For as long as he’s spoken out on political issues, encompassing well over 30 years, Donald Trump has favored fair trade, consistently criticizing poor trade deals in favor of tougher negotiations. Now, as President, he can do something about it. And he’s already withdrawn from the disastrous Trans-Pacific Partnership and indicated a willingness to re-negotiate NAFTA. Both are great news.
In keeping with another campaign promise of rejecting unfair trade, Trump recently imposed tariffs on imported washing machines and solar panels, as those domestic industries are being hit with a flood of foreign imports. The International Trade Commission voted 4-0 to recommend to the President that he impose the tariffs.
But, in a recent Rasmussen poll, 50 percent of Americans support imposing tariffs, while just 26 percent opposed the move. Most Americans do not support the move toward globalization.
The typical knee-jerk reaction followed: Tariffs cause higher prices, which will hurt the consumer and cost jobs. According to the Solar Energy Industries Associations, tariffs would kill 23,000 jobs within the year. Foreign nations, like China, will retaliate, we are always told, and then we will be in a destructive trade war that for some reason the world’s largest market is always destined to lose.
But what happened instead? The very thing we “protectionists” always said would transpire. China announced they were moving a solar panel plant to the United States, while Whirlpool is adding new jobs, meaning more domestic production. Why? To get around the tax, which is what it’s designed to do.
Protectionism. It was a cardinal principle of the Republican Party from Lincoln to the Cold War. But today it has become a swear word, while “free trade” now denotes positive connotations and is embraced by both parties.
In the 19th century, though, the opposite was true. If one were branded a “free trader” back then, it meant favoring foreigners over Americans, and that was the death knell of a political candidacy. President Grover Cleveland found out the hard way in 1888, losing his re-election bid because the opposition tarred him with that brush.
Free trade was always seen as a foreign economic theory that would be harmful to American industry. Karl Marx favored free trade because it was a weapon against the nation-state, which Communism wanted to crush. Protectionism, said Marx, was “conservative, while the Free Trade system works destructively. It breaks up old nationalities and …hastens the Social Revolution.”
Yet to some that matters not, only adherence to some economic theory or the bottom line. We hear from our libertarian friends that protectionism, most specifically the imposition of tariffs, always leads to higher prices and poor economic growth. Always.
But what libertarian economists have an almost impossible time explaining is most of the economic history of the United States, especially the critical period from 1861 to 1900, a time when America soared from a second-rate economic power to the world’s leading economy – all on the back of high tariffs.
Future President William McKinley said in 1890: “We lead all nations in agriculture, we lead all nations in mining, and we lead all nations in manufacturing. These are the trophies which we bring after twenty-nine years of a protective tariff. Can another system furnish such evidences of such prosperity?”
With no way to counter the use of history, about all free trade economists can say is that the US economy grew “despite the tariffs.” But that is a completely unrealistic and unworkable statistical category, much like Obama’s “saved jobs.” There’s absolutely no way to prove it. It’s as much a guess or hypothesis (or simple wishful thinking) as anything atheistic cosmologists have to offer about the age or size of the universe.
And what about those rising prices? By listening to economic theorists, prices should have soared during that time period. But they didn’t. Even though information is not as plentiful then as it is now, the Bureau of Labor Statistics has concluded, “The limited price data from the 19th century … show no pattern of consistent inflation; indeed, evidence suggests that there was net deflation over the course of that century, with prices lower at the end than the beginning.”
These economists are much like the “professional counselors” that President Theodore Roosevelt once spoke of in 1904. Discussing the policy of protection, TR noted, “Our experience as a people in the past has certainly not shown us that we could afford in this matter to follow those professional counselors who have confined themselves to study in the closet; for the actual working of the tariff has emphatically contradicted their theories.”
After a brief flirtation with freer trade under Woodrow Wilson, resulting in the “forgotten depression” of 1920, Republicans regained control of the government, imposed protection, and the result was Harding and Coolidge’s Roaring Twenties, an era of economic growth unparalleled before or since. Industrial production soared, inflation fell, wages increased, and the unemployment rate hit an all-time low of 1.6 percent in 1926.
Closer to our time, President Reagan slapped tariffs on Japanese imported motorcycles to save Harley Davidson, imposed import quotes on Japanese cars to help Detroit, and took protective measures to aid the steel and machine tool industry. Result: economic growth, jobs, and low inflation.
Even Adam Smith, whom many economists most often cite in support of global free trade, advocated protectionism in certain instances, notably to protect an industry that is vital to national defense, to use as revenge or retaliation, and to force a nation to open its market. And that’s exactly what Reagan did and what Trump is doing today.
With all due respect to our libertarian friends, there’s more to a country than the bottom line and a greater interest than corporate profits. There are real people involved – American citizens with lives and jobs. Donald Trump understands that. And that’s why fair trade really matters.