46: How Do Trump's Tariffs Stack Up Historically?

Episode Summary

Executive Summary: The episode places Trump-era protectionism in historical context by comparing it with major U.S. trade restrictions from the 1930s, Nixon’s 1971 import surcharge, the 1980s voluntary export restraints, and the 1960s chicken war. The hosts argue that raw tariff dollar totals are misleading; the key is scale, duration, trade share, and economic harm, which vary sharply across episodes.

Main Topics: Why protectionism is hard to compare over time (Priority: 5/5): The episode opens by arguing that tariffs and other trade barriers cannot be judged only by dollar value; economists must consider tariff rates, affected trade share, duration, and deadweight loss. Trump’s tariffs in context (Priority: 5/5): The hosts review the Trump administration’s announced and imposed tariffs, noting that the current package is large in modern terms but still below the most extreme historical trade restrictions—unless pending measures are enacted. The early 1980s voluntary export restraints (Priority: 5/5): Doug Irwin explains that Reagan-era measures were severe because quotas and export restraints covered a large share of imports and imposed large quota rents, making them economically costly despite not being tariffs. Nixon shock and the 1971 import surcharge (Priority: 4/5): The episode compares Trump’s tariffs with Nixon’s 10% across-the-board import tax, which was used briefly as leverage to force currency realignment and succeeded after four months. The chicken war and long-lived sectoral tariffs (Priority: 4/5): The 1960s U.S.-Europe chicken dispute shows how narrow trade conflicts can produce durable tariffs, including the still-existing 25% U.S. truck tariff. Smoot-Hawley and the 1930s (Priority: 5/5): The discussion concludes with the Great Depression-era tariff spiral, emphasizing that deflation, retaliation, and global policy breakdown made the period worse than the statute alone suggests.

Key Arguments: Dollar amounts of affected trade are a poor standalone measure of protectionism; tariff rate, coverage, and duration matter more. Quotas and voluntary export restraints can be as harmful as tariffs because they create quota rents and raise prices without generating government revenue. The Reagan-era 1980s restrictions were broader and more economically damaging than Trump’s then-current tariffs because they covered a larger share of imports and lasted in a high-friction trade environment. Nixon’s 1971 tariff was more sweeping in coverage than Trump’s early tariffs, but it was temporary and targeted at exchange-rate negotiations, which limits comparability. Smoot-Hawley is often overstated as a tariff increase alone; its impact was amplified by deflation, retaliation, and the use of specific tariffs. If all announced Trump measures were implemented, the U.S. would move much closer to historically large protectionist episodes, though still not automatically to 1930s levels.

Data Points: Trump tariffs imposed (as described early in episode): about $92 billion - Approximate value of American imports hit by tariffs at the time of recording Share of U.S. imports affected by Trump tariffs: about 4% - Equivalent share of 2017 U.S. imports covered by the tariffs already imposed Additional China tariffs announced: $16 billion - Further tariffs on Chinese imports expected soon Additional China tariffs under consideration: $200 billion - Tariffs tied to the July 10 product list that were still being worked out Potential auto and parts tariffs: $350 billion - Imports under national security investigation for possible future tariffs Chinese retaliation against U.S. exports: $73 billion - Value of American exports hit by trading partners’ retaliatory tariffs U.S. imports covered by restrictions in 1975: 8% - Import restrictions before the peak of early-1980s protectionism U.S. imports covered by restrictions in 1984: 21% - Share covered by voluntary export restraints and related measures Quota rents from early-1980s restraints: $26 billion - Estimated deadweight losses from auto, steel, textiles, and apparel restraints Quota rents as share of GDP: 0.7% - Economic cost of early-1980s restraints Equivalent tariff of early-1980s restraints: 49% tariff on all imports - One calculation translating quota-rent losses into tariff-equivalent terms Nixon import surcharge: 10% - Temporary across-the-board tariff imposed in 1971 Nixon tariff coverage: around half of American imports - Imports subject to the 1971 surcharge Estimated import reduction from Nixon surcharge: 6% to 8% - Economists’ estimate of the effect on imports Nixon tariff duration: 4 months - Time the import surcharge remained in effect Chicken export decline after EEC chicken duty: two-thirds - U.S. poultry exports fell sharply after the 1962 European tariff increase U.S. retaliation in chicken war: 25% tariff on imported trucks - Most famous retaliatory measure, originally aimed at Volkswagen trucks Smoot-Hawley tariff increase: about 6 percentage points - Increase from roughly 41% to about 47% on dutiable imports Dutiable imports share in Smoot-Hawley era: about one-third of total U.S. imports - Portion of imports directly subject to those tariffs Current U.S. tariffs, simple average: 3.4% - Baseline average tariff rate mentioned for comparison with old column-two tariffs Current U.S. tariffs, trade-weighted average: 1.4% - Alternative average using trade weights Smoot-Hawley column-two tariff, simple average: 36% - Hypothetical average if today’s tariffs were raised to old column-two rates Smoot-Hawley column-two tariff, trade-weighted average: 28% - Alternative hypothetical average under trade weighting Potential Trump tariff coverage if all announced measures were imposed: about 25% of U.S. imports - Estimated share if all pending China and auto-related tariffs were enacted

Pivotal Quotes: "Every protectionist measure is different in its own special way." — Doug Irwin: A humorous framing for why historical comparisons are inherently difficult "I have directed Secretary Connolly to suspend temporarily the convertibility of the dollar into gold or other reserve assets..." — Richard Nixon: Excerpted presidential statement introducing the 1971 Nixon shock and import tax "The main message there is just to remind listeners that we are still very far away from where we were in the 1930s." — Sumaya Keynes: Summary of the episode’s conclusion on historical comparison

Implications: Trump’s tariffs were significant, but history shows protectionism becomes truly severe when coverage, duration, retaliation, and macroeconomic stress align. Listeners should watch pending tariff rounds, not just announced ones, because the scale could shift quickly.