In a magazine piece last year, I wrote about a thought experiment:

Imagine you know nothing about the industrial make-up of the United States. The only information you have is government rules and regulations. You are then tasked with answering this question: What sort of businesses are likely to succeed?

Considering the tax code, environmental regulations, zoning rules, labor laws, inefficient government infrastructure, trade restrictions, and other factors, companies are more likely to succeed in the U.S. if they:

My point in that piece is that that’s a pretty good description of technology companies, and sure enough, technology companies do great in the U.S. Rather than seek to punish tech companies for succeeding, policymakers should seek to raise other industries to tech’s level by removing a lot of the government barriers that inhibit them.

That would seem to be consistent with the stated policy goals of the Trump administration, which wants to rejuvenate manufacturing. The tax law Trump signed earlier this month even addressed one of the major biases in the tax code against physical capital investment by enacting permanent full expensing. Previously, businesses could write off their entire human capital expenses each year, but could only write off their physical capital expenses over long depreciation schedules. For most physical capital investments, that is no longer the case, a major win for a fairer tax code.

But then, as Veronique noted in her post, there are the tariffs. This is yet another government policy that really messes with companies that make physical stuff, like General Motors, while minimally impacting companies that make software and apps, like Microsoft.

Computer code isn’t unloaded from ocean vessels. No customs agent ever has to collect a tariff on an app before it appears in an app store. High tariffs provide yet another advantage to technology companies relative to manufacturing companies in government policy.

As Greg Ip of the Wall Street Journal pointed out, this is actually one of the reasons why the stock market hasn’t been affected as much since the initial shock of the April tariff announcement. Fifty years ago, a terrible GM earnings report like the one we just saw would have done a number on the stock market. Today, GM only has a market cap of $50 billion. The biggest tech companies are over $1 trillion. The “old economy” that is hurt more by the tariffs simply doesn’t factor as much into overall stock market performance as the “new economy.”

Punishing the “old economy” is not what populists want, but if you want to continue to have an economy that structurally favors technology companies, tariffs are a great way to do that.