On CNN yesterday, “Why Trump’s trade hero turned away from tariffs”:
To learn more about tariffs and the role they play in US history, I talked to Douglas Irwin, a professor of economics at Dartmouth College and the author of multiple books, including “Clashing over Commerce: A History of US Trade Policy.”
In addition to explaining why the US moved away from tariffs in the 20th century, Irwin explained that the American figure most associated with tariffs, former President William McKinley — who Trump has said is an underrated president and cited in support of new across-the-board tariffs — was in the process of moving away from tariffs before he was assassinated in 1901.
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What Trump gets wrong about William McKinley
WOLF: Trump was at an event recently praising William McKinley as an underrated president because of McKinley’s tariff plan, which actually came before McKinley was president. What should Americans today know about McKinley and the tariffs in the late 19th century in particular?
IRWIN: When he was chair of the House Ways and Means Committee, McKinley did usher through, in 1890, a tariff bill that became known as the McKinley Tariff. He represented Ohio, and it’s interesting: Politics in Ohio and Pennsylvania are still relatively protectionist, and the reason is the same.
The iron and steel industry was located in Pennsylvania and Ohio, and they’ve always been afraid of trying to fend off foreign competition. That was true in 1890, it was true in 1990, and it’s true today. That’s why the Trump administration, and even the Bush administration before it, tried to help out the steel industry, which is very concentrated in certain swing states in the US.
But what’s interesting is that when McKinley became president a bit later, in 1897, he began to shift because he wasn’t just representing Ohio anymore; he was representing the whole country. What he saw was we had huge industries that were really blocked from exporting to other countries.
He began to entertain this idea of reciprocity, of trying to reduce foreign tariffs by offering cuts in our tariffs. This didn’t get very far.
He was shot at a rally in Buffalo in 1901 and passed away. But the day before he was assassinated, he had given an address saying that we ought to shift US policy away from protectionism, toward reciprocity, opening up foreign markets for us, exports. So he wasn’t quite the protectionist that Trump portrays him to be.
A volatile decade with tariffs and immigration
WOLF: What role have tariffs played in the American political conversation?
IRWIN: The federal government wasn’t as huge, as powerful, as it is today. It was an era of smaller government. So when you argued about what the government should be doing, you argued a lot about tariff policy, both on the revenue side or whether it should be protecting certain industries from foreign competition.
A lot of the debate very much echoes what we see today. Are big businesses helped or hurt by tariffs? Is foreign competition taking away jobs or not? Does protectionism… cause inflation?
President Trump says we had a very strong economy in the 19th century because we had these high tariffs in place. But one thing I think is underappreciated is that actually, the 1890s was a very volatile decade. Just because you have high tariffs doesn’t mean that you don’t have a lot of recessions or business cycles or high rates of unemployment. The 1890s, especially the early part, was not smooth sailing for the US economy.
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Douglas Irwin (Dartmouth College), author of multiple books, including “Clashing over Commerce: A History of US Trade Policy”, and former president of the Economic History Association. He is also co-author of a forthcoming textbook International Economics (with M. Chinn).
“Clashing over Commerce: A History of US Trade Policy”. Something I need to read. Irwin is first rate!
“But what’s interesting is that when McKinley became president a bit later, in 1897, he began to shift because he wasn’t just representing Ohio anymore; he was representing the whole country. What he saw was we had huge industries that were really blocked from exporting to other countries.”
Which means McKinley was a lot smarter than Trump who still does not recognize how his stupid trade war hurt a lot of US companies.
Let’s highlight the lies JD Vance said on Face the Nation:
https://www.msn.com/en-us/news/politics/full-transcript-of-face-the-nation-with-margaret-brennan-sept-15-2024/ar-AA1qCxRU?ocid=msedgdhp&pc=U531&cvid=a9d3b00ead70469187384541ef5ac492&ei=7
‘And Kamala Harris’ tax policies are, in fact, the inversion of that. She wants to raise taxes on American workers and actually reward companies for shipping jobs overseas. So, it is a really stark contrast between the agenda of Donald Trump and of Kamala Harris.
MARGARET BRENNAN: But just to follow up on that, you said penalize companies who ship jobs overseas. So your tariff policy would only apply to those companies who are shipping jobs overseas?
SENATOR J.D. VANCE: Well, almost by definition, Margaret, when you apply a tariff, what you’re really doing is applying a penalty to somebody who manufactures or makes something overseas.’
Harris has proposed tax cuts for the typical America worker. Now the 2017 Trump tax cut rewarded income sourced abroad. Harris wants to underdo that damage. And finally, tariffs penalize American consumers when they purchase imported goods. OK back to JD lying away!
‘One of the great tragedies of not just Kamala Harris’ leadership, but 40 years of American failure, is that we’ve lost our critical manufacturing industries to Mexico, to China. We started to undo that for four years under Donald Trump’s leadership’
Manufacturing output FELL under Trump. It has risen under Biden. JD? Other nations use “slave labor”. Oh – that is what Project 2025 proposes to do here. Got it! I could go on to note the lies he said to justify his vile racism with respect to immigrants but by now I’m ready to throw up just thinking about this KKK VP wannabe.
Off topic – Chinese housing price decline:
https://www.businesstimes.com.sg/property/china-new-home-prices-fall-fastest-pace-over-9-years-august
Those of us who think in terms shorter than year-over-year might not call this 5.3% y/y decline an acceleration, because the 0.7% m/m decline is no faster than in July. But 0.7% still annualizes to around 8.7%, plenty fast.
Recently announced economic measures haven’t had much time to work, so the article’s observation that the continued decline comes “despite” those measures is a little premature, but probably not off-target. Fact is, China’s recent effort to stimulate the economy has been small relative to the scale of the problem.
Xi has recently stopped talking about established growth targets, a suggestion that China will miss target. Still reason to fret about a debt spiral.
It’s my understanding that housing is the main savings and wealth of most people in China. If that asset is falling they will have a very hard time convincing consumers to spend more.
” It was an era of smaller government. So when you argued about what the government should be doing, you argued a lot about tariff policy, both on the revenue side or whether it should be protecting certain industries from foreign competition.”
The era of small government was, as described here, an era in which policy aimed at serving the interests of the powerful; is business helped or hurt by tariffs? In the era of big government, policy still aims at serving the interests of the powerful, but also of the general public. Ignoring the military, that expansion to serving the interests of the general public IS the expansion of government from small to large. Every effort to reduce the size of government amounts to an effort to no longer serve the interests of the general public. The interests of the powerful would still be served if government’s role were reduced.
https://fred.stlouisfed.org/series/FYONGDA188S
Federal Net Outlays as Percent of Gross Domestic Product
Alas this series does not cover the 18th century or even the 19th century as it starts as late as 1929. But not Federal spending as a share of GDP was only 3%, which would not even cover defense spending even during Peace Dividend periods such as the 1990’s.
No Medicare, Medicaid, Social Security, or any other form of transfer payments and an elimination of Federal nondefense purchases? The dream of the Heritage Foundation and the MAGA morons!