Something similar to the U.S.-China trade war happened before, during the most famous trade mistake in U.S. and global history. Today, we use that event to mark the Great Depression’s beginning.
Some of my contacts argue that the relatively strong U.S. economy allows the administration to take a harder line than would normally be advisable. growing long enough for the tariffs to make China bend. We can postpone a recession for another year or two if the trade war doesn’t intensify and Europe holds together. intensifying, we may not get that time. In other words, tariffs could end the conditions that justified them.
Herbert Hoover promised higher tariffs in his 1928 presidential campaign. He won, and the House passed a tariff bill in May 1929. So, when the Senate finally passed a tariff bill in March 1930, the thinking was not that different from what we see today. They thought they could preserve and even extend the good times.In 1932, both Smoot and Hawley lost their seats as Franklin Roosevelt beat Hoover in a landslide—57% of the popular vote.Throwing Caution to the Wind
I can point to several countries whose economic policies are mercantilistic, but at least everyone knows about them. We see the the dangers and back off to avoid an avalanche whose victims are impossible to predict.Everyone’s incentive is to avoid catastrophe and make incremental improvements. That makes trade talks extraordinarily difficult.
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