In a few weeks, President Donald Trump’s pricing blitz erased a century from the liberalization of American trade. Economists say it could take much more time to resume.
The periods of previous protectionism show that once the commercial barriers erected, they can be very difficult to dismantle. “What can go up quickly does not necessarily descend quickly,” said Doug Irwin, professor at Dartmouth College who has largely written on the trade.
The radical tariff increases in the 1930 Smoot-Hawley law, which is widely considered to be exacerbating the great depression, were quickly revisited after a change of government, but “still put decades to relax,” noted Irwin.
The combination of coverage Trump of 10% of bilateral rights and charges will, once implemented, take up the rate rate on all American imports even further, at its highest level since 1909.
The American president himself likes to turn to “the gilded age” of growth and inequality, while the federal income tax had not yet been invented and that the future president William McKinley pushed by the legislation to take average rates almost 50%.
“We were our richest from 1870 to 1913,” said Trump shortly after its inauguration. “This is where we were a pricing country.”
Economists say that commercial wars are always expensive, but that prices will be much more disruptive now, in an interconnected world economy where trade represents a much greater share of production.
The best chance of a rapid de -escalation would be if the Trump administration considered new prices as a negotiation tool to extract concessions in other areas, whether on trade or to serve other diplomatic objectives, said Irwin.
This is what Richard Nixon did in 1971, gutting a 10% surcharge on all notable imports to put pressure on Germany and Japan to devalue their currencies. “Once it was accomplished, the prices were turned off,” said Irwin.
There is still a brief window in which countries could gain a little suspended from so -called reciprocal rates – which must take effect on April 9 – even if the universal rate of 10% does not seem open to negotiation.
But when tactics like Nixon fail to extract concessions, prices can stay in books for decades.
An excellent example is the 25% “chicken tax” taken from the imports of American light trucks. This was imposed for the first time in the early 1960s, in retaliation against a European sample on American poultry stapled from the factory. He was never lifted and reshaped the world automotive industry. This was undoubtedly the detriment of the United States, as it led American producers to specialize in gourmet gas vans, while being slow to develop in the growth markets for smaller and fuel economy cars.
When the prices are explicitly intended to protect the national industries and to resonate jobs, they are likely to prove even “more sticky”, even after the original political momentum to impose funds.
This is due in part to the fact that new lobbies groups arise while industries are formed behind trade barriers, and in part because “there is a government interest in negotiating and obtaining a counterpart if they reduce the price,” said Gary Hufbauer, a former American and prolific author on trade, by adding: “I do not see a rapid pace.”
Prices in politically sensitive areas such as agriculture are particularly persistent.
“European agricultural protectionism was introduced almost everywhere in the 1870s and 1880s in the face of an invasion of inexpensive cereals of the new world, and it is still with us today,” said Kevin O’Rourke, professor at Sciences Po in Paris.
The American Coca-Cola recipe has a different taste for the version sold through the border in Mexico, because quotas and subsidies protecting farmers in the middle-west of swing states have made corn syrup rich in fructose always cheaper than sugar.
This protection against cheaper imports “has mainly been born of the invention and marketing of new products,” said Chad Bown, chief economist of the State Department as part of the administration of Joe Biden.
The prices also persist because they play well with the voters.
Alexander Klein, an economic historian of the University of Sussex, said that the prices introduced during the American civil war to increase income persisted long after they were necessary because they proved popular with the electorate and a business class happy to be protected.
“What history tells us is that voters listen to their work more as workers than their rights as consumers,” he said.
When the Smoot-Hawley prices were finally dismantled in full after the Second World War, it was because it sounded with American offensive commercial interests, Klein said.
“This took advantage of the United States, which was pressure on Europe to create a free trade area because their main market was Europe-Asia and Africa were not rich enough at the time,” he added.
But the factor that would make Trump’s new trade regime most likely to overcome it is if the prices became a great source of federal income – as they were at their peak of the 19th century.
“If they are really serious about the permanent prices to pay tax cuts, it makes the prices much more sticky, because you will have to increase other taxes to get rid of them,” said Jeffrey Schott, main member of the Peterson Institute for International Economics.
Kris Mitchener, professor at the University of Santa Clara, said that if Trump’s intention was to use prices as a negotiation tool or to stimulate national industry, he was condemned to failure – because this would lead to other countries to retaliate and to “see any development of policies with the United States as subjects at revision”.
But, he added: “If a universal price of 10% is now the basic line, and the declared objective is income, I do not see them wanting to reverse it.”