TRADE WARSAmerica’s Trade Wars: Past and Present
Trump’s trade dispute with China has expanded to Canada and Mexico. But this isn’t the first time the U.S. has conducted trade wars with adversaries and allies alike
Trade policy has been a contested issue for governments as long as separate governments have existed.
In the modern era, many economists have argued that reducing barriers to international trade, such as tariffs or export restrictions, can benefit all parties. However, national governments often face political tradeoffs between increasing trade and protecting domestic industries.
When such conflicts arise, barriers imposed by one country can lead trade partners to respond with barriers of their own, creating a back-and-forth escalation known as a trade war.
Throughout the Cold War and afterward, the United States was often seen as a champion of free trade and led efforts to establish the World Trade Organization (WTO) in 1995. But like many other countries, the U.S. has periodically engaged in its own trade wars, both recently and historically.
Smoot-Hawley Tariff Act (1930)
The early 20th century had seen the U.S. make massive economic strides. But when the Great Depression began in 1929, the Republican-dominated Congress sought to help hard-hit American farmers by using tariffs on imported goods to shield them from foreign competition.
Economists and business leaders opposed the idea, pointing out that the U.S. was already running a trade surplus, exporting more than it imported. Nevertheless, the bill was signed into law by President Herbert Hoover in 1930, taxing nearly 2,000 categories of imports at rates upward of 50% – some of the highest in U.S. history.
The bill’s passage drew an immediate outcry from America’s largest trading partners, with 10 of them passing retaliatory measures. France imposed heavy charges on American-made automobiles and Canada increased tariffs on many American imports while lowering them for British goods. Countries like Italy and Switzerland also saw calls for boycotting American products altogether.
As the retaliatory measures combined with the ongoing impact of the Great Depression, over the next few years U.S. exports decreased by 66%.
The tariffs were eventually repealed in 1934 by President Franklin D. Roosevelt, who replaced them with bilateral agreements negotiated directly with individual countries. The Smoot-Hawley Tariff Act has since been cited as an example of harmful “beggar-thy-neighbor” trade policy.
U.S.-Japan Semiconductor and Manufacturing Conflict (1980s)
After defeating Japan in World War II, the United States guaranteed its defense while encouraging its industrial and economic development as a counterbalance to the spread of communism in Asia.
