The National Interest, a US think tank website, published an article titled "Tariffs and the Ghost of Smoot-Hawley" on April 5. The author is Milton Ezrati. Below is the translation of the article:

Poor trade policies prolonged the Great Depression. Even a mild recurrence of such experiences is frightening.

Stock prices have plummeted and anxiety has soared as the White House announced "reciprocal" tariffs. Despite the market's strong reaction, this is not surprising. With signs of an economic recession, the stock market had already fallen significantly. Now, with the president's recent statements, the terrifying prospect of a trade war has greatly increased the weight of bad news.

The current tariffs are comparable to the famous "Smoot-Hawley" Tariff Act, which triggered large-scale retaliation and global trade wars in the 1930s, prolonging the Great Depression. Trump – always unpredictable – may have plans to avoid this terrible scenario, but no matter how one analyzes the White House's move, it is indeed a risky action.

Given Trump's earlier remarks, it is hard to believe that he wants to provoke a trade war. Even when imposing tariffs on rival countries in 2018 and 2019, he argued that it was a way to force opponents to revoke their highly significant protectionist policies. He defended the recent tariffs in the same manner, suggesting they were important levers for negotiation. He referred to these new tariffs as "reciprocal," subtly expressing the same viewpoint.

This description implies that pressure to increase U.S. tariffs can be alleviated by ending what Trump claims to be responding to, rather than resorting to retaliation. But even if, as he has hinted in the past, the goal is to reduce trade restrictions through negotiations, he still places world trade and the global economy at great risk.

If other countries fail to understand Trump's signals – if he indeed sent such signals – then the outbreak of a trade war and all its economic ills could become reality. China has retaliated with a 34% tariff. If this is the typical pattern triggered by Trump's statements, the world will begin to face a chaotic situation similar to the one caused by America's tariffs in the 1930s.

After the stock market crash in 1929, the sudden rise in unemployment greatly influenced Senator Reed Smoot (R-UT) and Representative Willis Hawley (R-OR). To protect American jobs, they pushed Congress to pass a massive tariff bill. This bill, known as the Smoot-Hawley Act, imposed an average tariff of about 20% on approximately 20,000 imported products. Other countries retaliated against American goods with tariffs.

By 1933, U.S. imports and exports had fallen by two-thirds compared to 1929. Although the act was repealed in 1934, its global negative impact took years to eliminate. It undoubtedly deepened and prolonged the Great Depression. Notably, the rise in unemployment that prompted the tariff bill reached 8.7% of the workforce in early 1930. Only after the bill passed did unemployment rise to a frightening peak, reaching nearly a quarter of the workforce in 1932 and 1933.

Even a low-key description of this historical experience is a terrifying prospect. It is along these lines, and based on orthodox economic theory, that much of the opposition to Trump's tariffs originates. However, the public faces the issue that the same arguments were used from the 1990s to the 2010s to promote globalization.

Although the trend toward free trade and capital mobility did enrich some people, it also left workers across the country in dire straits. Undoubtedly, the response to criticism of tariffs has some influence within Trump's administration, and these recent measures are a way to reverse this trend, which harmed many of Trump's voters. Unfortunately, when a driver hits someone, reversing and hitting themselves won't make things better.

Milton Ezrati is a contributing editor for The National Interest.

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Original article: https://www.toutiao.com/article/7490097262488470050/

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