Posted on 03/09/2018 7:03:56 AM PST by Kaslin
Donald Trump's announcement that he is imposing tariffs on steel and aluminum imports from other countries has aroused little enthusiasm and much criticism. It evidently prompted the resignation of Gary Cohn as head of his National Economic Council.
It has also prompted free trade-minded Republicans in Congress to propose repealing Section 232 of the Trade Expansion Act of 1962, which delegates to the president the power to adjust trade restrictions and impose tariffs.
It's not clear exactly what trade restrictions Trump is poised to impose or whether negotiations with Mexico and Canada will end the North American Free Trade Agreement. One possibility is that the self-styled master of the art of the deal is using steel and aluminum as leverage to get Canada to agree to his terms on NAFTA.
Trump's move is widely depicted as a departure from the free trade policies pursued by every administration since World War II. But a perusal of Dartmouth economist Douglas Irwin's history of American trade policy, "Clashing Over Commerce," reveals that his move is not all that different from what other postwar presidents have done -- and that free traders might be sorry if Congress actually were to repeal Section 232.
Tariffs, it is often said, have been one of the bases of American economic policy since the days of today's Broadway musical hero Alexander Hamilton. That's an exaggeration, argues Irwin, but they were the major revenue source for the early republic's pint-size federal government.
Irwin's second major point is that tariffs haven't been changed very often. A rise in tariffs rankled Southern cotton producers in the 1820s, and South Carolina's John C. Calhoun, the then-vice president, penned an argument that states could nullify federal laws. President Andrew Jackson sent troops to the state's borders, and the state backed down, at which point Jackson and Congress lowered tariffs.
Trade became a partisan issue, so, Irwin points out, significant tariff changes happened only when one party held the presidency, the Senate and the House -- a rarity then as now. Democrats lowered rates in 1846; Republicans raised them in 1862, during the Civil War; Democrats lowered them in 1913; Republicans raised them in 1922. In 1930, a Republican Congress took 18 months -- with 527 hours of Senate debate on some 1,253 amendments -- to pass the notorious Smoot-Hawley Tariff Act, which President Herbert Hoover enacted over a protest signed by 1,028 economists.
The Great Depression, which followed (but, says Irwin, wasn't caused by) Smoot-Hawley, opened the way for a changed policy. Franklin Roosevelt's first secretary of state, Cordell Hull, a fervent free trader, was often bypassed on foreign policy but was given full leeway in fashioning the Reciprocal Trade Agreements Act of 1934. This gave the president -- in practice, Hull's State Department -- authority to negotiate reciprocal tariff reductions with foreign countries. Tariffs fell from 30 percent of imports in 1900 to 5 percent in 1945 and 1.5 percent recently. On trade, Hull was one of the most successful policymakers in American history.
Trade acts in 1962 and 1974 made Hull's reforms permanent. Section 232 also left presidents with the power to raise tariffs, which free trader Republicans are complaining about today. Trump is not the first president to use this power.
Ronald Reagan, a free trader from his days as a Democrat, facing mass closure of steel and auto plants, negotiated voluntary restraint agreements with the European Economic Community, as well as surge controls limiting steel imports from particular countries and voluntary export restraints limiting Japanese auto exports. George W. Bush imposed higher duties on steel imports in 2002.
These measures were intended to be -- and were -- temporary. Producers adjusted. Foreign-based auto companies built American plants, evading domestic content requirements and import limits. American steel producers eventually adopted high-productivity processes developed by Europeans decades before.
American trade policy over the past several decades, as Irwin describes it, has been one in which Smoot-Hawley-type tariffs are irrelevant and in which complex, low-visibility negotiations between executive branch agencies and foreign nations respond to grievances of American interests. High-visibility complex free trade agreements -- notably, NAFTA (1993) and most favored nation status for China (2000) -- have also passed Congress, with most Republicans in favor and Democrats increasingly opposed.
Trump developed his views on trade in the 1980s, when Reagan was fending off protectionist pressures with temporary expedients. It's unclear whether Trump really hopes to re-create the 1970s steel industry (he won't) or whether he's seeking leverage in negotiations with trading partners as other presidents have.
A dicey process, perhaps, but surely better than the Smoot-Hawley days, when Congress voted on thousands of amendments.
Rep. Markwayne Mullin: Trump isn’t starting a trade war, he’s helping to restore ‘Made in America’!
President Trump isn’t starting a trade war, and if you think he is—you’re blind to the fact that we are already in the middle of one.
Last year, the United States grew its trade deficit to $566 billion. The president is bringing everyone to the negotiating table. After the passage of the Tax Cuts and Jobs Act last December, we now have one of the most competitive tax codes in the world. It’s important that we use it to our advantage when it comes to trading goods with other countries. While other countries will continue to look out for their own best interests, I’m grateful President Trump is looking out for ours.
