June 7, 2016


In shot at Donald Trump, Hillary Clinton is correct about tariffs' role in Great Depression (Louis Jacobson, June 6th, 2016, Politifact)

During a speech in which she attacked Donald Trump's foreign policy ideas as "dangerously incoherent," Hillary Clinton reached back almost nine decades to make a Great Depression-era analogy.

Clinton said she understood voters' concerns about the negative impacts of free trade agreements -- a big driver of Trump's electoral success so far. Still, pursuing large tariffs against such trading partners as China and Mexico -- as Trump has suggested -- would be dangerously misguided, Clinton argued.

"I understand a lot of Americans have concerns about our trade agreements," Clinton said. "I do, too. But a trade war is something very different. We went down that road in the 1930s. It made the Great Depression longer and more painful." [...]

Douglas Irwin, a Dartmouth College economist and author of Peddling Protectionism: Smoot-Hawley and the Great Depression and Trade Policy Disaster: Lessons from the 1930s, said Clinton was "astute" in distinguishing between putting the brakes on future expansion of free trade, as Trump and Clinton have both at times advocated, and actually reversing established trade agreements by imposing new tariffs, as only Trump has suggested.

"Protectionism did not cause the Great Depression, but I think saying it made it longer and more painful is actually quite well put," Irwin said.

Irwin said there was "no real reason" to impose such tariffs, and that it was mainly done for "domestic political reasons." In fact, President Herbert Hoover is said to have signed the law only reluctantly, over the spirited objections of many economists.

After the tariffs were enacted, other countries, including Canada, retaliated against the United States by establishing a preferential trade bloc with Great Britain and other countries, thus hurting U.S. exports.

"Other countries also used trade restrictions and protectionism as beggar-thy-neighbor policies to help their domestic economies during the worldwide slump," Irwin said. The problem, Irwin said, was that "if every country tries this strategy, everyone worse off since one country's imports are another country's exports. World trade reduced significantly, and since trade barriers are easy to impose and hard to relax, the problem festered for some time."

Posted by at June 7, 2016 7:33 PM