We don’t want to go where trade wars have taken us before
Trump is not deterred by economists' warnings of a global trade war that could usher in a new depression.
President Donald Trump has unveiled a long list of punishing tariffs that will affect everyone. Is this the beginning of a worldwide trade war or simply a clever negotiating tactic by a man who sees himself as an expert on “the art of the deal” – an opening salvo in his campaign to get a better deal for American workers?
Obviously, we don’t know the answer to this question yet, as world leaders scramble to figure out their responses. However, once the dogs of war are unleashed – in a shooting war or a trade war – we’re tossed into the realm of the unpredictable and we would be wise to take some time to consider our position.
Perhaps a look back at trade wars in history might be a useful place to start.
At one time, it was routine for countries to go to war to protect their trading interests. England, France and Spain carved up the world into spheres of economic interest and routinely engaged in battles to protect what they saw as theirs. In fact, the US came into being as a direct result of a trade war with Mother England. The Boston Tea Party was a fight over the payment of a tax on imported tea.
However, by the 20th century the idea of going to war to defend trading interests was fading. Instead, nations waged economic war through the use of government-imposed tariffs and duties. The most notorious such legislation – blamed at least in part for bringing in the Great Depression of the 1930s – was the Smoot-Hawley Tariff Act, named after two American legislators who will forever live on in infamy.
Although the causes of the Depression were many and not simply the result of this bad legislation, the Smoot-Hawley Tariff Act contributed to the world’s slide into a depression that took decades to sort out. It has become synonymous with the folly of trade wars in which everyone loses.
The other thing of interest about the Smoot-Hawley is that it was opposed by just about every economist at the time. They had good reason to believe it would result in the misery it did in fact bring in. More than 1,000 economists signed a letter urging President Calvin Coolidge not to allow the legislation to go into effect.
Coolidge disregarded their advice, as did those who sided with Smoot and Hawley. The result was hard times that really didn’t end until the ramped-up production that came about as a direct result of the Second World War.
Like Coolidge, Trump is obviously not deterred by the warnings from economists of a global trade war that could usher in a new depression. He believes he’s going to get a better deal for American workers by pursuing this protectionist strategy. This seems to be his way of negotiating.
Is he right?
Nobody knows what the future holds – including Trump.
Conrad Black’s new – and quite sympathetic – book about Trump is called Donald Trump – A President Like No Other.
Whether you agree with what’s said in the book or not, there’s probably no one who will disagree with the title. Trump is unique in almost every respect and there has indeed never been a president quite like him. He’s completely unpredictable and inspires either visceral hatred and contempt or blind loyalty – there seems to be no middle ground.
It’s also not clear who influences him – if anyone. According to one source, Trump was asked by a now long-gone White House official who he listens to. Trump replied: “You’re not going to like this but I listen to myself.”
So there is no doubt that Trump is a strong man with very definite ideas. It’s just not always clear what those ideas are.
And the world needs strong leaders. Think of Winston Churchill in 1940. Through sheer will and determination, Churchill guided his country through an almost unbelievably difficult time.
But there have been other strong leaders in the past century whose huge egos have done an incredible amount of harm. The infamous troika of Josef Stalin, Adolf Hitler and Mao Zedong come immediately to mind.
Trump is neither Churchill nor one of those monsters. He’s a determined man who believes in what he’s doing. He says that he’s taking the actions he’s taking in the best interests of his countrymen.
If he’s right – if he knows what he’s doing – there will be no destructive trade war and he will get the deal he wants. The world will get back to business as usual.
If he’s wrong, we’re all in for a rough ride.
The Frontier Centre for Public Policy, a Canadian public policy think tank with offices in Alberta, Saskatchewan, and Manitoba.
© Troy Media 2018