It was a trade war that helped cause the Great Depression

Donald Trump: “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”

People, this is totally bonkers. Trade wars are lose-lose propositions. The Smoot-Hawley Tariff of 1930 (see below) resulted in a trade war that helped plunge the world into the Great Depression.

And Trump’s “easy to win” remedy of ending trade with countries that run trade deficits with us can’t possibly result in a big win for us, because American consumers would end up paying far more.

Someone should also remind Trump that trade deficits aren’t necessarily bad even if foreigners end up holding lots of dollars, since we’re the ones who create dollars in the first place.

China raises a special set of problems, but those problems won’t be rectified by starting a trade war with a nation on which so much of our exports, especially agricultural products, depend.

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THE SMOOT-HAWLEY TARIFF OF 1930

The Tariff Act of 1930 (codified at 19 U.S.C. ch. 4), otherwise known as the Smoot–Hawley Tariff or Hawley–Smoot Tariff, was an act implementing protectionist trade policies sponsored by Senator Reed Smoot and Representative Willis C. Hawley and was signed into law on June 17, 1930. The act raised U.S. tariffs on over 20,000 imported goods.

The tariffs under the act were the second-highest in the U.S. in 100 years, exceeded by a small margin by the Tariff of 1828. The Act and following retaliatory tariffs by America’s trading partners were major factors of the reduction of American exports and imports by more than half during the Depression. Although economists disagree by how much, the consensus view among economists and economic historians is that “The passage of the Smoot–Hawley Tariff exacerbated the Great Depression.”