Trump latest in long line of protectionists steering US trade policy

Trade tariffs have been a recurrent theme of US history ever since the late 18th century

For years the rivals had been shaping up for a fight. Eventually, the talking and the insults stopped and there was a duel, and it was America’s leading proponent of trade tariffs who came off worse.

Donald Trump and his stand-off with China’s Xi Jinping? No, this was how Alexander Hamilton – the first US treasury secretary and the originator of the protectionist ideas enthusiastically embraced by the current occupant of the White House – met his end.

As a young and dashing treasury secretary, Hamilton submitted to Congress his “report on the subject of manufactures”, which proposed that the US should shield its infant industries from international competition.

Thirteen years later Hamilton was fatally wounded in a duel with Aaron Burr, but not before he had charted a course for the US economy entirely at odds with the free trade theories of Adam Smith.

What’s more, protectionism has been a recurrent theme of US history ever since. Abraham Lincoln, one of the most revered presidents, raised tariffs during the civil war, and for much of the 19th century the US deployed trade barriers to help it industrialise. On the eve of the first world war, the US had the highest trade barriers of any leading country bar Russia.

So it did not come as a bolt from the blue when the US responded to the onset of the Great Depression with a fresh round of protectionism. The Wall Street Crash of October 1929 was followed less than a year later by the most notorious trade measure in history – the Smoot-Hawley Act – which raised raised tariffs on 20,000 imported goods.

Willis C Hawley and Reed Smoot, co-sponsors of the Smoot-Hawley Act of 1930.
Willis C Hawley and Reed Smoot, co-sponsors of the Smoot-Hawley Act of 1930. Photograph: Alamy

The Smoot-Hawley tariff set off a chain reaction. Other countries raised their tariffs in a series of tit-for-tat retaliatory moves, resulting in a sharp contraction in global trade during the 1930s.

Present-day economists such as Paul Krugman have rejected the notion that protectionism caused the Great Depression, pointing out that trade was too small a part of the US economy to have been the decisive factor behind the collapse of industrial production and mass job losses.

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But while bank failures, budget cuts and an inability of the Federal Reserve to combat deflationary pressures quickly enough are now seen as the prime causes of the slump in the 1930s, most economists agree that protectionism made a bad situation worse.

The legacy of the trade wars of the 1930s was one of the reasons behind the creation of a new international framework in the 1940s designed to foster cross-border co-operation: the International Monetary Fund, the World Bank and the forerunner to the World Trade Organisation, the General Agreement on Tariffs and Trade.

Britain pushed for free trade during its pre-eminence in the mid-19th century and when the US emerged from the second world war as the world’s economic superpower it became keener on breaking down barriers. But there has always been a protectionist lobby in the US – and it currently has a champion at 1600 Pennsylvania Avenue.

Contributor

Larry Elliott

The GuardianTramp

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