Glossary
Free trade
The exchange of goods and services across borders with few or no tariffs, quotas or other government barriers.
Also called: trade liberalization, open trade, comparative advantage
Free trade is a policy of allowing goods and services to move across national borders without government-imposed barriers such as tariffs, quotas or subsidies. Its intellectual foundation is the theory of comparative advantage, developed by David Ricardo in the early nineteenth century, which holds that countries gain by specializing in what they produce relatively efficiently and trading for the rest.
The U.S. pursued it after World War II through the General Agreement on Tariffs and Trade and the World Trade Organization, and through agreements such as NAFTA (1994), replaced by the USMCA in 2020, and China's entry to the WTO in 2001. Most economists favor free trade, saying it raises overall income, lowers prices and increases variety.
Critics point out that gains are widely spread while costs are concentrated: studies of the "China shock" found sizable job losses in manufacturing communities, and that workers do not always find new jobs easily. Conservatives have divided: Reagan-era and market conservatives defend free trade, while national conservatives and populists argue for tariffs and protectionism to protect industry and national security, a shift visible in recent Republican politics. Many economists favor adjustment assistance for displaced workers. Compare the trade deficit.
Last reviewed November 8, 2026