How can investors parse Donald Trump’s policymaking? That is a burning question right now, as markets tumble after the US president announced tariffs on Wednesday that exceed even those of the protectionist 1930s.
Viewed through the lens of mainstream 20th-century economic thinking — be it that of John Maynard Keynes or free-marketeers like Milton Friedman — such tariffs seem strangely self-sabotaging. Indeed, the so-called liberation day declared by Trump smacks of such economic lunacy that it might seem better explained by psychologists than economists.
However, I would argue that there is one economist whose work is very relevant in this moment: Albert Hirschman, author of a striking book published in 1945, National Power and the Structure of Foreign Trade.