The only thing America liberated itself from was prosperity

Unsurprisingly, stock markets in the US and around the world have been smashed by this news.

For a policy that is being promoted as good for US businesses, it sure seems like the markets don't believe it will work quite the way Trump seems to think.

Australia was not exempted, with Trump drawing special attention to our restrictions on US beef imports as justification for the imposition of a 10 per cent tariff on Australian beef exports.

Trump claimed that Australia applies a 10 per cent tariff to US goods. This does not appear to be true. In fact, the overwhelming majority of US goods face no tariffs at all under the Australia-US Free Trade Agreement.

Let's leave aside the 10 per cent tariff Trump put on Heard and McDonald Islands - not even a country, but an Australian Antarctic protectorate, uninhabited except for the occasional penguin.

It is important to understand that Australia's abolition of trade duties wasn't some benevolence to the United States. It is overwhelmingly in Australia's interest to pay less for the US goods that we import.

Trump also claimed that the purpose of his tariff regime is to correct US trade deficits. As the United States has mostly had trade surpluses with Australia for years now, this, too, seems like a poor justification for action against Australia.

Of course, one could go much further than that. On the whole, trade deficits actually don't really matter much at all.

The balance of trade represents the agglomeration of decisions by individuals and firms. The sum of the whole is far less important than the parts.

Individual businesses can win or lose from trade. If consumers buy their product, businesses win; if consumers don't buy, businesses lose.

However, countries don't win by making their citizens consume less than their trading neighbours.

Countries win or lose by maximising the standards of living of their people.

The problem is that we are constantly encouraged to view the world from the perspective of producers, not consumers.

Producers like a captive market they can exploit for maximum gain. Consumers like more choice, better products and lower prices. They largely don't care where their goods come from provided they meet those criteria.

Australians getting cheap automobiles from Czechs or Malaysians, or solar panels and televisions from China, or luxury brands from Europe increases our standard of living far more than having factories that make all those things here.

It's not just economic theory that tells us this: we used to make many of those items in Australia and the cost was high and the quality poor.

The Americans are not the only ones who believe in the fallacy that a dollar earned from manufacturing or farming is somehow better than a dollar earned from services or healthcare or mining or education.

It isn't.

Two disparate groups have been particularly susceptible to this flawed thinking. Trade unionists obviously have a bias towards manufacturing jobs, as they have long been a traditional union heartland (one of the reasons manufacturing isn't economically viable in Australia on the whole).

The other group oddly enough is conservatives, especially those who are less prosperous. Indeed, the embrace of free trade by conservative parties is a relatively new phenomenon in many respects.

In Australia for example, the strongest protectors of the tariff regime historically were often in the Coalition (especially Nationals like Black Jack McEwen). The initial push to liberalise the Australian economy actually came from the Labor party under Whitlam in 1973.

Even outside the US, we often still see spurious calls to abandon trade on the basis of national security or skills development or other more nebulous justifications around national pride. So often, these justifications are just a fig leaf for jingoistic protectionism.

It cannot be stressed enough that the push to blame globalism or free trade agreements for manufacturing job losses is wrong. The biggest factor that drove crashing employment across the manufacturing sector was automation.

It was the robots that took all the jobs, not the foreigners.

Even if Trump's tariffs bring manufacturing back to the United States - which it may do at some level - it will not create huge numbers of jobs.

And it won't provide masses of long-term, high-paying jobs for unskilled workers.

We have to acknowledge that this hope is often the underlying motivator for protectionists. It's bound up in the idea we can return to a time when good manufacturing jobs guaranteed a higher standard of living for all working-class people.

It's worth pointing out that rarely is an actual time period specified when this paradise existed, no doubt because it would allow the claim to be actually tested. Even so, there are still no good reasons to accept it as true.

In fact, Australia's standard of living has increased substantially across the board at the same time as our tariff protections were reduced. Indeed there are good reasons to think the reduction in protection was one of the big reasons why our standard of living increased!

Even if this were not the case, the economic, cultural and technological settings that enabled this supposed golden age to happen are all gone. No matter how big a barrier you attempt to construct around the economy, they cannot be recreated.

This means the harms protectionism creates are real, but the promised utopia cannot exist.

Liberation day is just another cynical exploitation of naiveté and nostalgia by a political movement that is untroubled by facts, consequences or costs.

The only thing the US has been liberated from is a source of economic prosperity.