There's No Reason America Should Be Trading with Vietnam

In Defense of Sane Policies

Welcome back, and thanks for reading. As promised, today’s article is part 2 of a series on trade and history, this time with a focus on why America’s trade policy is such a mess. For those who are new, it would probably be helpful to read my recent article on the McKinley presidency and semi-recent review of Friedrich List’s The National System of Political Economy, as the concepts therein will be mentioned a great deal here. As always, please tap the heart at the top or bottom of the page to like this post, as that is how Substack knows to promote it! Thanks again

I was recently discussing trade policy with a frequent reader and paid subscriber of this Substack (if you’re a paid subscriber and want me to address an issue, please just shoot me a question like this), and he asked me a question that I think many have. To paraphrase a bit, it went something like this: “Why is it a good thing that Trump put a 46% tariff rate on Vietnam?¹ Sure, they might cheat a bit on trade issues [they actually cheat quite a lot],² but doesn’t it make sense that we should just import the textiles and low-value industrial goods they sell us at a lower rate than our producers can make those items, so we can sell them more expensive goods?”

This is, essentially, the famous argument Adam Smith made in his The Wealth of Nations that it made sense for England to import wine from Portugal while selling it textiles,³ rather than each country trying to produce both wine and textiles, as it is theoretically more efficient to focus on “competitive advantage” than autarky.⁴

The answer we are trained to say is “Of course, that makes sense. Efficiency is a natural good.”

The actual answer is “No, that is utterly senseless for a number of reasons.”

Listen to the audio version of this article here:

[AUDIO] There's No Reason America Should Be Trading with Vietnam

1. The Listian Argument

The first is what Friedrich List recognized in The National System of Political Economy: the wine-for-textiles trade that Smith championed was, in fact, far from being a sterling case of free trade’s benefits.

Rather, it was a state of trade effected via a treaty (the Methuen Treaty)⁵ that allowed the British to disembowel Portugal’s domestic woolens industry and textile manufacturers in exchange for placing only a limited tariff on Portuguese wine. Far from being a major success for both parties, the treaty, as List noted, proved in the long run quite harmful to Portugal. It both retarded its economic growth and industrial development and made it reliant on Perfidious Albion for basic materials.⁶

So, far from Smith’s classic example—the basis of most modern arguments about comparative advantage—showing how free trade is beneficial, it shows how mendacious treaties can prove as harmful as they are “efficient.” Thus, the lesson is not that “comparative advantage” is a good basis of trade that enriches all involved, but rather that longer-term consequences than just the present price of a given good ought to be considered, as a bad trade deal can lead to Portugal-style destruction and humiliation.

While the consequences of the Methuen Treaty that Smith ignored and List noticed are mainly just historical trivia at this point, the lesson remains important: in putting itself at the whims of other nations, namely Southeast Asian manufacturing giants, in the name of “comparative advantage,” America risks following the impoverished path of Portugal.

So, if we wish to be the British in the example rather than the Portuguese, it is finding methods of and treaties for trade that encourage domestic investment that is salutary, not mere chasing of temporary efficiency gains. The cost-cutting consultant types hate that, of course, but it is true nonetheless. The British became a wealthy, industrial powerhouse because of massive levels of investment-stimulated domestic production and imperial trade deals that let them advantageously export those products that weren’t consumed at home, not because they imported wine from Portugal and reaped some efficiency advantage from that. The benefit was the captive export market.

2. The American Situation

It is not just List’s theory that justifies America deciding to focus on domestic production and investment instead of cost-cutting via imported goods. In fact, America’s industrial history provides clear evidence as to why turning everywhere in the Heartland into the decayed hell described by JD Vance⁷ is not just utterly immoral, but also disadvantageous.

To explain that, it’s necessary to first dive into what it is America buys from Vietnam: the major goods essentially break down into industrial equipment, apparel, and furniture.⁸

All of those goods are goods we can make in America. None of it needs to be imported from a communist country that we lost tens of thousands of men to in a brutal slog of a war. Yet, import manifold goods from them we do.

Electronic Imports

Electronics are a key example. Both at the consumer and industrial levels, they were originally a category of products America was renowned for making. Whether telecommunications equipment or semiconductors, radios or home appliances, nearly all of those products were not only invented in America but were successfully and profitably produced here for decades. That was the legacy of Thomas Edison and countless other tinkerers, inventors, and workers like him who have since become classic examples of American ingenuity.

It wasn’t until the 1970s that we lost the lead in their production to the East Asian countries.⁹ But, thanks to domestic and trade policies that put American producers at a disadvantage at the same time as they were opened up to new Asian competitors who at had protected domestic markets, a near $0 cost of labor, and a nearly tariff-free America to import such goods into, lose the lead we did.

Now, even goods that are critical to the functioning of our armed forces are made by countries that either hate us or squeeze everything they can out of us; even our military can’t function without Chinese electronics,¹⁰ and America has to import tens of billions of dollars’ worth of electronics from Vietnam every year.