When our car manufacturers market cars in China, there is a 25 percent tariff added to the cost. This is not free or fair trade. However, China believes they shouldn’t be paying tariffs on products that come to the United States. Other countries feel similarly. The trade deals these countries operate under are drastically in their favor. These countries want free trade when it comes to trading with the United States, but they do not extend the same to us when we try to sell products to their countries. They claim they do this in order to protect their working class. Shouldn’t we be doing the same?
tps://en.wikipedia.org/wiki/2002_United_States_steel_tariff
The GOP would be shooting themselves in the foot again, and any democrats going along with this. It basically is a slap in the face of the blue collar worker.
Trump again has outsmarted them.
HOORAY President Donald J. Trump. Stable genius BUMP!
Barone is either a dumb ass or a liar. How could the GD follow Smoot Hawley? Smoot Hawley went into effect in 1931 almost 2 YEARS AFTER THE START OF THE GREAT DEPRESSION.
Only 4.3% of the economy was involed with Internationale trade at the time and Smoot-Hawley passage which only affected about 1/3 of that (agricultural imports mostly) so Barone is arguing that a slight rise in tariffs affecting 1% of the rural economy was a major factor? Ridiculous. Smoot-Hawley had, if anything, a slight stimulative effect on American farming and no major impact on anything else. International trade dropped because overall demand dropped following the crash.
The desperate globalists themselves know they are lying when they trot that one out.
Here's hoping Gary Cohn really is in line for a Cabinet position as the rumors have indicated - that would take their "Trump is so bad even a great economic advisor felt the need to quit" meme and put it where the sun don't shine --- along with all their other thoughts.
Anyone who pretends what has been pursued since WWII was free trade is either dishonest or profoundly ignorant. We've had a bunch of negotiated trade agreements, negotiated by many nations which have no intention of practicing free trade now, or ever.
We finally have a president who recognizes this and says it out loud, and points out how past US presidents and congresses have accepted unfair, one-sided deals that have done great harm to the US industrial base including industries critical to our national security.
We're now hearing the squealing of those who benefited from those bad for the US, overall, trade agreements, and also a collection of folks who had the free trade/comparative advantage theories crammed into their heads in college and can't see beyond the theories to assess how it has and will continue to damage the US.
When Smoot-Hawley was enacted in 1930 the US ran about a 40% surplus in our balance of trade.
Today we run about a 40% deficit in the balance of over $2 trillion in trade.
That’s a LOT of buffer before any projected retaliation causes pain at the macroeconomic level.
“International trade dropped because overall demand dropped following the crash”
World-wide trade had collapsed before Smoot-Hawley went into effect. Complete collapse.
The main point of the article, the Fed decreased the money supply around 20% during the first three years following the stock market collapse of 1929. Well worth reading for general knowledge of the GD.
You really want to kick China, Inc. (aka: US chamber of commerce) where it really hurts?
Slap tariffs on auto parts, hardware and fasteners, finished electronic, and electronic components/semiconductors.
Oh, and do the same with Canada and Mexico, so the chicoms can’t launder goods through NAFTA countries either.
And spare me the bullshit about cost, labor, quality, regulations, etc.
I watched first hand as companies packed up their machinery and knowledge, and sold it to some government owned entity in china. The sole purpose was to increase their margin. Ask GM about “china pricing” as dictated to their tier suppliers.
The funny thing is: The price of their products only went UP.
That, along with rampant inflation, and a increasingly worthless dollar, has put the domestic manufacturing base in a real bad position.
It has become a vicious cycle.
Bookmark
Smoot-Hawley wasn’t the problem, it was the New Deal that kept the Depression going.
The 'bust' had to come, but the problem was the solution, instead of letting the Market correct itself, Hoover and then FDR got the government involved.
Whatever happened in the 1920s, the decisions of the Fed after the stock market crash of 1929 caused the Great Depression. Shrinking the money supply, then allowing the runs on banks and the bank failures created a banking and money supply crisis. Some older ancestors of mine described it as "nobody had any money". A schoolteacher ancestor was paid in script rather than dollars, script that merchants would then discount when used for purchases.
Near the bottom of the article linked in #13, this explanation is provided under the paragraph entitled: "The Road Not Taken".
Agreed 100%! Free trade is a bad joke that has been played on the American people for 65 yrs. Tariffs for the sake of tariffs is self-defeating, but targeted, retaliatory tariffs make perfect sense. If a foreign country is taxing our imports there is no free market correction available, it must be coerced.
If the rest of the world wanted totally free trade with US, I am all for it, either we compete or we loose, but when you have one bad trade deal after another where every country in the world but the US can impose tariffs and fees, that is not free trade that is our economist, elites and government selling us out to the highest bidder.
We have been in a trade war for decades and we have surrendered at every turn. So now we decided to, gasp, fight back with the same tactics used against us and the elites piss themselves on live tv, oh the horror, the great cost to the American people! You know those cheap imported products are great but if you as an American citizen don’t have a job or one that pays near nothing what the hell good are they being so cheap???
Free and Fair trade, that is the ticket!
One losing a Goldman Sachs stooge is WINNING as far as I am concerned.
I am not in the least concerned as Trump is NOT generally an ideologue. He is not abandoning free or fair trade. He is passing policy that benefits America and Americans by levelling the playing field.
Canada and Mexico have already been excluded and Trump said other countries are free to make their case.
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