There's a lot of talk about the tariff lately. Especially since the US administration has changed.
The general belief is that a nations industry, which creates goods, must be protected if the nation is to survive.
Though this idea is widely held by the greatest of minds, it is a false idea. Or, it is an idea which has not been thought through carefully.
In a more advanced nation, the goal would be to reach for the sale of more services than sales of goods. So the more advanced your nation, the more services you sell compared to goods, if you want to prosper in the most effective way.
Its worth noting that services are valuable only insofar as they supported or enhance the creation of real wealth, not when they existed to extract it without contributing, such as when monopolies use services to extract economic rent.
Services are more effective at producing wealth having fewer more costly inputs of goods, than the production of goods directly, which cost more to deliver than the services per dollar input. Especially in the way that better services assist in boosting the division of labour and a nations comparative advantage. Trade policy should reflect a nation’s strengths, whether in goods or services, rather than blindly protecting domestic goods production at all costs.
"Goods will not be imported into any country unless they can be obtained more easily by producing something else and exchanging it for them, than by producing them directly." George in Protection or Free Trade.
While this applies to tangible goods, George’s broader point is about comparative advantage—a concept he grasped intuitively, even if he didn’t use the modern term. He recognized that "something else" could include services. If a country is better at providing services (e.g., shipping, finance, or skilled labor) than manufacturing certain goods, it’s foolish to protect the latter at the expense of the former. He saw protectionism as a rigid policy that ignores this dynamic, locking nations into less efficient production patterns.
George’s argument shines through when he discusses trade’s role in the division of labor. He noted that some regions are better suited to services due to "differences in industrial development, in habits, customs, and related occupations" (Chapter 12). For example, a nation with a skilled workforce or strategic location might excel at shipping, banking, or education—services that generate wealth more effectively than forcing domestic production of goods it can import cheaply. He saw protectionism as a backward step, propping up industries that might no longer align with a country’s evolving capabilities.
In his view, if services are what you’re now better at producing, protecting goods production is not just inefficient—it’s economically irrational. It’s like forcing a skilled artisan to farm when he could trade his craft for food more profitably. George’s insight here predates modern economic shifts toward service-dominated economies, showing his forward-thinking grasp of trade dynamics.
George didn’t just judge services by their productivity in a vacuum—he actively contrasted them with goods in the context of trade policy, arguing that protectionism fails when it ignores a nation’s best path to prosperity. He went deeper by showing that economic evolution demands flexibility, and services could be that next step for some societies. His point wasn’t that services inherently outshine goods, but that protecting goods production at the expense of a service advantage is a misstep—a deeper critique than I first conveyed.
He pointed out that protecting goods production is foolish if services are where your strength lies, framing it as a practical application of free trade principles. His insight was less about elevating services philosophically and more about exposing the rigidity of protectionism in a changing economic landscape.
We should take care not to elevate services above goods as a mode of production. The point is to say that once a nation reaches a certain break point, services will become that much more important to devote scarce capital to. And to attempt to protect the production of goods in the face of cheaper foreign competition can only harm the home nation in the end, unless the home nation can truly produce those goods at a cheaper price all else being equal. And if it can then why all the fuss already?
So services, being indirectly involved in the production of wealth, have more power to produce wealth. And fr that reason should be targeted by the home nation as soon as is has the ability to do so. And especially when the costs of continuing to produce goods, rather than services, is starting to negatively impact the home economy.
There may be reasons to protect the home industry, such as for security, in case of acts of God. But in a globalised world, there will always be someone willing to sell you those goods you're now short of, who is not harmed by God yet. OK OK. So keep a stock of industry in goods to protect against 1000 year black swans but htat can be a relatively small stock. The home industry does not need protecting.
Is there a justification for the protection of home services though?
Perhaps. When a foreign nation is trying to buy up the home industry at a temporary loss. In the hope that eventually the foreigner will be able to raise prices high and the home industry cannot afford to restart it. But this is really 'super-protectionism' by the foreigner. Where the stupidity of borders has expanded. The people of a foreign nation are humans too. Nature knows nothing about borders. So, in the final analysis here, nature will take care of it all with no accounting for justice, equality, fairness or love. She will deliver truth. In the end the entire economy of the world will suffer through super protection, even the foreign industry if it initially succeeds will pay for it in the end.
So I believe Mr Trump is right here to counter-tariff a foreigner trying to corner their market. He can see super-protectionism is a fools policy and is trying to save the world.
Note: a large part of this - on the comparative advantage of services, after arguing about it gleaned from Grok.