Those who say you should take Donald Trump seriously but not literally must not have been referring to his tariff policy. Trump’s obsession with tariffs is nothing new, but this go around it looks like it is going to do real damage to the American and global economy. I am mystified by how many people seem to be accepting protectionism as a logical strategy, even though it risks inflation, recession, U.S. supply chains, and the international economic system. It is as dangerous as the Modern Monetary Theory was under Joe Biden.

Tariffs are a relic of another time and the historical record is clear about their effects. To that end, I am running a slightly modified article that originally ran in the Financial Times during Trump’s first term about the disaster that was the Smoot-Hawley Tariff Act, a misguided Congressional response to the Great Depression that exacerbated it and arguably helped lead to World War II. Hopefully, politicians will realize that an economic own-goal will not bode well for them when the chickens come home to roost.

If we do not learn the lessons of history, we will regret it.

Donald Trump has ignited a trade war, having previously declared them “easy to win.” He has slapped tariffs on our three largest trading partners — Canada, Mexico, and China — as well as the EU and blithely shrugged off the prospect of economic damage. The president’s view, which he has held since at least the 1980s, flies in the face of hundreds of years of theory and practice.

For a historical lesson on what would happen as Mr Trump’s dream comes true, we should look back to 1930 and one of the most notorious legislative blunders in American economic history. The Smoot-Hawley tariffs, approved by the US Senate 81 years ago this month, led to an unfettered trade war, exacerbated the Great Depression, and extended the global economic misery that was a significant cause of the second world war.

After the October 1929 Wall Street crash, Washington came under pressure to stem the tide of unemployment and aid farmers who were suffering from falling commodity prices. President Herbert Hoover had asked Congress to enact agricultural tariffs but to cut those on industrial goods.

Senator Reed Smoot of Utah and Representative Willis Hawley of Oregon took up the banner — but decided to go in a different direction.

They proposed raising duties on more than 900 types of goods across the economy, seeking tariffs at levels not seen in 100 years. As the economy deteriorated in late 1929, Congress seized on the bill as a potential quick fix and a way to signal they were taking action.

Those at the time who understood economics vociferously opposed the bill. Progressive senator Robert La Follette (a sort of Jazz Age Bernie Sanders) denounced it. So did JPMorgan head Thomas Lamont, who recalled that he “almost went down on my knees to beg Herbert Hoover to veto the asinine Hawley-Smoot tariff. That act intensified nationalism all over the world.”

More than 1,000 leading economists, led by Yale’s Irving Fisher, signed a protest letter outlining the potential consequences of Smoot-Hawley with startling precision. They warned that it “would operate in general to increase the prices which domestic consumers would have to pay” and “raise the cost of living and injure the great majority of our citizens.” Miners, bankers, farmers and workers would be crushed by retaliatory tariffs, cautioned the economists.

Hoover, a wealthy businessman and former commerce secretary, initially opposed the tariffs, calling the bill “vicious, extortionate and obnoxious.” But after the stock market fell again, he bowed to political pressure and signed the bill into law.

The result was disaster: country after country erected their own barriers in retaliation, global trade plummeted, and American exporters saw their suffering intensify. By 1933, US exports and imports had fallen by about 60 per cent.

Franklin Delano Roosevelt campaigned against Smoot-Hawley, declaring the act “compelled the world to build tariff fences so high that world trade is decreasing to vanishing point.” But once in office, he in many ways continued Hoover’s mistakes. As part of his plan to kick-start the economy, he set up additional trade restrictions in the form of subsidies and price controls. The rise of economic nationalism exacerbated and prolonged the Great Depression and the 1930s saw the world descend into violence, extremism, and totalitarianism. By the end of the decade, war had arrived.

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We need to learn these lessons of history quickly. Tariffs do not work: they usually end up hurting most those they are aimed at helping. The Trump administration’s tariffs in the first term, for example, led to immediate price increases on washing machines . It is clear that automobile prices, for one, will soon be going up substantially.

More alarmingly, the tariffs Mr Trump has levied are spurring retaliation from our closest trading partners. Canada’s reciprocal tariffs will profoundly effect agriculture from wheat to watermelons. The EU has announced duties on American products like Kentucky bourbon and Harley-Davidson motorbikes. The losers are sure to be consumers, along with workers in steel- and aluminum-consuming, agriculture and other affected industries whose costs will increase or competitiveness crumble. Eventually, all of us will suffer as the economy’s growth is distorted and slowed.

Free trade has been a bipartisan issue for generations in the US, opposed largely by crony capitalists and union leaders. From Harry Truman to Ronald Reagan, from George HW Bush to Barack Obama, responsible leaders on both sides of the aisle have known that trade is a win-win proposition and that the free flow of commerce can also help avert war. Mr Trump may have his own ideas about how trade works, but those in power who go along with him should be aware of the political risk.

After serving 30 and 25 years respectively, Senator Smoot and Congressman Hawley were both voted out of office at the election that followed their disastrous act. Hoover himself, who knew better, was defeated as well. Our current leaders should take note: if they do not do the right thing, they may face the same electoral fate.

A version of this article originally ran in the Financial Times in March 2018.

[Ed.-Why is it still timely seven years later???]

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