Trump’s new tariffs make perfect sense, if you look at the history of US trade policy

Part of the league of defenders.
Part of the league of defenders.
Image: Reuters/Jonathan Ernst
We may earn a commission from links on this page.

The steel and aluminum tariffs Donald Trump proposed earlier this week have left economists, politicians, and chief executives around the world aghast and angry.

“None of this is reasonable, but reason is a sentiment that is very unevenly distributed in this world,” said European Commission president Jean-Claude Juncker, who is vowing to hit the US back just as hard.

Paul Krugman, the Economics Nobel laureate and New York Times columnist, vented about the absence of “adults” in the Trump White House who could have saved the president from himself.

But expecting Trump to produce sensible, economically sound trade policy is itself unreasonable, and not just because of the president’s unconventional style and chaotic administration. US politicians have a long history of using tariffs and other protectionist measures to advance their political agendas. Protecting steel, specifically, is practically an American tradition.

“Trump isn’t doing anything radical. He’s just doing it in his own way, which makes it look like it’s really, really radical,” says Carmen Dorobat, an international trade expert at Leeds Trinity University.

That’s not to say that Trump’s reportedly impromptu outburst on tariffs won’t have some nasty consequences, both political and economic. But put into a broader historical context, it’s not as unusual, nor as dire, as it might initially appear.

The politics of trade

Looking at Trump’s protectionist impulses through the lens of economics misses their point. The function of these measures is political, says Dorobat.

The tariffs are the economic equivalent of Trump’s proposal to build a border wall to stop illegal immigration. They may not play well with policy wonks—or indeed, with a big swath of the American public—but they get Trump’s base very excited at a time when the president needs to gin up political support. Like the wall, blocking trade gives Trump followers the illusion that he is taking on the genuine economic problems they elected him to solve. “Trump only has four years to show that he’s done something,” says Dorobat. Listening to the Paul Krugmans of the world won’t score him any political points.

Trump is not the first politician to ignore economists. There are numerous other instances of politics trumping economic rationale when it comes to trade. In one of the most famous examples, back in 1930, more than 1,ooo economists asked president Herbert Hoover in a public statement not to sign the Hawley-Smoot tariff. The bill’s stated goal was to shore up farms, but it turned into a free-for-all in Congress as individual lawmakers sought to extract protections for their own jurisdictions. “I have stated…that, by the eternal, I will not vote for a tariff upon the products of another state if the senators from that state vote against protecting the industries of my state,” one of them said. By the end, even manufactured imports had been slapped with higher tariffs.

The increases made no economic sense, argued the economists’ statement, and would hurt consumers and anger trading partners. Hoover, however, did not heed their warnings, setting off a chain of retaliatory measures from other countries.

The people who control trade often don’t know much about trade

Donald Trump has been lambasted for seemingly having no clue about the economics of trade. As it turns out, other presidents could be blamed for the very same thing, according to Douglas Irwin, economics professor at Dartmouth College and author of Clashing over Commerce: A History of US Trade Policy.

In one egregious example, president Grover Cleveland, a Democrat who was elected in 1884, wasn’t even aware of the tariff regime at the time or his party’s push to cut it. (Trump is ahead at least on that front.)

And it’s been politicians, not economists, who have historically been in the driver’s seat when it comes to hammering out trade policy. One observer lamented in the 1930s that the impact of economists in trade policy debates up to that point in time could “be best approximated by the number zero, which is a rather depressing finding,” Irwin said at a presentation of his book last year.

But more recently, there’s evidence that politicians do tend to listen to experts’ warnings about what could derail trade policy. Trump himself was reportedly convinced not to abandon the North American Free Trade Agreement when he was shown a map of the communities that would be most affected by it—those that voted for him.

An American tradition

One doesn’t have to go very far back in time to find instances of other presidents who have sought to protect the steel industry. George W. Bush, a self-declared free trader, imposed tariffs of up to 30% on steel imports in 2002—with poor results. The list of steel defenders also includes his father, George H.W. Bush, Ronald Reagan, Jimmy Carter, Richard Nixon and Lyndon B. Johnson.

But the idea of protecting American producers is much older. In 1791, then Treasury secretary Alexander Hamilton presented to Congress his “Report on Manufactures,” in which he proposed a series of tariffs—albeit small—to nurture  the US’s budding industries until they became stronger. All of the tariffs, including one for steel, were adopted.

The US is not going to abandon free trade overnight

Infighting between free traders and protectionists also dates back to earliest days of the US, but the thrust of the US trade regime itself has only swung from one school of thought to the other two times since then, according to Irwin’s research.

It’s taken massive shocks to move from one end of the spectrum to the other—events as impactful as the Civil War and Great Depression. In fact, it was the Great Depression, combined with the Second World War, that set the US on its current course of free trade. That course has held steady, despite occasional protectionist flare-ups. The origin of the US’s current free-trade policy, by the way, is also political. Its architect, Cordell Hull, who served as secretary of State under Franklin Delano Roosevelt, believed that international trade fostered political cooperation and world peace. It’s an idea that spread. He was awarded the Nobel Peace Prize in 1945, among other reasons, for seeking to end trade wars and establish friendly commercial relations between nations.

Absent a major debacle, whatever rules are in place tend to stay there, in part, because the players who benefit from them put up a big fight at the first inkling of change, Irwin found. We see that today in the legions of farmers, carmakers, and even officials of foreign countries who have been lobbying Congress and the president not to end NAFTA.

That kind of pressure, along with the time-consuming mechanics of installing tariffs, makes it unlikely that “the Trump administration will be able to shift the US too far away from its historical commitment to open trade,” Irwin told Quartz.

The US doesn’t like being left out of world markets

Even if Trump manages to significantly dent trade, history suggests his successors would seek to revert that—particularly if his protectionist policies result in economic pain. In the past, it’s been when the US has felt it’s being left out that it has sought to engage in international trade negotiations, according to Irwin.

Trump himself has even floated the option of joining the Trans-Pacific Partnership—barely a year after he abandoned the trade deal. Given his more recent push for tariffs, that seems unlikely. Then again, even the tariffs are not a sure bet.