Do Free Markets Exist?

The most likely answer begins with "It depends..."

The poor job I have done is contained in the fact that many have raised - that what is being charged in tariffs is not "reciprocal". Included in the issues are currency manipulation, regulatory restrictions, and other issues, while real, are unlikely to be solved by equalizing tariff costs.

When viewed in the "reciprocal" context, I get the rationale behind the tariffs - the problem I have created is not explicitly recognizing that the Trump team has dumped a whole gaggle of problems in a #2 washtub and applied a solution to all of them that doesn't fit all of them - and this approach may not work - and in fact, may doom the entire exercise,

I got hung up on the esoteric aspects of tariffs rather than raising the issue that I think this is more of a political approach than an economic one - and the inconsistent messaging from Trump's team is not making it better.

I realized I had strayed from the path when I was getting called a communist for expressing that free trade, at least in the textbook definition, does not currently exist. Some began claiming that I wanted global control of markets or that I was saying that unless all trade was free, none was - and I actually did mean the latter.

Whether free trade truly exists depends on how you define it and the reality of global trade practices. Free trade, in theory, means goods, services, and capital flow between countries without restrictions like tariffs, quotas, or subsidies that favor domestic industries. The argument for it is that it boosts efficiency, lowers prices, and spurs innovation—classic economics stuff, like what Adam Smith or David Ricardo would argue.

But in practice? It is messy. Far less clean cut than we shade-tree economists want to believe. Even in so-called "free trade" agreements—like NAFTA (now USMCA) or the EU single market—there are still rules, exceptions, and loopholes. Tariffs might drop, but non-tariff barriers pop up: think safety standards, environmental regs, or labor laws that quietly protect local players.

The WTO says global trade is freer than ever, with average tariffs falling from 10.5% in 1995 to about 6.4% in 2020. Yet, look at the U.S.-China trade war—tariffs spiked to 19% on Chinese goods by 2019—or the EU’s subsidies to Airbus, and you see "free" isn’t absolute. Governments can’t resist meddling when jobs or votes are at stake. Tariffs, currency manipulation and regulatory barriers do exist. They are a reality. There are also bans by our own government for doing business or buying things in certain countries, like Russia, Iran or Cuba, and for very good reasons.

Pure, textbook free trade is as rare as unicorns because politics and self-interest get in the way.

I get that the counterargument is that trade today is freer than it was a century ago—less mercantilism, more open markets, even if imperfect. I guess it depends on where you draw the line between "free enough" and "not free at all."

My argument and perspective has always been that while the high velocity of trade is a net benefit, but the country with the fewest barriers will always bear some cost - "taken advantage of" is probably too coarse a statement, but that country, especially one with the biggest international trade portfolio will absorb costs other economies don't or be blocked from markets that other countries are not.

Whether those absorbed costs are deemed significant enough to be a problem is a volatile and often political question.

Trump and his team say they are significant enough to warrant action.

Wall Street, libertarians, NeverTrumpers, and textbook toting economists say they aren't. But this never was a textbook economics test, this was always political - and in the political realm, rules are a little less rigid and the outcomes a little less predictable.