The last American "trade war" didn't work out so greatBreaking News
tags: Trade, Trump, Trade War, Tariffs
What's the theory behind Trump's case? And what's the history of starting just these sort of "trade wars" (in Trump's words)? I reached out to Patrick Gillespie, an economics reporter for CNNMoney, to get some answers.
Our conversation, conducted via email and lightly edited for context, is below.
Cillizza: Let's start with Trump's tweet this morning that "trade wars are good, and easy to win." How much basis in fact is there for that claim?
Gillespie: America's last trade war exacerbated the Great Depression in the 1930s, when unemployment rose to 25%. Claiming it was protecting American jobs, Congress passed the Smoot-Hawley Act in 1930. The original bill was meant to protect farmers. But to build political support, many lawmakers asked for tariffs -- or taxes -- on all sorts of goods in exchange for their vote.
Several nations, such as Canada, slapped steep tariffs -- or taxes -- on US goods shipped and sold abroad. For example, US exports of eggs to Canada fell to 7,900 in 1932 from 919,000 in 1929, according to Doug Irwin, a Dartmouth professor and former trade adviser to President Reagan.
The result: US imports fell 40% in the two years after Smoot-Hawley. Banks shuttered. Unemployment shot up. Surely, there were a litany of factors at play. But economists widely agree Smoot-Hawley made the Great Depression much worse than otherwise.