A Little "History" of Tariffs .

The Republican Party was born
for tariffs , as this old
illustration shows.

If  a Trade war is looming. President Donald Trump can learn a little from Henry Clay , I will explain that as we read on . BUT NOW ,  US President Donald Trump on Thursday approved the levies of 25 per cent on imported steel and 10 per cent on imported aluminium despite warnings of a global trade war and protests from allies in Europe and home.As he signed off on contentious (1.1)>>trade tariffs, Trump declared the American steel and aluminium industries had been “ravaged by aggressive foreign trade practices”. Trump was apparently referring to excessive imports and global production overcapacity driven partly by Chinese government subsidies.  American history over 200 years has been a subject of tariffs since its first day . (1.2)>>The 1st United States Congress, wanting a straightforward tax that was not too onerous and easy to collect, passed the Tariff Act of 1789. The goal of using higher tariffs to promote industrialization was urged by the first Secretary of the Treasury, Alexander Hamilton, and after him the Whig Party. They generally failed because Jeffersonian and Jacksonian Democrats said the tariff should be only high enough to pay the government's bills; otherwise, it would hurt the consumers. The Republicans, however, made high tariffs the centerpiece of their economic policy beginning in 1861, and as late as 1930. Since 1930, tariffs have not been a major political issue.  Trump's plan can go both ways . There was a lot of discussions about the pros and cons of this deal . Trump has stood by the tariffs, despite resistance from his fellow Republicans and other countries, which have vowed to respond with levies of their own. On Thursday, Trump pressed ahead with the imposition of 25 percent tariffs on steel imports and 10 percent for aluminum.   The ultimate irony: by acting ostensibly to protect U.S. steel jobs with sweeping tariffs, The tariffs are good for steel producers that melt and produce their own steel. But for those which is reliant on imported raw materials, they could prove catastrophic.  Trump will also kill off some steel jobs.Trump, however, is ignoring the W.T.O., which he dismisses as biased against the United States. That’s one reason it is important not to discount history, or the possibility of further repercussions. The rest of the world could interpret Trump’s tariffs as a signal that the United States is retreating from leadership on trade, and, indeed, retreating from a basic commitment to play by the rules that previous U.S. Administrations did so much to create. In the long term, as The Economist points out in its latest issue, such a perception could prompt other countries to react in kind, thereby undermining the entire system, much as the (2)>>Smoot-Hawley Act did in the thirties. Last April, Trump ordered the Department of Commerce to investigate steel imports under a little-known part of the Trade Expansion Act of 1962, Section 232, which allows the executive branch to place import restrictions or tariffs on steel for national security reasons.  More broadly, Trump’s move risks undermining international order built on mutual trust in the World Trade Organization, the multilateral system of dispute settlement designed to keep trade fair. In invoking “national security” as the basis for tariffs, (3)>>Trump is essentially acting outside the WTO. Trump’s “smart” trade action, then, might spark a trade war, hurt the auto industry, bleed jobs from the Rust Belt, and anger American allies around the world.    President Donald Trump can learn a little from Henry Clay , strangely enough last year President Donald Trump sang the praises of “the great 19th century statesman” Henry Clay, the former Speaker of the House, U.S. Senator and Whig Party co-founder. “Henry Clay believed in what he called the ‘American system,’ and proposed tariffs to protect American industry and finance American infrastructure,” Trump said. “Like Henry Clay, we want to put our own people to work… Clay was a fierce advocate for American manufacturing. He wanted it badly, he said, very strongly, free trade… He knew all the way back, early 1800s, Clay said that trade must be fair, equal, and reciprocal. Boom.” Experts say that Trump’s assessment of Clay’s belief that the country would prosper when industry at home grew is correct, yet Clay’s ideas weren’t based on helping American workers. The way to keep the material within the U.S. and benefit textile producers here, Clay reasoned, would be to tax British imports, to encourage people to want to buy fabric produced domestically rather than from overseas. But, though Clay’s ideas were intended to support the U.S. as a great commercial nation.   In that sense, he diverged from the populist idol who has been a frequent touchstone for Trump: Andrew Jackson, whose portrait hangs in the Oval Office. And so for the Trump  administration, a key test will be its willingness to go toe to toe with Wall Street .  Senator McConnell left no doubt — and issued a veiled warning  to the White House, that he sides with those in his party who fear Trump’s action could spark a global skirmish.“There is a lot of concern among Republican senators that this could metastasize into a larger trade war. We are urging caution,” the senator said Tuesday, his first public remarks since Trump announced his trade plans last week.

NOTES AND COMMENTS: 

(1.1)>>trade tariffs. . A tariff – A tariff is a tax on imported goods. It made European goods more expensive and encouraged Americans to buy cheaper products made in America. The tariff also made the country money, which would be used to improve things. (1.2)>>The 1st United States Congress. The U.S. Constitution of 1789 gave the federal government authority to tax, stating that Congress has the power to "... lay and collect taxes, duties, imposts and excises, pay the debts and provide for the common defense and general welfare of the United States." and also "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes."Tariffs between states is prohibited by the U.S. Constitution, and all domestically made products can be imported or shipped to another state tax-free. (2)>>Smoot-Hawley Act. Smoot-Hawley Act of 1930, which sharply raised tariffs on more than twenty thousand goods produced overseas and exported to the United States, didn’t cause the Great Depression, but it did accentuate it. As other countries retaliated with import duties of their own, the volume of world trade spiralled down. At the start of 1930, world trade had been about $2.7 billion. By the beginning of 1932, it was less than $1.3 billion. Among the countries that imposed new duties on American exports were Australia, Canada, Cuba, France, Mexico, Spain, and New Zealand.(3)>>Trump is essentially acting outside the WTO.  World Trade Organization  U.S. President Donald Trump did not single-handedly kill the WTO yesterday by announcing he would impose tariffs on imported steel and aluminum. It had been dying a slow death for a long time. China in particular never accepted the norms of the WTO, and its spectacular economic success pursuing policies that too often defied the organization’s market-based principles did more than any other country to weaken the legitimacy of the system. The WTO is already on the verge of paralysis because the United States has vetoed new judicial appointments, letting the number of trade judges dwindle to four from the usual seven. A trade war triggered by safeguard tariffs would open a new wound in the global trading system, because it would unravel almost a quarter of a century of discipline and dethrone the WTO as the arbiter of global trade and a check on protectionism.