Protectionism or Expansionism: Trump’s Self-inflicted Dilemma

Since entering politics, President Trump has portrayed himself as the champion of the Rust Belt. His trade policy reflects that commitment: protect American manufacturers from foreign competition, even when doing so means higher tariffs and prices.

His latest move is a 50 percent tariff on Canadian automobiles, trucks, and steel after trade negotiations collapsed. Yet Trump has also repeatedly expressed a desire to make Canada the 51st state. He has even said that tariffs on Canadian goods would “totally disappear” if Canada joined the Union.

He is right. If Canada became a state, Canadian goods would become American goods. There could be no tariff on Canadian steel entering Michigan any more than on Michigan steel entering Ohio. And therein lies the contradiction: Trump cannot simultaneously pursue protectionism and expansionism.

American expansion has historically meant expanding the country’s internal free-trade market. When new states entered the Union, their producers gained access to American consumers—but existing producers also gained new competitors.

The admission of the Great Lakes states to the Union, combined with the opening of the Erie Canal, illustrates this process in the early nineteenth century. Once Ohio, Indiana, and Illinois could cheaply ship grain to Eastern markets, farmers in New York and New England faced intense competition from Midwestern producers. Many shifted away from agriculture toward manufacturing and commerce. Consumers, meanwhile, benefited from cheaper grain, while New York prospered as the commercial gateway connecting the Great Lakes to the Atlantic.

Fast-forward to the beginning of the twentieth century, and the same process unfolded again with the rise of Detroit’s automobile industry. Henry Ford’s assembly-line production dramatically reduced the cost of automobiles and helped shift the center of American car manufacturing toward the Midwest. Older industrial centers in the Northeast had to adjust, specialize, and find new areas of comparative advantage.

These transformations were not painless. Businesses failed, factories closed, and workers had to change occupations or move to where new opportunities emerged. But that is how a large, competitive domestic market reallocates resources—and it has been a defining feature of the American economy for centuries.

Washington did not need to decide which region should win. Consumers did.

A farmer in Illinois could compete with a farmer in New England. A manufacturer in Detroit could compete with one in Pennsylvania. Neither needed protection from the other because neither was foreign.

That is precisely what would happen if Canada became part of the Union. Canadian steel would compete with Indiana steel. Ontario automakers would compete with Michigan automakers. Canadian farmers would compete with American farmers.

Some American producers would lose market share. But that is not a failure of economic integration. It is the mechanism through which integration creates gains.

A larger market generates prosperity not by ensuring that every existing producer survives, but by allowing consumers to choose among more producers. Capital and labor move toward their most productive uses, while competition pushes firms to lower prices and improve quality.

America became an economic powerhouse in part because it developed one of the world’s largest integrated domestic markets. Its strength came from allowing Americans to trade across state lines, not from erecting barriers between them.

Trump wants a bigger America, and at the same time, he also wants to protect the industries that already exist within its borders. However, he cannot have both. Expansion requires embracing competition; protectionism demands shutting it out.

Forced to navigate a conflict of its own making, the Trump administration has engineered a contradiction it will eventually be forced to resolve.