A history lesson for Trump on how things went the last time the US slapped tariffs on imports
America’s protectionist policies of the 1930s led to a 25% decline in world trade and indirectly helped create economic factors that led to World War II.
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Donald Trump has hit the 30-day pause button on imposing 25% tariffs on Canada and Mexico, but is proceeding with slapping 10% tariffs on Chinese imports, and tariffs on the European Union are still on his agenda.
Trump has declared that “tariff” is “the most beautiful word in the dictionary”. Yet as the president weighs up the sweeping consequences of his tariff fixation, he may want to throw out the dictionary and pick up a history book.
The magnitude and scale of the proposed tariffs hark back to the US Smoot-Hawley Tariff Act enacted in 1930.
For example, Nobel Laureate economist Paul Krugman told Bloomberg that “we’re really talking about tariffs on a scale that we … have not seen”, adding that “we’re talking about a reversal of really 90 years of US policy”.
The Smoot-Hawley tariffs were initially intended to provide support to the deeply indebted US agricultural sector at the end of the 1920s, and protect them from foreign competition – all familiar themes to the anti-free-trade rhetoric peddled by Trumpists today.
The advent of the Great Depression had generated widespread, albeit not universal, demands for protection from imports, and Smoot-Hawley increased already significant tariffs on overseas goods. Members of Congress were eager to provide protection, trading votes in exchange for support for their constituents’ industries.
Although at the time more than 1,000 economists implored President...
