History may not repeat itself perfectly, but it often rhymes. Two protectionist episodes – The infamous Smoot -Hawley Tariff Act from 1930 and today's prices of the Trump era – offer a striking example. Both emerged from economic nostalgia and the fear of change. The two were politically attractive. And the two were expensive and apparent errors that undermined the savings they were supposed to protect.
Smoot-Hawley was designed in an America uncomfortable as to economic transformation. In the 1920s, when the economy was otherwise booming, farmers were in crisis. After an post-war boom, the prices of cultures collapsed and the rural debt has skyrocketed. About a quarter Maintenance of workforce still working in agriculture, down half a few decades before. Many Americans aspired to an earlier time when agriculture was dominant and prosperous.
Foreign competition was the scapegoat. Politicians seized this frustration. Promising protection against cheap imports was an easy way to win votes. The result was a price that increased its functions on more than 20,000 goods by around 20% on average.
Smoot-Hawley's intention was to reduce imports and increase interior prices, especially for farmers. But the plan turned quickly. American trade partners retaliated in Canada, Mexico, Cuba, Great Britain, France and others have imposed their own prices. Exports have dropped, imports have become more expensive and global economic conditions have deteriorated.
The timing could not have been worse. The great depression had started and the stock market, which slowly recovered from the 1929 accident, again abandoned when the bill became the law. Instead of stabilizing, the United States has sank further into depression. Far from saving American farmers, prices have deepened their crisis. Between 1929 and 1934, world trade collapsed by 65%.
Today, Smoot-Hawley is widely considered a catastrophic error.
Now fast to the new wave of protectionist nostalgia, this time was aimed at restoring manufacturing. Trump's 2016 campaign promised to relaunch the lost era of factory and industrial force jobs. And like the Republicans of the 1920s accusing foreign cultures for the collapse of agriculture, Trump blamed imported products.
It does not matter that America has long moved to an economy based on services or that manufacturing represented only 10% of jobs by 2016. The emotional attraction of “Make America Great Again” was based on a lowered desire for nostalgia for the age of smoke and mounting lines – and a large middle and homogeneous class – before globalization and automation transforms the economy.
When Trump resumed his duties in January, he inherited a robust economy that had further improved after his election, on the basis of the anticipation of investors of pro-growth policies. Instead, the administration turned to economic nationalism and shot the foot economy.
The highest point occurred on April 2, when Trump announced radical “liberation day” of 10% on all imports and additional prices and targeted prices against homologists such as China, Japan, Vietnam and the European Union. He presented it as a patriotic effort to restore the industry of sovereignty and reconstruction.
As we know, the benefits were immediate. The markets sang and the business partners have threatened any reprisals, some even taking measures. Economists warned against cost increases, damaged supply chains and diplomatic tensions. Australia, among others, condemned this decision as economically hostile. Small businesses continued the administration, arguing that the prices exceeded the presidential authority and inflicted serious damages.
And just as Smoot-Hawley injured the farmers, he was supposed to help, Trump's prices hurt the manufacturers. Far from providing an industrial renewal, they led to dismissals in manufacturing factories.
In the end, despite its populist packaging, the release day marked a spectacular escalation of failed protectionist thinking. He also relaunched the nationalist style rhetoric of the 1930s.
The two blunders still have one thing in common: cronyism. According to The historian of the economy Douglas A. Irwin, Smoot-Hawley was not mainly a question of ideology. These were interest group policy: an ad hoc rush motivated by the constituents' demands, sectoral lobbying and legislative negotiation.
In the same way, Trump's prices relaunched lobbying for the price exemptions that we saw during his first mandate. Apple obtained a exemption For the iPhone and now, of course, everyone wants one. As a Lincicome Scott of the Cato Institute commented On X, “the buffet line of cronyism is now open.” Dominic Pino of the National Review calculated These price lobbying expenses increased by 277%.
The lesson is clear: economic nostalgia is a bad guide to solid policy. The prices of Smoot -Hawley and Trump represent attempts to recreate a romantic past – one of the small farms or animated factories – rather than embracing the reality of a changing world. But the savings are dynamic. Trying to freeze them in place with commercial barriers does not stop changing; This makes the transition more difficult, more expensive and more painful.
History deems harsh Smoot-Hawley. The final verdict on Trump's prices is not yet written, but the first signs are familiar. If we want prosperity, we have to wait forward, not behind. The future belongs to those who adopt creative change and destruction, not those who resist it.
Veronique de Rugy is main researcher at the George Mason University Mercatus Center. This article was produced in collaboration with the union creators.
