James Fallows has written a great post today about the tariffs. The first part is all about what constitutes good and bad tariffs and when they are useful. You should read it. Then he goes into the history of tariffs in the U.S.
I think it’s useful to think of them in great waves:
- The founding. This is the Hamilton era until after the Civil War. The US as a whole “needed” tariffs to develop its industries against more mature and efficient British and European competitors. That is what Hamilton asked for, and got.
From then through the Civil War, the tariff was a hugely divisive issue, second in national political importance only to slavery itself. The lines of division largely paralleled those of slavery: The industrialized North generally favored tariffs, to promote its industries. The agricultural and plantation-based South generally opposed them, since tariffs raised their costs but did not “protect” their output. (The Brits weren’t competing with cotton from Mississippi or Alabama.)- Reconstruction through McKinley. I doubt that Donald Trump could pick a photo of a young William McKinley (below) out of a lineup, or recite anything about his life, his Civil War record, or his death. But Trump has seized upon the idea that McKinley’s tariffs were the greatest thing about him, “the most beautiful word in the dictionary.”
According to most people other than Trump, the McKinley-era tariffs (especially the main act of 1890, which raised the average tariff on imports to 50% !!!) were one more part of Gilded Age expansion-and-corruption. Useful to favored industries. Not useful to the country as a whole. Like many of today’s policies, they enriched the rich, and raised prices for everyone else.- Bring on Smoot-Hawley. Enough said. Let’s skip through the worldwide Great Depression of the 1930s and all it wrought. No one who has looked into Smoot-Hawley has said, “Let’s do that again!” Until today.
- The Cold-War Era and GATT. In its role as Western World hegemon after World War II, the US was aware of two trading realities. One was that on an “open competition” basis its industries would easily out-compete those in practically any other country. So it could afford to lower tariffs. The other is that it was in Western and US interests to have industries and economies develop in the non-Soviet world. Thus it should lower tariffs, and take other measures to help potentially allied countries to recover. (GATT is General Agreement on Tariffs and Trade.)
- Clinton, WTO, and NAFTA. In the 1990s, Bill Clinton’s administration lowered tariffs and trade barriers across the board. Bringing China into the World Trade Organization. Connecting the US, Canadian, and Mexican economies through NAFTA. Judge it a success or failure as you will. For now I’m just noting it as an era.
- Biden and the return of ‘Industrial Policy.’ This is the era that I think will get more attention in the long run, but that in the by-wash of Biden’s re-election catastrophe is under-appreciated now.
Biden mostly kept the Trump I-era tariffs against China. But unlike Trump, I or II, he connected them to an “industrial policy” for long-term development of US alternatives. The focus was on exactly the areas most “left-behind” and hollowed-out by Chinese and other competition from Clinton-era changes. (As William Janeway described here.) I’ll have more references about the Biden policies below. For the moment I’m mentioning them as prelude to phase 7, which we’re just now entering.- Insane Clown Posse: Trump at the helm. Effective tariffs are long-term. They are precise, rather than splatter-shot. They come from the left brain (rational) rather than the right brain (impulse). They take careful account of larger strategic interests—for example, with the US’s neighbors, Canada and Mexico. They are informed by thinking, “If we do this, will the other side do that?” They show the same care a responsible general, squadron commander, or police chief would use.
What we appear to have, instead, from Trump is trade-policy-as-MAGA-rally. He is mad and wants to flex. He hasn’t thought through to what might happen next.This is where we stand today. It’s “Blind Into Baghdad” without the Humvees. And it will do at least as much damage.
I would just amend that to say that Trump can’t think through what will happen next. He lives in a delusional fog, ignorant of anything but his base instincts and the people around him are either deluded as well, thinking that he’s a magic man, or they see opportunities in his madness.
Fallows also shared some very useful links. We might as well dive in. It looks like we’re in for a long trip:
Here are a number of articles, reports, books, and other cites I have found worthwhile.
From the WSJ (!), Phil Gramm (!!) and Donald Boudreaux on why the person most upset by Trump’s incoherent trade policy would be … the sainted William McKinley himself.
From seven years ago, a Planet Money “brief history of tariffs.”
From two days ago, a PBS NewsHour Paul Solman assessment of how tariffs would affect US manufacturing.
From the WaPo this week, a Heather Long column on how tariffs could bring back the 1970s nightmare of “stagflation.”
From Brookings this year, a David Wessel and Elijah Asdourian an explainer on how tariffs work—and don’t.
From Robert Litan this week, a big-picture perspective on how Trump’s impulses match the larger history of trade.
From Foreign Affairs last month, Douglas Irwin and Chad Bown on why tariffs will backfire not just for the country as a whole but also for Trump’s own goals (to the extent they are knowable).
From Henry Farrell, an assessment of the tensions in right-wing politics revealed by the tariff proposals.
From Barron’s this week, Matt Peterson on how Trump’s tariffs may move the US into “developing country” status.
From Foreign Affairs this week, Michael Froman on how incoherent US trade policy has put China in the driver’s seat.
