Free trade is a sacred shibboleth to economists, but this paper is a behavioral economic analysis which points out a psychological flaw based on the phenomenon of Frustration-Aggression, illustrating how US trade deficits with Asia-Japan, Korea, and China-cause generalized economic frustration in the US and hence are significantly related to all types of hate crimes. This is similar to the history of pre-WWII Germany. However, Japanese companies, by locating substantial production facilities to the US, have been able to significantly reverse this phenomenon. China`s trade deficit, largest vis-a-vis the US, shows a strong relationship with hate crimes in the US. In contrast, Korea was an ally of the US unlike Japan and China, with a relatively small trade deficit with the US, and so does not suffer from the stigma of other Asian Countries.