Textiles and the Like

The same is true of apparel, furniture, and like goods. America used to be able to produce those for and sell them to the domestic market at a reasonable profit. That was, in fact, a national objective from the very start of our republic. Key sections of books about early America, such as like The Age of Federalism and The History of the United States During the Administrations of Thomas Jefferson, are essentially tales of how America used tariffs to keep out British-manufactured goods so that our domestic textile manufacturers and the like could thrive and our economy would escape reliance on Britain.

That early success then lasted for decades, and textile towns sprang up across both northern Georgia and the Northeast. Then, much like electronics, the trade policies and domestic issues of the 1970s saw all that hard work and progress turn to dust as we once again became net importers of such products. All the mills went out of business, our woolens industry never recovered, and now we unnecessarily have to rely on places like Vietnam for our clothing.

That’s not to say it’s impossible to produce textiles here. Jocko Willink’s Origin Jeans company¹¹ took around $1 million to start, and now, quite in contrast to the textile mills of the ‘70s, appears to be quite profitable¹² and continually expanding. But such products are marginally more expensive than the imported equivalents, and so “efficiency” brain means we’ve become reliant on enriching foreign rivals rather than encouraging a thousand Origin-style mills to prosper.

The General Issue

Vietnam is just the example from the question I was asked, so I have stuck to it, but the same story is broadly true across all of our manufactured goods categories.

Thanks to hard work, Listian policies, and the American penchant for inventiveness, America became a huge manufacturing success and net exporter by the late 19th century.¹³ Then, we let all that disappear from the 1970s on, and “efficiency” increasingly replaced the old values of the American System¹⁴—namely domestic flourishing via investment and national independence through effective autarky—as the government’s goal. Now, television sets and t-shirts are marginally less expensive, but that came at the cost of all the jobs and rooted domestic capital that made America a flourishing place in the middle of the 20th century.

The cost of that is immense. When America cared about making things here, corporate behemoths like AT&T could afford to run titanic R&D centers like the magnificent Bell Labs, known as “The Ideas Factory” because of the magnificent manner in which it led national innovation in everything from high-tech materials science to radio astronomy. But that was when things were made here, and before the government destroyed AT&T to give us Verizon, destroying The Ideas Factory in the process.¹⁵ At a more general level, free trade, bad trade deals, and the like meant that both the jobs and the R&D that shoveled coal into the engine of future success and prosperity disappeared. Now, hollowed-out towns sit where innovative companies once made excellent goods.¹⁶ In exchange, we get cheap knockoffs of products that were once examples of American excellence.

That is a tragedy, and it is totally unnecessary, as the list of goods we import from Vietnam shows. Within living memory, America was the world leader in the manufacturing sector generally, and certainly had no real competition for things like textiles and electronics. We made those things here because we were good at it and the obvious benefits of having a thriving domestic manufacturing base, namely good jobs, political independence rooted in economic independence (a key focus of List’s)¹⁷, and an impetus for continual future investment, were obvious and outweighed the supposed benefit of marginally cheaper goods.

Now, all that has been turned on its head. The dollar is treated as sacrosanct, and getting it as “efficiently” as possible, meaning with the fewest American workers, is seen as the ultimate good. So, companies didn’t blink twice about shipping the manufacturing centers for everything from tennis shoes to semiconductors over to our communist enemies. Now we import those goods, and totally lack the social and economic benefits that came with having made them here, from housing for employees to businesses like grocery stores that supported those employees. That is largely true whether the new maker is an electronics sweatshop in Vietnam or a Ford assembly line in Mexico. Instead of having not just the jobs at the mines and factories, but the total economy that surrounded them as well, we have nothing except hollowed-out towns and big box stores selling imported goods.

Do we at least get the benefit of exporting manufactured goods in which we have a “comparative advantage” to Vietnam? Not really. While we do sell them some high-cost nuclear power and aerospace equipment, two categories in which America has a residual advantage thanks to tariffs and import restrictions, the rest of what we sell them is mainly agricultural.¹⁸

That is the opposite of the recipe for national success. As Friedrich List and the American leaders he inspired noticed, trade benefits, if there are any, come mainly from exporting manufactured goods and importing cheap natural resources and base agricultural goods like grain. The opposite of that, exporting those natural resources and importing manufactured goods, is a poor one to be in for a nation that prizes independence, as it makes you reliant on the nations from which you import those goods; while it is fit for countries in the early stages of development, it is to be gotten out of as quickly as possible.¹⁹

Our early leaders, many of whom were acolytes of List, understood that, which is why America strove so hard to become a net exporter of manufactured goods. But then we forgot that struggle and lesson, giving up our manufacturing base as we did so. The result is increasing stagnation and poverty, as List would have predicted. Now we sell soybeans to buy much-needed electronics, essentially the opposite of the American System that was invested in for a century and a half to make America flourish.

We Can Just Make Things

There’s little reason for America to, in a sane world, worry overly much about trade, as we could be autarkic if we so desired. Trade is a sometimes beneficial add-on, but far from necessary for national flourishing in the way that investment in domestic production and innovation is.

The America that existed in the days of McKinley,²⁰ when America became a manufacturing behemoth, was essentially an autarkic one that benefited at the fringes from trade while becoming prosperous by continually investing in building out domestic production.

