Well, the week is off to a “solid” start on the trade war front.
Trump apparently waited to at least sit upright in bed before attacking someone on Twitter Monday (as opposed to rolling over as soon as he opened his eyes and grabbing the phone off the nightstand like he did on Friday morning), but the result was the same. More hawkish trade rhetoric that left a bad taste in everyone’s mouth.
The President accused Canada of “treating our farmers badly” and that weighed on the loonie which is now sitting at its weakest since July.
Meanwhile, Macron is pissed in France.
If Trump applies the steel and aluminum-imports tariffs “it’s clear they’ll be in contravention of the WTO rules,” he said at a joint press conference with Quebec Premier Philippe Couillard in Paris on Monday, adding that “nationalism is war, and everybody loses.” He also said if Trump goes ahead with the tariffs, France will respond “rapidly.”
Quebec’s Couillard stated the obvious, which is that America’s markets will invariably absorb the tariffs, with import tariffs increasing the cost of making metal-based goods in the U.S. “It’s the U.S. manufacturers that will pay for this policy,” Couillard added, flatly.
So, with Trump all fired up to go ahead and try his hand at dismantling decades and decades of progress on global trade, we though this was a good time to run the following “brief history of U.S. trade since the Great Depression” as expounded by Goldman last summer.
Via Goldman
US trade policy has evolved significantly since the Great Depression when tariffs on dutiable imports peaked at nearly 60% and there was no centralized organization overseeing global trade matters. Below we highlight some of the key milestones along the path towards trade openness that helped drive growth for the US and globally.
- The Smoot-Hawley Tariff Act of 1930, the most significant piece of trade legislation during the Great Depression, raised tariffs on more than 20,000 imported goods in an effort to protect the domestic economy. The result, however, was a series of retaliatory measures by major trading partners and a 40% reduction in total US trade volumes between 1930 and 1932.
- The Reciprocal Tariff Act (RTAA), which was signed into law in 1934 by President Franklin Delano Roosevelt, authorized the president to negotiate like-for-like tariff reductions between the US and its trading partners. Between 1934 and 1940, FDR used this authority to negotiate tariff reductions with 21 countries representing roughly 60% of total US trade, helping to lower average tariffs on total imports from 19.8% in 1933 to 12.5% by 1940.
- Post WWII, global trade negotiations were reestablished, and in 1947 the US along with 22 other countries signed the General Agreement on Tariffs & Trade (GATT), which served as the primary framework for trade negotiations over the next 50 years. Through multiple rounds of international negotiations between 1947 (Geneva Round) and 1994 (Uruguay Round), duties collected as a percentage of total US imports fell from 7.9% (1947) to 3.0% (1994).
- With the passage of the Trade Act of 1974, focus has shifted towards the reduction of nontariff barriers (e.g., voluntary export restraints; quotas) while also providing “adequate procedures to safeguard American industry and labor against unfair or injurious import competition”. The law provided increased access to “trade remedies” (e.g., antidumping duties; countervailing duties) to address concerns among domestic industries suffering from foreign competition, while also providing the president authority to negotiate both tariff reductions and nontariff measures. It also established “Fast Track” authority, allowing Congress to either approve or veto the negotiated agreements as they stand, but not alter them.
- Trade reform once again shifted gears again in the late 1980s and early 1990s, both with the establishment of the World Trade Organization (WTO) in 1995 as the primary organization regulating global trade (replacing the outdated GATT) and the proliferation of free trade agreements. With the US-Canada Free Trade Agreement of 1989 (later joined by Mexico to create NAFTA), US trade negotiations shifted back towards direct bilateral and regional trade pacts. Today the US has free trade agreements in place with 20 countries and also negotiated the Trans-Pacific Partnership (TPP), which is not yet in force (the US withdrew in January 2017). As a result, the percentage of imports that are subject to tariffs (“dutiable”) has fallen from more than 65% in 1990 to just 30% today.
