Not backing off in the face of global opposition to US trade policy, voiced most recently in this weekend’s G-20 summit, President Trump on Tuesday praised his recent trade actions, tweeting that “tariffs are the greatest”, warning any country that has treated the US “unfairly on Trade negotiates” will get hit with Tariffs. “It’s as simple as that” he added, pledging that “All will be Great!”
Tariffs are the greatest! Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs. It’s as simple as that – and everybody’s talking! Remember, we are the “piggy bank” that’s being robbed. All will be Great!
Countries that have treated us unfairly on trade for years are all coming to Washington to negotiate. This should have taken place many years ago but, as the saying goes, better late than never!
Tariffs are the greatest! Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs. It’s as simple as that – and everybody’s talking! Remember, we are the “piggy bank” that’s being robbed. All will be Great!
— Donald J. Trump (@realDonaldTrump) July 24, 2018
Countries that have treated us unfairly on trade for years are all coming to Washington to negotiate. This should have taken place many years ago but,
as the saying goes, better late than never!— Donald J. Trump (@realDonaldTrump) July 24, 2018
Trump’s commitment to trade war comes roughly one month before the Trump administration is set to launch as much as $200 billion in additional tariffs.
“I’m not doing this for politics. I’m doing this to do the right thing for our country. We have been ripped off by China for a long time, and I told that to President Xi” Trump said.
Meanwhile, US allies have been angered by the administration’s tariffs on aluminum and steel ordered in May, which placed duties on imports from some top steel-producing allies including Canada. “Let me be clear: These tariffs are totally unacceptable,” Justin Trudeau said just before the measures were implemented. “Canada is a secure supplier of aluminum and steel to the U.S. defense industry, putting aluminum in American planes and steel in American tanks,” Trudeau said. “That Canada could be considered a national security threat to the United States is inconceivable.” Canada was one of the first countries to announce retaliatory tariffs targeting U.S. exports, passing duties on approximately $13 billion worth of U.S. goods earlier this month.
Last month, the president threatened to impose tariffs on all European cars entering the United States, a topic which will be under discussion when EU president Jean-Claude Juncker meets with Trump in Washington tomorrow.
Meanwhile, countering Trump’s enthusiasm on trade wars, here’s a look at six past trade wars and the havoc they caused to the global economy.
1. The Opium Wars
When China attempted to suppress the opium trade in the mid 19th century — an illegal activity enjoyed mostly by British traders and the cause of widespread addiction and social problems — it led to armed conflict.
Or, as one analyst bluntly put it: “England went to war with China because it was upset that Chinese officials had shut down its drug trafficking racket and confiscated its dope.”
China burned more than 20,000 chests of opium, leading to a conflict which resulted in the ceding of Hong Kong to the British and an increase in the number of treaty ports where British ships could trade and reside.
A second conflict erupted when the British forces — this time joined by the French — fought again to extend their trading rights in the region. The end result was the establishment of more than 80 new treaty ports in China, the legalization of the importation of opium and rights for all foreign traders to travel within the country.
2. Franco-Italian trade war
Aiming to foster its own fledgling industries, Italy turned to protectionism in 1886, ending its trade agreement with France and placing tariffs as high as 60 percent on French imports. France retaliated and trade fell dramatically between the two countries.
The result was the passing of the protectionist Méline Tariff in 1892 which essentially ended France’s dalliance with free trade. The trade dispute also had the unintended consequence of pushing Italy closer to Germany and the Austro-Hungarian empire in the lead up to World War I.
3. US-Canadian trade wars
The Canadian-American Reciprocity Treaty, signed in 1854, was a trade agreement between the United States and the United Kingdom which applied to British colonial possessions, including Canada.
After the US Civil War, the Reciprocity Treaty with Canada was abolished; an act which kicked off decades of tit-for-tat trade measures and tariff retaliations. Unfortunately for the US, its protectionism policies led to the fleeing of American companies out of the US — perhaps with sweet irony, to Canada.
By the late 1880s, about 65 US manufacturing plants had relocated to Canada — and it took nearly a century for free trade to develop between the US and Canada again.
4. Smoot-Hawley Tariff Act 1930
Some economists blame the Smoot-Hawley Tariff Act of 1930 for exacerbating the Great Depression. Implemented with the aim of saving US factories, the act raised tariffs on more than 20,000 kinds of imported goods — despite a petition signed by more than 1,000 economics and threats of retaliation from other countries.
The act did not revive the American economy, as its architects envisioned, however. Instead, it is blamed for spreading protectionist policies around the globe, helping global trade plummet by about 26 percent in the years after its signing.
Smoot-Hawley “was such a disaster that it’s held sway over American trade policy for over 80 years,” said Joshua Meltzer, a senior fellow at the Brookings Institution who teaches international trade law at Johns Hopkins University. “No one wants to repeat it.”
Following World War 2, the World Trade Organization was formed to regulate international trade and prevent a repeat of destructive trade policies.
5. The Chicken War
Cheap chickens sparked a trade war between the US and Europe at the height of the Cold War. The ‘Chicken War’ of 1963 erupted when France and Germany complained about the importation of inexpensive chickens from the US.
France and Germany slapped tariffs on American imported chicken and in response, the US placed a 25 percent tax on imports of Volkswagen microbuses, potato starch, dextrin and brandy imported from Europe.
The tariff significantly hurt German automaker Volkswagen and it still stands for imported light trucks today.
6. Cuban embargo
The first US trade embargo on Cuba began in October 1960 and covered all US exports to Cuba apart from medicine and select foods. The embargo was later expanded to cover US imports from Cuba in 1962. The blockade was ordered by President John F. Kennedy in protest at Fidel Castro’s leadership and his alignment with the Soviet Union.
Taking hypocrisy to dizzying levels, hours before signing the embargo, Kennedy ordered a personal shipment of 1,200 Cuban cigars for his own enjoyment. Later, Kennedy’s press secretary Pierre Salinger visited the Soviet Union and was gifted with 250 Cuban cigars from Soviet leader Nikita Khrushchev, which he smuggled back into the US.
The US’s blockade of Cuba still stands today and it would require an act of Congress to remove it — something which would be highly unlikely, particularly under a Republican administration.
If history is any indicator, it seems trade wars are not “good” or “easy to win” as Trump has claimed.
In fact, they rarely result in big wins for anyone; they can sometimes have the opposite to the intended effect — and they are ultimately pyrrhic victories whose negative impacts can reverberate for decades.
via RSS https://ift.tt/2LKwkDC Tyler Durden