Critics of free trade base their arguments on"sentimentality and fear,rather than hope and opportunity",he added.
"History proves that economic isolationism is a precursor for war,"he said.
"If a nation becomes economically isolated then history proves it can end up accelerating domestic
nationalism fuelling outward facing aggression."
The former Australian treasurer's speech,entitled'The Sinews of Prosperity',was the third annual Cherry-Price lecture delivered at Westminster College in Fulton,Missouri.
He said tariffs should only be used as a"very short-term tool"to force change on recalcitrant World Trade Organisation members.
"President Trump is deploying all the tools he can to get a fairer global trading system for the United States,"he said.
"I understand the reasons for his frustrations. Australia supports both free and fair trade.
"But these types of measures are not a sustainable long-term solution."
He added:"The sensible middle ground of society understands that when we trade freely with other nations,our nation gets richer.
"Whilst global trade continues to grow in goods and services,that growth has been at lower than forecast rates in recent years.
"So now,more than ever,the United States should be leading the debate in favour of free and fair trade."
Read the full speech below:
Hockey took aim at some of Trump's most fundamental economic views - including his oft-repeated claim that tariffs function as a tax on rival countries.
"Let’s be really clear:tariffs are taxes imposed by governments on their own people,"Hockey said."Quotas are access limits placed by governments on their own people."
Hockey also argued it"doesn't make sense"to focus on trade surpluses or deficits with other countries - another Trump contention.
"I have heard suggestions – and perhaps you have heard them too – that to'win'in trade with another country,you need to sell more to them than you buy from them,"he said.
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"That is,that you should have a trade surplus. I disagree."
He continued:"The argument put by protectionists in favour of tariffs and quotas is akin to saying that instead of spending my time working for my employer I should make my own food and sew my own clothes.
"Trust me,no one wants that."
Hockey said the US had"walked away from its own leadership"by abandoning the Trans Pacific Partnership,a defunct 12-nation trade deal spearheaded by Barack Obama.
He also said the US should have followed Australia's lead and joined the Asian Infrastructure and Investment Bank even though it was initiated by China.
Under President Barack Obama's leadership,the US declined to join the infrastructure bank.
Former Liberal senatorArthur Sinodinos will take over from Hockey as US ambassador in January.