The argument is simple: trade is not a policy choice. It is the medium through which modern economies function. The substrate that carries capital, capabilities, and specialization across borders. You can dam water temporarily, but it finds new channels. You can tax trade heavily, but commerce routes around. The question isn't whether trade continues. It's whether you're positioned in the flow or fighting the current.

The Physics of Trade

When economists measure trade, they count goods crossing borders. This misses the point. What actually crosses is capability. The accumulated knowledge, specialization, and productive capacity that no single country can replicate alone.

Take an iPhone. Gross trade statistics record it as a $500 Chinese export. But research tracing value through the supply chain shows China adds roughly $10 in assembly labor. The rest flows from American design, Korean displays, Japanese camera sensors, Taiwanese chips, and rare earth minerals from half a dozen countries. The phone isn't made anywhere. It's made everywhere. Trade is the assembly line.

This is the substrate in action. Trade enables a form of production that would otherwise be impossible. The NBER estimates U.S. 'look-through' exposure to Chinese industrial inputs is nearly four times higher than face-value import statistics suggest, because Chinese components flow into products from dozens of other countries that then export to America. The connections run deeper than any customs declaration reveals.

How the Channels Got Built

Trade at this scale didn't happen naturally. It required infrastructure. Infrastructure America built.

The postwar order rested on three pillars. Naval supremacy guaranteed safe passage through chokepoints from Malacca to Hormuz. Legal architecture—Bretton Woods, GATT, the WTO—created rules for capital to cross borders predictably. And ideology spread the operating system: bankers and consultants traveled the world after the Berlin Wall fell, teaching that corporations existed to maximize shareholder value, that markets should be open, that efficiency trumped resilience.

Investment banker Scott Bok on an episode of Odd Lots: "We were like missionaries. The religion we were spreading is that you should focus on shareholder value." In France and Germany, where corporate purpose had meant institutional perpetuation, this was revolutionary. The result was trillions in cross-border M&A that consolidated companies into global champions. The Dow rose from 1,000 to over 40,000 during this era—with globalization as a major tailwind.

America didn't just trade. It engineered the channels through which trade would flow.

Monkeys in the Forest

Harvard economist Ricardo Hausmann offers a vivid way to understand what this infrastructure enabled: imagine products as trees in a forest, companies as monkeys, and countries as collections of monkeys distributed across different trees. Economic development means monkeys jumping to richer parts of the forest.

The insight is that trees close together—products requiring similar capabilities—allow easy movement. Dense parts of the forest (machinery, chemicals, electronics) enable rapid capability expansion because adjacent skills transfer. Sparse parts (raw materials, basic agriculture) trap countries in low-complexity activities.

Trade is what carries monkeys between trees. When Philips invested in Taiwan Semiconductor Manufacturing Company in 1987, transferring chip fabrication technology, it wasn't losing a race. It was building a complementary partner. Philips would focus on design, TSMC on manufacturing, and both would become more valuable. The substrate enabled a leap neither could have made alone.

This is the opposite of zero-sum competition. When Taiwan excels at fabrication, American chip designers become more valuable, not less. Specialization across the network raises returns for everyone in it.

The forest explains what moves. The water explains why it keeps moving.

Where the Anxiety Comes From

So why the protectionist turn? Two sources of genuine concern, and one illusion.

The first concern is displacement. As value chains stretched globally, American manufacturing employment dropped 24% since 2001. Transportation and warehousing rose 48% over the same period. Jobs moved to coasts and hubs, not heartland communities. Logistics became part of the production. The substrate delivered efficiency gains that weren't evenly distributed.

The second concern is strategic exposure. China now accounts for half of global shipbuilding, 70% of port cranes, 95% of shipping containers. This is a different strategy than America pursued. Where the U.S. built infrastructure others could use, China is trying to become the sole producer everyone relies upon. Another dam rather than part of the current.

The illusion is that tariffs reverse this. Smoot-Hawley collapsed trade 65% in two years without restoring the jobs it aimed to protect. Current tariffs have coincided with manufacturing employment falling 66,000 year-over-year. The water finds new channels: Vietnam, Mexico, transshipment through third countries. Canada has returned to it’s first trade surplus in 8 months through diversification. Production reorganizes around barriers rather than returning home.

Complementary, Not Competitive

The distinction that matters is between competitive and complementary trade relationships.

Competitive trade is the textile mill problem: everyone fighting for the same crowded branches. Country A subsidizes what Country B makes. Tariffs follow. Returns collapse for everyone as overcapacity spreads. This is zero-sum, and it explains legitimate anxiety.

Complementary trade is the TSMC model: strategic specialization that raises the value of both partners. The U.S. excels at fundamental research and platform technologies. Germany leads in precision manufacturing systems. Taiwan dominates advanced fabrication. Each specialization enhances, rather than threatens, the others.

China's concentration strategy invites routing around which is exactly what the water metaphor predicts. When you become the sole source, every customer has an incentive to find alternatives. Canada is already diversifying exports to the EU, Africa, and the UAE. Supply chains are quietly restructuring to reduce single-source dependencies. The dam creates pressure that eventually finds release.

The Network Is the Factory

Adam Smith's pin factory showed specialization: ten workers doing one task each produced 48,000 pins daily, far more than generalists working alone. But the pin factory was static. A building, one village, fixed in place.

Modern trade is the pin factory distributed across hemispheres. A container ship carrying 20,000 boxes holds goods from dozens of specialized producers in dozens of countries, converging at a single port to serve markets none could reach alone. The network is the factory. Trade is the conveyor belt. Each port is a station. Each supplier does one thing well.

This is why protectionism struggles. You can't reassemble a distributed factory by blocking one input. The system routes around. Capabilities that took decades to develop don't relocate on tariff schedules. And the efficiency gains from networked specialization—the reason a $500 phone exists at all—disappear when you force generalism back into the production process.

What Flows Next

The substrate will persist. Capital seeks returns. Specialization creates value. Networks find paths around obstacles. These are closer to physics than policy.

The question is what flows through the channels, and who captures value from it. America built the infrastructure that enabled global trade. The next chapter isn't about dismantling it. It's about recognizing which trees are ours to climb, which capabilities we develop that complement rather than compete, and how digital infrastructure might let a welder in Mumbai work with a manufacturer in Wales to serve watercraft buyers neither could have found alone.

Trade is the substrate. The forest is vast.

Success matters whether you're positioned in the current or fighting it.

 And water always finds a way.