Tariff talk is all the news now, generating lots of heat and precious little light, much as it was in May 1930 when the Smoot-Hawley Tariff Act slithered onto President Herbert Hoover’s desk.
Our economy was in a slump and, darn it, other countries were to blame. Feeling we needed to protect ourselves, a Republican Congress created just the instrument to do it: a tariff scheme to square things. People who actually study economics know tariffs are really a roundabout, regressive tax on those who issue them. More than a thousand alarmed economists warned President Hoover not to sign that bill. He ignored them, made it law and, as predicted, a mild repression devolved into The Great Depression.
Sound familiar? It seems we may have to learn again that those who ignore their history are doomed to repeat it. While we’re currently not as bad off as we were in the late 1920s, we’re not immune to some setbacks either, and the farmers President Donald Trump purported to help are soon to feel the pain; especially soy and corn growers.
Now he’s giving them subsidies (welfare) with money borrowed from the country he started the trade war with. Retaliatory tariffs always bring downstream effects. Many small manufacturers now find themselves unable to absorb higher supply costs and, as their production shrinks, some are looking at Mexico. Oh, and Apple has lost $120 billion in recent weeks.
Among the possible lessons in the arc of events, from 1930 until now, is the self-delusion inherent in blaming our woes on others. One of the central ideas justifying the present trade war is that the Chinese “stole our technology.” While this handily frames us as victims and justifies our ire, another perspective may teach us more. Is it possible that the first investors just didn’t bargain well enough to keep our intellectual property secure? I suspect those eager financiers, so flush with expansive, neoliberal optimism, would have sold their mother’s souls to enter the Chinese market. The Chinese didn’t have to steal our expertise: blinded by greed, we gave it away. And blaming them, we missed the lesson.
Productive, stable trading can only occur in a culture of trust where win/win outcomes are expected and fairly constructed. Unfortunately this is a condition for which our president is totally unsuited. His paranoid mind-set can’t grasp it. To him, life is a dog-eat-dog, zero sum game where you can only win by causing your opponent to lose. And he’ll do that even if he has to con and cheat; recall the 3,500 lawsuits filed against him. Created conflict and conquest are the tools an extreme narcissist needs to maintain a grandiose self and feel alive. Fairness and integrity are irrelevant. The art of his deal is to dazzle, seduce and deceive so he’ll feel gloriously superior.
This process only produces a tragic, fear-driven soul with few friends, a clutch of flatterers and a long train of enemies.
And China may be next.