Qingdao, China – November 8, 2023 – Container ships frequently enter and exit Qianwan container terminals at Qingdao Port in Shandong Province, China, November 8, 2023.
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The trade war is brewing – if history is any guidance, the U.S. economy may not be happy with it.
Donald Trump imposed a 10% tax on all Chinese imports starting on Saturday from Tuesday. In response, China Retaliate with your own tariffs Starting February 10, up to 15% of U.S. imports are available.
Experts believe these are just the initial Salworths of a broader trade war between the two countries.
At the same time, the United States is On the cliff Trade quarrel with Canada and Mexico. Trump also threatened to impose tariffs on the European Union, and if this happens, countries will vow to retaliate.
Danish Prime Minister Mette Frederiksen Said on Monday. “But, of course, if the United States puts tough conditions on Europe, we need a collective and strong response.”
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Economic historians say the current hatred has many similarities to the early plots in U.S. history (the Tariff Act of 1930), which triggered a full-scale trade war and exacerbated the Great Depression.
The law, known as the Smoot-Hawley tariff, is “one of the most controversial tariff practices ever made in Congress”, Doug Irwin, professor of economics at Dartmouth College, and former president of the Economic History Association, Write 2020.
This is also the last example of a U.S. trade war, said Kris James Mitchener, an economics professor who studies economic history and political economy.
Mitchina said Smoot-Hawley inspired “mothers of all trade wars.”
What are the tariffs for Smoot-Hawley?
Rep. Willis Hawley, R-ore. , Left and R-utah Senator Reed Smoot, April 1929, shortly before the Smoot-Hawley tariff bill passed the house.
Source: Library of Congress
If Smoot-Hawley’s tariffs sound familiar, it might be thanks to pop culture: the 1986 film Ferris Bueller’s Photo will have a memorable scene in which a high school teacher’s drone with a monotonous sound of crawling Tariffs involved.
The main purpose of Smoot-Hawley is Assure Michener said American farmers expanded agricultural production during World War I, but suffered a discount on European output returning online and bankruptcy after the war.
But, Congress Expanded scope A large number of tariffs have expanded agriculture to include all economic sectors. The law comes from the chief Republican supporter of Congress: Rep. Willis Hawley of Oregon, chairman of the House Roads and Means Committee for Taxpayers, and Utah Sen. Reed Smoot ) served as chairman of the Senate Finance Committee.
Mitchner said Smoot-Hawley was “broad” with a tariff of about 25% of all goods imported to the United States (about 800 to 900 different types of goods).
If the United States puts tough conditions on Europe, we need a collective and strong response.
Mette Frederiksen
Danish Prime Minister
President Herbert Hoover, who had campaigned for the office on a platform to help farmers obtain protective tariffs, signed the law in June 1930, ignoring the petition Signed by more than 1,000 economists Ask him to veto the bill.
Michener said the law raised taxable taxes on average – tariffs on import-taxed goods by about 6 percentage points.
The duties may not sound as many, but they triggered a trade war with the major U.S. trading partners, which may be their “most important consequence.”
How did Smoot-Hawley inspire the trade war?
Irving said Smoot-Hawley raised the average tariff on taxable imports from 40% to 47%. He added that in 1932, price machine flux in the era of depression finally dropped that average to nearly 60%.
Michener said nine countries — Argentina, Australia, Canada, Cuba, France, Italy, Mexico, Spain and Switzerland — impose retaliatory tariffs specifically targeting U.S. products.
“Canada relies heavily on the U.S. market, retaliated almost immediately and imposed enough tariffs that could make U.S. export sales quite large,” Owen wrote.
Michener said the “tit-for-tat response” with targeted tariffs is a sign of the trade war.
Other countries formed trade groups that did not include the United States, Irving wrote. Eventually, 35 governments filed official protests against Smot Hawley, Mitchina said.
The result: Global trade collapsed, exacerbating the Great Depression, the worst economic recession in U.S. history. Mitchina said U.S. exports to retaliatory countries fell about 28% to 32%. Furthermore, the country protesting Smoot-Hawley It has also been reduced Their U.S. imports are 15% to 23%.
According to history, this is “one of the most disastrous actions in Congress’ history” Overview On the U.S. Senate website.
Tariffs that lead to Trump
Scott Lincicome, vice president of general economics at the Stiefel Center for Trade Policy at the Cato Institute, said the United States turned around after realizing how to intensify foreign policy issues and promote foreign policy issues for the world war.
Lincoln said the global economy is “like a complex dance.” “Tariffs are just throwing wrench in that dance.”
According to 2024, the average taxable import rate for taxable amounts dropped from about 59% in 1932 to about 13% in 1950, and from the mid-1990s to 2015. analyze By Cato Institute.
Meanwhile, the average tariff rate for all imports, including products not subject to tariffs, fell from 20% in 1933 to below 2% from 2000 to 2019.
Experts say that although Trump and President Joe Biden’s previous presidents also used tariffs, they were enacted for different reasons and for different reasons.
These are not reasons used in the past for tariffs.
Brett House
Professor of Professional Practice, Department of Economics, Columbia Business School
Historically, “When domestic industries complain about competition from foreign suppliers, the U.S. government often invokes tariffs.”
For example, during President Barack Obama’s second administration in 2013, the International Trade Commission issued the form of “anti-dumping duties” or tariffs in Mexico and South Korea, especially on washing machines in Mexico and South Korea.
Years later, during his first term, Trump also issued tariffs on washing machines, but this is global, rather than narrowing it down to a specific country. Meanwhile, Trump imposes other tariffs, such as steel and aluminum fees.
Other presidents, including George W. Bush, Ronald Reagan and Richard Nixon, also signed tariffs on steel companies, an industry that has historically received federal protection, Irwin told CNBC. But Trump’s second term is unique because he uses tariffs in a “broad brush” way – for example, for all goods in a country, something “no president in recent memory” does.
Furthermore, “the reason why Trump’s tariff policy is different is to try to commemorate Canada and Mexico to drive illegal drugs and undocumented people,” House said.
“In the past, these were not reasons for tariffs.”
Will history be repeated?
The spit caused by Smith Hawley resembles today’s trading environment in several key ways, including a well-known trading partner calling for retaliation against U.S. policy, economists say.
For example, before A 11-hour deal Officials in Canada and Mexico to delay the 25% tariff for a month swear Counterattack.
Canadian President Justin Trudeau warned Saturday Will implement There are about $100.7 billion in U.S. goods on a 25% tariff. them include Tariffs for meat, dairy products, agricultural products and other foods as well as beer, wine and spirits.
China said it would impose a 15% tariff on the U.S. and liquefied natural gas imports from the U.S., while U.S. crude oil, agricultural machinery and certain cars will impose a 10% tariff on U.S. crude oil, agricultural machinery and certain cars.
“We have seen a trade war going on,” Irving told CNBC.
The proposed tariffs on Canada, China and Mexico will shrink U.S. economic output by 0.4 percentage points between 2025 and 2034 and increase American tax revenue by $1.1 trillion. estimate By the Tax Foundation.
Of course, “whether this becomes a trade war and history repeats on that (Smoot-Hawley), it depends on the reaction of our trading partners and/or whether Trump is bluffing to get some sort of franchise,” Mitchina in E – said. mail.
