The Wall Street Journal editors have made a monumental error of judgment. In their unsigned piece “Great Trump Tariff Rollback” (3/13/25) they announce that the Trump Administration has lost its trade war against Adam Smith.

The editors in unison with the US stock market are celebrating the administration’s pull back from its maximalist tariff applications. An essential condition, however, for Adam Smith to triumph ultimately, has not been fulfilled. This is for there to be free trade in capital as an accompaniment to free trade in goods. At very least that requires a roll-back of financial repression, exchange restrictions, and currency manipulation.

Further the Wall Street editors are mistaken to describe economic warriors in Washington as in a battle against Adam Smith. In fact the America First warriors and Adam Smith may yet find common cause against the foreign repressors and manipulators, most of all in China and the EU.

The importance of capital to the advancement of Adam Smith’s principles starts with the observation taught in economics 101 that trade balances are determined in a simultaneous process with net capital flows. If there is something sinister about the trade balance outcomes, then there is also something awry about the global flow of capital. …

So how will Washington deal with this current EU situation – likely to feature a further build-up of euro-zone savings even considering widened fiscal deficits? (Yes - Ricardo effect still alive.) The short answer is not much. Instead, Washington’s America First warriors are likely to focus exclusively on trade in goods markets rather than opening a capital chapter. The negotiations will be around the key objectives of the EU removing its barriers to the import of US agricultural goods and autos.