May 2018, Vo. 245, No. 5
Features
Historic Perspective on U.S. Protective Tariffs
Protective tariffs occasionally have played a role in U.S. policy, but always with a less-than-desirable result going back to the late 1820s and marking the start of the nation’s Great Depression in 1930 with the now historic Smoot-Hawley Act, the product of a Republican majority Congress and 18 months of debate that put protective tariffs on just about all U.S. imports at the time.
The act and resulting retaliatory tariffs by America’s trading partners were major factors in cutting American exports and imports in half during the Depression. Although economists disagree by how much, the consensus is that Smoot–Hawley tariffs exacerbated the Great Depression.
Dartmouth University economist Douglas Irwin in his history of American trade policy, “Clashing Over Commerce,” points out that Smoot-Hawley was signed into law by President Herbert Hoover over a protest signed by more than 1,000 economists. Irwin noted that trade policy was made into a partisan issue going back to the 1840s, and whenever the presidency, Senate and House were all held by the same party, tariffs were either minimized or maximized, depending on the party in power. Democrats periodically lowered tariffs only to have Republicans raise them from mid-19th Century through the Great Depression and the aftermath of Smoot-Hawley.
Marc Spitzer and Tom Trendl, energy and international trade legal experts, respectively, in the Washington office of Steptoe and Johnson, conclude that history doesn’t bode well for the Trump administration’s imposition of protective tariffs on goods (steel and aluminum) and nations (China).
See also: Metal Import Tariffs: Unwanted 'Help' for Pipelines
George W. Bush’s administration imposed Section 201 global tariffs on steel from the rest of the world, Trendl said. “The outcry from this among end-users, such as car manufacturers, refrigerator manufacturers, and all the people who use the product fomented a large negative response and it didn’t take Bush very long to rescind the 201 duties, claiming that he got something, but it didn’t last long.”
“For the U.S. economy generally, these massive tariffs across all fields can be pretty devastating,” he added. “Steel and pipes are a more unique animal in that they are so intertwined with energy dependence.”
Spitzer recalls a history professor from his undergraduate days who was convinced that the Smoot-Hawley tariffs contributed to the hyper-inflation and deteriorating economy in Germany in the early 1930s that allowed Hitler to seize power by the narrowest of margins.
“I’m an old-school Republican who likes free trade,” Spitzer said. “Based on what Tom is saying there is a little bit of New York bravado going on here with the Trump administration tariffs.” P&GJ
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