Two of the most influential voices against free trade in the late 18th and 19th centuries were American founding father Alexander Hamilton and German economist Friedrich List. Both championed a version of the “infant industry” argument, advocating temporary protectionist measures to foster domestic manufacturing in countries still lagging behind industrial leaders like Great Britain.
Alexander Hamilton, from as early as 1782 and later as Secretary of the Treasury in his Report on Manufactures (1791), argued that free trade could not be expected to promote American prosperity under existing global conditions. Rather than rely solely on market forces, Hamilton urged proactive government support. He believed that encouraging domestic manufacturing would make the United States more economically self-sufficient and militarily secure.
Hamilton’s rationale drew partly on mercantilist themes: a favorable trade balance was considered a national priority. But his key innovation was the “infant industry” argument. According to this theory, newly emerging sectors in the United States could not be expected to compete on an equal footing with well-established European peers. They needed to be shielded from competition until they were better developed. Without protective tariffs and government subsidies, American manufacturers might never survive their early, unprofitable stages.
Yet, Hamilton’s logic presents a trade-off: if a domestic industry cannot survive without tariffs, it uses resources less efficiently than available alternatives. And even if domestic producers could eventually learn to be competitive, the initial protection diverts capital and labor from more productive uses, distorting economic incentives.
Friedrich List in Germany
A German economist, journalist, and political exile, Friedrich List spent several years in the United States during the 1820s, where he was influenced by the country’s economic nationalism and by Hamilton’s Report on Manufactures. Originally a liberal reformer in Württemberg, he was imprisoned and later exiled for his political activities. After returning to Europe, List turned to economic theory as a means of national development.
List took Hamilton’s ideas further in his 1841 book The National System of Political Economy. He believed that national economic development required nurturing a country’s “productive powers.” He insisted that protection was a prerequisite for industrial takeoff. Only after achieving industrial maturity should nations open up to global competition. He insisted that Britain, which had industrialized much earlier than the rest of Europe, was preaching free trade to others only after securing its industrial advantage.
List regarded industry as the engine of civilization and believed that its development justified temporary material sacrifices.
This worldview, however, assumes that the government can successfully identify the most promising industries while also preventing them from becoming dependent on state support and resisting its removal once the original justification for protection no longer applies.
Today’s Trade Wars: Echoes of Protectionist Logic
Protectionist ideas never disappeared, but they are gaining new momentum. The United States began a trade war against other countries. The result is a volatile trade environment that threatens economic stability. Countries around the world have already responded with retaliatory measures, and the global economy has entered a period of high uncertainty.
Donald Trump’s new tariff regime rests on a flawed “reciprocal” formula that treats trade deficits as if they were equivalent to foreign tariffs. But a trade deficit is not evidence of unfair trade: it reflects global capital flows and consumer choices. Worse, the policy ignores the domestic costs—American consumers, farmers, and manufacturers bear the burden of higher prices and disrupted supply chains. What began as an effort to protect domestic industries now resembles an improvised and dangerous experiment—one that echoes Hamilton and List’s calls for protection. Instead of strengthening the economy, these policies risk weakening it, with lasting consequences for global commerce.
The Legacy of Hamilton and List
The ideas of Hamilton and List continue to influence policy debates, particularly in developing countries. Their arguments underlie many of the industrial policies pursued throughout Latin America. For example, the Import Substitution Industrialization (ISI) strategies widely adopted across Latin America directly applied the logic of protecting nascent domestic industries through high tariffs and government support.
Modern economic consensus strongly favors free trade. Yet policymakers still face pressure to intervene in trade, especially under the guise of protecting strategic sectors, securing employment, or responding to foreign subsidies.
Free trade recognizes that openness, competition, and comparative advantage yield greater prosperity for nations over time. As Henry Hazlitt warned, once economic fallacies enter the popular sphere, they lose nuance and become dangerous dogma. Hamilton and List’s arguments may have been complex, but the protectionist outcomes they inspired are clear: inefficiency, cronyism, and harm to the very people they claim to help.
