U.S. failing to learn from its own history

“Canada is well aware that trade treaties with the United Kingdom or European nations are not liable to sudden changes for political exigency. A new government in Britain does not mean reversals and upheavals in trade contracts just for a change or for political whim. United States political leaders do not realize that vital fact. Some are elected merely to make repudiations with foreign nations — as a vote getter!”

— The Brandon Sun editorial page, May 4, 1933, nearly three years after the Smoot-Hawley Tariff Act was signed into law.

Funny how history repeats.

Especially when certain folks who should know better refuse to learn the lessons of history.

On Monday, Canada’s biggest trading partner once again launched punitive trade tariffs on Canadian goods: U.S. President Donald Trump decided to levy a 50 per cent tariff on a wide range of Canadian exports, a move that is expected to affect US$20 billion in Canadian exports.

The reason?

Because Canada had the temerity last year to actually respond to unilateral U.S. tariffs despite Canada’s trade deals with that country.

Long a fan of using ancient and esoteric law to push his tariff agenda, this time Trump has reached back to the Dirty ’30s to resurrect Section 338 of the Smoot-Hawley tariff act, part of a piece of tariff legislation that economists say severely deepened the Depression.

Is this an attempt to use leverage in ongoing negotiations in the Canada-U.S.-Mexico trade agreement? Possibly, because the reason Trump says he’s imposing the tariffs mirrors the complaints he’s made publicly about CUSMA — dairy imports into Canada among them.

Is it an attempt to test-drive using section 338 to impose tariffs after his earlier tariff efforts were thrown out by the U.S. Supreme Court?

Again, possibly.

Is it because the war against Iran is going badly and he needs to create a distraction? Possibly again.

Whatever the reason, it’s both tiresome and dangerous for the Canadian economy — and for American customers, who will be the people actually paying the cost of the new tariffs on everything from wood for housing construction to bedsheets and, for some reason, mosses, lichens and fake beards.

It’s worth looking at the effects of the Smoot-Hawley legislation. So why not look at the analysis offered up by U.S. Senate of how successful the tariff law was for an America on the edge of the Great Depression?

“It was on June 13, 1930, that the Senate passed the Smoot-Hawley Tariff, among the most catastrophic acts in congressional history,” a page on the U.S. Senate website says. “A thousand economists signed a petition, drafted by a Chicago economist, and future U.S. senator, Paul Douglas, that implored the president to veto the tariff … Ignoring the experts, President Herbert Hoover signed the tariff on June 17, 1930. As the economists predicted, the high tariff proved to be a disaster … Nor did the tariff sit well with the voters. In 1932 they turned the majority in both houses over to the Democrats, by large margins. The voters also made clear their disdain for the Smoot-Hawley tariff by booting both Reed Smoot and Willis Hawley out of office that year.”

Smoot-Hawley was a clear example of the perils of starting trade wars, and an object lesson that Donald Trump seems to have failed to understand. It might, however, be obvious to ordinary Americans, as prices rise on US$20 billion worth of products.

That doesn’t make the risks to Canadians any smaller — but what exactly are we expected to do? Mollify the bully? Accept the blackmail, lower our opposition and expect that Capo Trump won’t turn around and come back for more?

Because he most definitely will.

We have to continue to try to find global partners who uphold the agreements they’ve signed, whose word is their bond (not simply a timely convenience) and move forwards.

We have to continue to negotiate on CUSMA, but from the pragmatic point of view that a new deal might well not be worth the paper it’s printed on.

While it did no good for Canada’s economy of the day either, history has shown that Smoot-Hawley was an economic disaster for the United States in the 1930s.

As U.S. Senator Reed Smoot — co-author of the Smoot-Hawley Tariff Act —sheepishly admitted in August 1934, the anticipated U.S business recovery that prompted the unwarranted tariff push in the first place never came to pass. All it did was serve to greatly reduce Canadian exports into the United States and hurt ordinary Americans in the process.

“I am sorry to say business has not recovered as anticipated,” Smoot was quoted as saying in the Aug. 19, 1934 Brandon Sun. “Plans were mapped out and courses have been followed which have never before been tried — but I doubt if the results are what the administration anticipated.

“American people, I think, will stand taxation to avoid suffering, but perhaps the old policy of letting things work out themselves would have brought record quicker than the present course.”

Without a doubt, this modern echo of Smoot-Hawley will fare no better.

» Winnipeg Free Press & The Brandon Sun