former. Hence, the need for intense public skepticism and scrutiny, something politicians and cronies are keen to avoid.

History is again littered with examples of the problem Smith identified. Smoot-Hawley’s 20,000-plus tariff line items were adjusted largely in committee, most with industry input and without floor debate. Many of today’s tariff peaks—on apparel, footwear, and more—are direct descendants of Smoot-Hawley, surviving decades of U.S. trade policy reforms without notice or revision. Congress has repeatedly amended “trade remedy” rules and Buy American restrictions to help Big Steel and other industry groups. The Jones Act lobby has repeatedly narrowed the conditions for waiving the law. The Byrd Amendment—quietly slipped into a large omnibus appropriations bill in 2000—required that antidumping duties be paid directly to the companies that had filed the petitions for them (it’s protection plus a subsidy!). And don’t even get me started on the farm bill and congressional biofuels policy.

As the above quote indicates, this is precisely the type of protectionism we should expect to be stuffed into must-pass bills that nobody reads. Yet not even the cynical Adam Smith could fully anticipate the scope of the problem today. Smith imagined protectionism as requiring a visible legislative act: a British merchant seeking protection had to petition Parliament directly. And that’s basically how it worked in the United States before World War II, with interest groups lobbying Congress.

Today things are different, with the RTAA pushing almost all routine protectionism to the executive branch and a permanent bureaucracy that can impose, modify, and perpetuate import barriers through regulatory action, executive orders, emergency declarations, and agency guidance—often without a single congressional floor vote. Hundreds of trade remedy measures (mainly, antidumping duties and countervailing duties) are set at the Commerce Department and the International Trade Commission. Section 232 “national security” tariffs go through Commerce. Section 301 restrictions go through the Office of the U.S. Trade Representative. The Department of Agriculture manages agricultural “tariff rate quotas” and marketing orders. Maritime protectionism is administered through the Maritime Administration, and tariff classification and enforcement is managed by Customs and Border Protection.

Each legal regime, and others like them, gives industry groups an opaque and byzantine opportunity to lobby an agency for new protection from import competition—and to “capture” that agency through repeat interactions. Clueless outsiders don’t stand a chance.

The agencies themselves, meanwhile, are often hardwired to cater to the companies they supposedly regulate. USTR’s Industry Trade Advisory Committee system (ITACs) formally embeds industry representatives in U.S. trade negotiating positions. Steel and aluminum producers have dedicated contacts at Commerce’s Import Administration. Textile companies have their own office at USTR. USDA has special offices for dairy and other foods, managing price supports, marketing orders, supply controls, and import quotas. And, to the extent Congress is involved in any of this, it’s usually one of the dedicated industry caucuses—the Steel Caucus, the Textile Caucus, and so on— trying to make these laws even more protectionist.

President Donald Trump, of course, has turned this all up to 11, imposing a litany of new tariffs under various laws—some routine, some novel—and centralizing tariff-setting in the White House via an even more opaque and discretionary system. As of January 2026, more than half of all U.S. imports were subject to one or more special tariff measures implemented without Congress. Unsurprisingly, trade lobbying has skyrocketed as firms jockey for exemptions and new restrictions on foreign competition— just as Smith would expect:

Smith called on the public to devote “most suspicious attention” to tariffs and other commercial regulations—and for very good reason. Unfortunately, the administrative state and U.S. trade law make such scrutiny exceedingly difficult, if not impossible.

‘As absurd as to expect that Oceana or Utopia should ever be established.’

The third and final quote is Smith’s most pessimistic—and most prescient. This is from Book IV:

Contrary to the common characterization of Adam Smith as a naïve ideologue, we see here that he understood well the deep structural obstacles to free trade from both the public and, more importantly, from organized industry. The latter’s resistance is classic public choice: Protectionism’s concentrated benefits and diffuse costs mean that protected industries will fight like hell for trade protection—and against reforms. Companies and workers, as well as their communities, suppliers, and political representatives, also capitalize gains from tariffs as higher asset values, wages, and political capital—meaning that these groups all stand to lose real money if protection is removed (the so-called “transitional gains trap”).

Meanwhile, the benefits of trade liberalization—lower prices, more efficient resource allocation, dynamic gains, economic growth, etc.—are surely real and, in fact, much larger in the aggregate than those won by the protectionist groups. But these improvements are smaller per person, invisible, and unorganized. So, we don’t lift a finger.

This dynamic means that it’s extraordinarily hard to repeal protectionist policies, even ones that are universally acknowledged as costly and failed. And the U.S. record again bears this out. We still impose tariffs of almost 50 percent on cheap shoes even though the policy clearly harms American consumers (especially poor and large households) and the U.S. has essentially no cheap shoe industry. Big Steel has won a century of protective measures yet remains a global laggard while downstream manufacturers shrivel due to artificially high input costs. The Jones Act has presided over the long and slow degradation of U.S. commercial shipbuilding and the merchant marine, but even emergency waivers are hard to come by because of a notorious Big Ship blockade (get it?). Heck, even after it was clear that U.S. tariff and nontariff barriers helped cause the 2022 baby formula crisis, those barriers snapped right back into place once most people stopped paying attention—thanks in large part to the efforts of Big Dairy.

Studies repeatedly show that protection imposes large consumer costs while failing to produce a thriving industry, yet it persists in numerous forms because the beneficiaries fight to keep it while everyone else barely notices. Unfortunately, this same political economy will make it difficult to reform Trump’s new tariffs. Even with strong economic evidence of harm and terrible polling, it’s bound to be an uphill climb.

So, what now?

Adam Smith was a pragmatist, if not a pessimist, when it came to politics and free trade policy in practice. But he also spent hundreds of pages optimistically documenting why free trade and free markets were worth fighting for, and his political insights point toward some of the ways advocates can wage that fight.

First, there’s an unceasing need for education and transparency. Generating a “most suspicious attention” among the voting public requires shining light on U.S. protectionism and its hidden costs. Free market organizations do this every day. We at Cato, for example, just created the Jones Act waiver tracker (plug!) to show all the commerce—American trade of American goods—that President Trump’s recent waiver has unleashed (much to Big Ship’s chagrin). Our hope is that it’ll help people see some of the law’s very real harms, be increasingly skeptical of its purported benefits, and maybe even support future efforts to reform it. More of this kind of sunlight is surely needed.

But sunlight alone isn’t enough. The only long-term way to stop the lobbying machines from seeking protectionist rents is to stop offering them so freely. And that requires new institutional checks on the application of tariffs and other protectionist measures—legal provisions that make clear to interest groups that U.S. trade policy isn’t up for grabs. Laws must be amended to include automatic sunset provisions, mandatory cost-benefit analyses, meaningful procedural constraints, hard publication requirements, and genuine judicial review of executive-branch trade actions (instead of near-total deference). As public choice pioneer James Buchanan might remind us, the answer isn’t just better politicians and better arguments; it’s better rules.

This kind of root-and-branch reform isn’t easy to enact, but it’s what two and a half centuries of political economy demands.

Markets FTW

German soccer fan Freddy is in the United States for the World Cup, and he’s live-tweeting his daily adventures—and his amazement at American abundance (including Buc-ee’s).

DUDE LMAO THIS IS A GAS STATION😭😭😭 pic​.twit​ter​.com/​Y​Y​F​m​W​JiCQa

— Freddy🇩🇪 (@FreddyLA7) June 10, 2026

Chart(s) of the Week

U.S. tariff revenue went negative last month:

Shale gas consumer savings:

Small businesses are paying a lot in tariffs: