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Donald Trump signed an order on Thursday imposing steep tariffs on steel and aluminum imports, after days of guessing games and internal White House battles over whether daring China to enter a trade war is sound policy.
The president appeared in the Oval Office, flanked by senior officials on one side and a group of steelworkers on the other.
'You are truly the backbone of America, you know that? You are very special people,' he told the blue collar contingent.
'We want a lot of steel coming into our country, but we want it to be fair and we want our workers to be protected.'
Eighty four years ago on this day President Hoover signed the now-infamous Smoot-Hawley tariff bill, which substantially raised U.S. tariffs on some 890 products. Other countries retaliated and world trade shrank enormously; by the end of 1934 world trade had plummeted some 66 percent from the 1929 level.
The Tariff Act of 1930 (aka the Smoot-Hawley Tariff Act), started out as a bill that would only raise tariffs on some agricultural products, but a host of other special interests piled on and before the legislation finally reached President Hoover’s desk it represented one of the largest tariff increases in U.S. history.
The stock market crash that had begun in the last week of October 1929, some eight months before Hoover signed the Smoot-Hawley tariff. The Dow had plummeted from 326 on October 22 to 230 in the next six trading days and it finally settled at a low of 41 in July 1932.
While the upper 1 percent was doing very well, those farther down the income scale were not doing as well and many were buying cars, appliances and other products on credit. Additionally, many Americans had been buying stocks on margin and when the stock market collapsed, they saw their equity plummet and they stopped buying goods and services; in the first half of 1930, consumers cut their expenditures by ten percent. Companies were afraid to invest in new capacity or products, and they too stopped spending.
In early May 1930 1,028 leading American economists presented President Hoover, Senator Smoot and Congressman Hawley with a letter urging Hoover to veto the bill if it passed Congress. (The organizer of the letter was Dr. Claire Wilcox, my economics professor in college.)
The economists argued that the tariff increases would raise the cost of living, limit our exports as other countries retaliated, injure U.S. investors since the high tariffs would make it harder for foreign debtors to repay their loans, and damage our foreign relations. Unfortunately, this is what happened.
The Smoot-Hawley tariffs represent a cautionary tale. Regardless of whether they were the major cause of the Great Depression or not, they definitely were a truly terrible idea. In today’s world where Central Banks have been pumping out liquidity and inflating stocks, similar to the case in the 1920s, we must hope that we don’t repeat the mistake of Smoot-Hawley.
The drop in exports was significant. From 1929 to 1933 American exports declined from about $5.2 billion to $1.7 billion, and the impact was concentrated on agricultural products such as wheat, cotton and tobacco. As a result, many American farmers defaulted on their loans, which in turn particularly affected small rural banks.
US Steel will in demand again, after decades of decimation from imports
originally posted by: SailorJerry
Ugh
I really hope this turns out ok, last time we were in a similar economic situation with an inflated stock market, we through out tariffs and ended up in the Great Depression.
This is a dangerous move and sould not be taken lightly.
Keep in mind that the last time we did this, we actually were a mecca for production and export , and still it destroyed us. We barely produce anything now.
I hope Trump is right, I hope it goes well, but this should not be taken with a grain of salt.
Fine, they have to deal with the tarrifs now too.
originally posted by: SailorJerry
a reply to: BlueAjah
US Steel will in demand again, after decades of decimation from imports
Not if other countries retaliate, and if the countries we tariff decide "Fine Fk it" and start selling their products to other countries at a discount, to undercut the prices THOSE countries are buying from us.
There are two sides to every coin and people really really need to weigh things out.
originally posted by: BlueAjah
I think this is a smart move. Trump has slowly been doing what he promised - improving trade agreements so that the US does not get the short stick, and strengthening US industry and employment.
Each one of these moves gives the US additional leverage for making deals with other countries. These deals can be made country by country, instead of getting us stuck into some pact that was negotiated by others who do not have our best interests as their priority.
US Steel will in demand again, after decades of decimation from imports.
originally posted by: strongfp
originally posted by: BlueAjah
I think this is a smart move. Trump has slowly been doing what he promised - improving trade agreements so that the US does not get the short stick, and strengthening US industry and employment.
Each one of these moves gives the US additional leverage for making deals with other countries. These deals can be made country by country, instead of getting us stuck into some pact that was negotiated by others who do not have our best interests as their priority.
US Steel will in demand again, after decades of decimation from imports.
How will it be in demand?
How many steel mills are left in the US?
Any nation needing steel can meet their needs without the US. This was a dumb move by Trump, it will only cause head aches.
originally posted by: strongfp
originally posted by: BlueAjah
I think this is a smart move. Trump has slowly been doing what he promised - improving trade agreements so that the US does not get the short stick, and strengthening US industry and employment.
Each one of these moves gives the US additional leverage for making deals with other countries. These deals can be made country by country, instead of getting us stuck into some pact that was negotiated by others who do not have our best interests as their priority.
US Steel will in demand again, after decades of decimation from imports.
How will it be in demand?
How many steel mills are left in the US?
Any nation needing steel can meet their needs without the US. This was a dumb move by Trump, it will only cause head aches.