Do tariffs make a country great? President Trump says other nations are ‘ripping off’ the United States all the time. He claims his tariff threats will boost American companies. But history suggests it’s not that simple…
#tariffs #trump #china #usa #explainer
#tariffs #trump #china #usa #explainer
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00:00Let's talk about the T word.
00:02Stocks plunge as Trump's tariffs kick in.
00:05Sweeping global tariffs.
00:06Additional tariffs.
00:07Tariffs.
00:08Tariffs.
00:09Tariffs.
00:10Tariffs have sparked fear around the world.
00:16But they're nothing new.
00:18In fact, the history of trade is full of them.
00:21And some tariffs could offer important lessons.
00:24Back in October 1929, stocks on Wall Street collapsed,
00:28plunging the world into the Great Depression.
00:30Less than a year later, the United States passed the Smoot-Hawley Act,
00:34bumping up tariffs for foreign products coming into the country.
00:38President Herbert Hoover thought tariffs would protect American workers.
00:42But experts say they made things even worse.
00:45Smoot-Hawley, and particularly the trade retaliation against Smoot-Hawley,
00:49helped deepen the Great Depression.
00:52The last time a trade war on this scale has happened was in the 1930s.
00:57Exactly in 1930, it was the Smoot-Hawley Tariff Act,
01:01and it led to a global recession worldwide.
01:05We know only too well from history, from back in the 1930s,
01:08the infamous Smoot-Hawley Tariff,
01:10that the kind of policies which this could result in
01:15tends to make situations far worse rather than better.
01:19Economists from the US and Europe released a study in 2021.
01:23They looked at raw data from the 1930s.
01:26The data shows that some of America's biggest trading partners
01:29hit back at the Smoot-Hawley measures, imposing tariffs of their own.
01:34That made US products more expensive in those countries.
01:37And within three years, they'd cut imports from America by 28%.
01:42But what about the other countries?
01:45Most complained to Hoover's government.
01:48They did not respond with tariffs.
01:50But here's the thing.
01:51When you look at the goods these countries bought from America,
01:55there's a pattern.
01:56The numbers are way down for the most popular American products in each country.
02:01In fact, those imports fell on average 35%.
02:06Now, that may seem strange.
02:08After all, these countries decided against tariffs on US imports.
02:13But clearly, it was not business as usual.
02:16The research suggests many of these countries did hit back in their own way.
02:21So, for example, Czechoslovakia put a limit on car imports.
02:26In theory, that applied to every trading partner.
02:29But at the time, the US was the world's biggest exporter of cars.
02:34Britain was another country that did not respond with tariffs.
02:37Instead, it traded less with America and more with its own colonies.
02:42And so, by 1932, its imports from the US had dropped over 70%.
02:48So, these trading partners did not slap the United States with blanket tariffs.
02:53But that doesn't mean they turned the other cheek.
02:55Instead, they found strategic ways to respond.
02:59Smoot Hawley shows us that tariff disputes often go beyond just tariffs.
03:04And that can have a massive effect on global trade.
03:08And so, here we are, nearly 100 years later.
03:12I'm telling you, these countries are calling us up, kissing my ass.
03:17They are dying to make a deal.
03:19Please, please, sir, make a deal.
03:21I'll do anything.
03:22I'll do anything, sir.
03:23Like Hoover, President Trump believes tariffs on imports will help American workers.
03:29He's placed a 90-day pause on reciprocal tariffs for all countries except China.
03:35That's brought some relief, but the threat of tariffs remains.
03:39Reciprocal tariffs on countries throughout the world.
03:43Reciprocal.
03:44That means they do it to us and we do it to them.
03:47Very simple.
03:48Can't get any simpler than that.
03:50The T word could change trade for years to come.
03:54But if Smoot Hawley is anything to go by, it may not be the final word.