Though exports surged massively in the early years of the 20th century,²¹ that wasn’t the reason for our prosperity. What made America prosperous was the virtuous cycle of domestic investment we saw then,²² particularly in heavy industry. Namely, the leaps forward that came with continual investment in both manufacturing-level productivity gains and domestic resource extraction pushed down the costs of raw materials and finished goods, benefitting Americans massively and making our exported goods all the more competitive.²³

Yes, trade then made some large businesses and merchant firms in America more prosperous. But that only occurred because we first focused on (heavily protected)²⁴ domestic manufacturing, and so poured the capital required for the huge and efficient mines and mills at the base of the system into them. That, in turn, meant our heavy industry was massively more competitive than the Europeans, who mainly focused on squeezing what they could out of past investments rather than in making new ones, which meant our exports were quite profitable. Carnegie’s steel mills, as contrasted with British mills, were a great example of this.²⁵ But it is important to not put the cart before the horse: the domestic production and investment came first, and trade was a byproduct of that; “efficiency”-inducing trade wasn’t seen as the end goal or ultimate good.

In short, generally competitive exports across manufactured goods classes were a byproduct of focusing on domestic success rather than the point of American business. First and foremost, American companies served Americans, not a vague concept of efficiency and comparative advantage, and so they were far better across all metrics than their foreign competitors, who were generally more focused on gaming the system and extracting wealth, in the short term, from it.

That was and remains possible because America has a vast wealth of resources. We have all the oil and ore, land space and human capital possibly needed for a flourishing domestic economy. Yes, better policies would help with extracting those resources and building that domestic capital, and allowing imports can be a competitive spur to domestic production. But, still, the resources necessary are here. We should prioritize utilizing them through prudent policies like immigration restrictions and tariffs.²⁶ If we do so, trade success will follow.

What is unlikely, however, is that such prudent policies would mean an uptick in imports from countries like Vietnam. What they export to us is what we can and should produce here; it is we who should be exporting (better) versions of those products to them, as was the case for much of colonial history. The fact that we don’t do so is an indictment of our present incompetence and insanity, not a point in favor of trade with countries whose only point of advantage is their use of near-slave labor. Americans shouldn’t have to compete with that; competing with slaves is merely a race to the bottom that makes you a slave, and so we should use tariffs to make it a non-issue.

In conclusion, America can and will succeed in exporting high-value-added goods, as was the case in the early 20th century, if it once again does what led to that era of industrial success. Then as now, success for us comes not from worrying about comparative advantage as justification for new Methuen Treaties that prove equally detrimental over the long term, but rather on the continual investment and protection needed for the domestic flourishing that drives success in all sectors.

Featured image credit: Diego Delso, CC BY-SA 3.0 <https://creativecommons.org/licenses/by-sa/3.0>, via Wikimedia Commons

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1. The Liberation Day tariffs: https://www.aljazeera.com/economy/2025/4/17/as-trump-threatens-tariffs-vietnam-scrambles-to-avert-economic-disaster

2. https://www.cfr.org/blog/vietnams-tariff-trouble-just-gets-worse

3. The wine and textiles claim: https://www.tandfonline.com/doi/abs/10.1080/09672567.2018.1559339

4. Autarky is national economic independence through self-sufficiency: https://en.wikipedia.org/wiki/Autarky

5. https://en.wikipedia.org/wiki/Methuen_Treaty

6. You can read more about List’s critique of the treaty here, if interested (the article is in English, though part of the title page is in Spanish): https://revistas.ucm.es/index.php/IJHE/article/download/83356/4564456562027/4564456658313

7.

8. In somewhat more detail: https://valovietnam.com/blog/us-imports-from-vietnam

9. https://files.epi.org/page/-/old/studies/consumer_electronics-1989.pdf

10. https://thehill.com/opinion/5090860-us-china-trade-war-impact/

11. https://originusa.com/collections/denim

12. Could Origin USA Succeed Where Berkshire Hathaway Failed?

13. https://www.nber.org/system/files/working_papers/w7638/w7638.pdf

14. Described some here:

15. Some commentary on that: https://www.monika-schnitzer.com/uploads/4/9/4/1/49415675/watzinger_schnitzer_breakup_of_bell.pdf

16. JD Vance’s depiction of that is quite sad:

17.

18. https://tradingeconomics.com/united-states/exports/vietnam

19. https://ghdi.ghi-dc.org/pdf/eng/6_EL_Friedrich%20List%20English.pdf

20. This is the name of a fabulous biography of President McKinley: In the Days of McKinley

21. Described here: https://www.nber.org/system/files/working_papers/w7638/w7638.pdf

22. That cycle discussed here:

23. That process described here: https://www.nber.org/system/files/working_papers/w7638/w7638.pdf

24. Some of this discussed here:

25. https://ufl.pb.unizin.org/imos/chapter/steel/#:~:text=British%20steelmakers%2C%20who%20had%20previously,slashed%20prices%20and%20undersold%20competitors.

26. Importance of that discussed here: