Bitcoin and the Trump Tariffs

Bitcoin’s Decentralization and Its Conflict with Tariffs

Let’s address the deep philosophical conflict between the Trump administration’s tariffs and Bitcoin’s underlying principles. In recent weeks, President Trump has imposed—and relaxed—broad, wide-scale tariffs at a level and scope unseen in over a century. The stated reason is to rebalance the global trade order and specifically eliminate the U.S. trade deficit.

Tariffs raise prices on imports, and if other countries retaliate, they raise prices on U.S. exports. The Trump administration argues that the rest of the world is taking advantage of the United States, that U.S. manufacturing has declined, and that the trade deficit is inherently bad. On top of this, the COVID-19 pandemic revealed America’s dependence on foreign medical supply chains.

While there may be a glimmer of truth in these concerns, in my view, they are largely exaggerated. The core problem is that these views lack grounding in existing economic theory. Trade between countries—just like trade between individuals—is Pareto improving, meaning it benefits both parties. It leverages the unique skills and resources of each participant. If all individuals or countries were identical, trade wouldn’t be necessary—but they’re not. Trade, of any kind, increases total economic output.

The U.S. primarily exports education, services, and tourism, while it imports manufacturing. China does the reverse. Is there something wrong with this picture? It does involve a degree of reliance on a foreign country, but severing that relationship through protectionism will carry economic costs.

Here’s a concrete example: suppose the states within the U.S. imposed tariffs on each other. Californians would pay more for Texas beef, and Texans would pay more for California-made computer chips. This would be absurd, as each state has its own comparative advantage. California’s expertise in Silicon Valley R&D is valuable to the whole country, just as Texas’s open plains support cattle ranching. If Texans had to design and manufacture their own chips, and Californians only ate their own beef, both states would be worse off.

Regarding national security, a more targeted policy would be to insource or subsidize a select few industries—such as medical and military devices—where strategic independence is politically justified. But the idea that Americans should manufacture their own iPhones is not sensible. Without a sound economic foundation, the Trump administration is taking a big gamble. History shows that countries that try to isolate from free trade suffer in the long term, for the same reason a household would be poorer if it had to grow all its own food rather than buying from a grocery store.

Tariffs are taxes, plain and simple. They are paid by domestic consumers and serve as a revenue source for the federal government. While it’s tempting to believe this revenue can be offset by spending cuts elsewhere, this is unlikely to happen. When governments receive new revenue, they are more likely to spend it than to restrain themselves. Once tariffs are in place, they provide yet another source of income for the state, increasing its size and scope over the long term.

Bitcoin doesn’t specifically address free trade. But Bitcoin, by contrast, is fundamentally based on decentralization. Any network-wide decisions are encoded in the protocol in advance and cannot be changed unilaterally. All other actions in the Bitcoin network are trustlessly executed by independent actors (nodes, miners, buyers, and sellers). Tariffs cannot emerge through the spontaneous order of the market; they are only imposed via government decree, either presidential or congressional.

The collapse of confidence in the U.S. may indeed deflect capital from the dollar into Bitcoin, which would raise Bitcoin’s price. But Bitcoin’s principles reject central planning and top-down intervention—and therefore is antithetical to tariffs — even if Bitcoin’s price may benefit.