Trade, whether between neighbors or nations, is one of the most powerful forces for wealth creation in human history. Every day, Americans benefit from it, often without even noticing. Whether it’s a farmer selling corn to his fellow Americans or U.S. consumers importing microchips from Taiwan, the effect is the same, both parties are better off from the exchange, and our standard of living rises as a result.
Yet in today’s policy discussions, the gains we accrue from exchange are being taken for granted. There are renewed calls for America to “make everything itself,” to become entirely self-sufficient. That’s certainly possible. But if we take that path, we’ll sacrifice a tremendous amount of our wealth—wealth we enjoy today without realizing its source.
The Invisible Wealth of Trade
Trade-generated wealth is hard to see. It doesn’t show up in a single paycheck or appear neatly itemized on a grocery receipt. It’s distributed across millions of products, transactions, and time-saving conveniences that we’ve become accustomed to. Because of this, people tend to underestimate it, especially when the subject turns to international trade. But whether at the personal level, the state level, or the national level, trade consistently makes us richer.
Making Everything in America Means Making Less of Everything
It’s true that America could make everything it needs. The nation is the third most populous country in the world and the fourth largest in area. We have the people and the resources to provide for ourselves. We could build our own electronics, grow our own coffee, and sew our own clothes. But if we did that, we would give up much of the value created by trade—value that comes from specialization, comparative advantage, and economies of scale.
These principles are easier to grasp at the individual level. Take bread as an example. Any American with an oven can bake it. It’s not hard. But almost no one does. Why? Time is part of it, but the better explanation is that professional bakers are better at baking. They specialize in it. And bread from a grocery store, or a national brand, is cheap—often cheaper than the ingredients alone—because large-scale producers enjoy economies of scale. How much of your leisure would you need to give up to bake your own bread regularly?
A major contributor to the success of the United States is that states, by law, cannot impose tariffs on each other. It is the largest free trade zone in the world.
The same logic applies not just to individuals, but to political and corporate entities. Florida is great at growing oranges. Idaho potatoes. Illinois dominates pumpkins. These aren’t arbitrary facts—they’re reflections of comparative advantage. Because these states have natural advantages in producing certain goods or just because they focus on them, they are able to produce more of those goods than if every state had to supply its own residents with every good.
Like US States, countries have their own strengths. Germany has world-class engineers. Italy has olives. France has grapes. The U.S. excels at corn, wheat, oil, gas turbines, and a host of other industries. By focusing on what each country (or region) is relatively good at, and trading for the rest, everyone gets more—more food, more fuel, more stuff.
By focusing on what each country (or region) is relatively good at, and trading for the rest, everyone gets more—more food, more fuel, more stuff.
Specialization and Scale at the National Level
The United States is the richest country on the planet because the government lets individuals and corporations choose to produce and sell whichever products they want. Consequently, Americans focus our labor, capital, and infrastructure on industries where we have advantages—natural resources, technology, education, or sheer size. This concentration allows us to become more efficient, drive down costs, and produce far more than we could if every state, or every person, tried to be self-sufficient.
That extra productivity is what we trade. And when we import goods that other countries produce more efficiently, we free up our own resources to focus on our strengths. The result is a bigger pie for everyone, and America gets a huge slice of that pie. Trade doesn’t just shift wealth—it creates it.
The Wealth We Take for Granted
Economists understand this because it's a core component of their training. They don’t argue about whether trade creates wealth; they argue about how much. But most people only notice the costs of trade—job losses in specific sectors, factory closures, or trade deficits—while ignoring the benefits spread out over thousands of cheaper goods, better services, and wider choices.
While it is my opinion that the gains discussed in this post are impossible to estimate accurately, I would be remiss to not point to some attempts. The Peterson Institute for International Economics estimated that trading with other countries boosts the average American's annual income by $7,800.
People should use whatever scale helps them understand. If thinking about international trade is too abstract, start with your own household. Why don’t you make your own clothes or repair your own car? If that makes sense, scale up: Why shouldn’t cities, states, and countries behave the same way?
Trade makes us immeasurably rich. We just need to look a little closer to see it.
