Trump and the history of tariffs. With Doug Irwin

Episode Summary

Executive Summary: The episode argues that tariffs are back as a major force in U.S. trade policy, driven largely by Donald Trump’s preference for restriction over revenue or reciprocity. Tariffs have historically served different purposes, but the conversation concludes that Trump-era tariff policy—especially toward China—likely represents a durable geopolitical shift rather than a temporary blip, though domestic politics, market backlash, and lobbying may limit how far it goes.

Main Topics: Tariffs return as a central policy tool (Priority: 5/5): The discussion opens by noting that tariffs, once seen as obsolete, have re-emerged as a defining instrument of U.S. trade policy under Trump, potentially signaling a move toward a new high-tariff era. The three R’s: revenue, restriction, reciprocity (Priority: 5/5): Doug Owen frames tariff policy as serving three historical goals: raising government revenue, restricting imports to protect domestic industries, and enabling reciprocal bargaining or retaliation in trade negotiations. U.S. tariff history and historical inflection points (Priority: 5/5): The episode traces major tariff eras from the early republic through the Civil War, late-19th-century protectionism, Smoot-Hawley, and the postwar multilateral order, asking whether today marks another turning point. Trump compared with Nixon, not just Hamilton (Priority: 4/5): Owen argues Trump most resembles Richard Nixon in trade policy: both used tariffs aggressively, tied trade to national security, and relied on rhetorical excess and strategic ambiguity. China, geopolitics, and the limits of trade policy (Priority: 5/5): The conversation stresses that today’s tariff conflicts are shaped by geopolitical rivalry with China, making tariffs part of a broader confrontation over technology, power, and alliances rather than just economics. Political economy, exemptions, and lobbying (Priority: 4/5): Tariffs create pressure for exemptions, which can turn policy into a transactional system benefiting powerful firms while smaller businesses bear the costs; this raises corruption concerns and weakens tariff walls. What could constrain a second Trump tariff surge (Priority: 4/5): While the president has substantial legal authority, the biggest checks may come from markets, business backlash, farm-state impacts, consumer prices, and international retaliation rather than Congress.

Key Arguments: Tariffs were originally mainly a revenue tool for the U.S. federal government before becoming instruments of protection and reciprocity. The claim that high tariffs caused 19th-century U.S. industrialization is overstated; growth also depended on immigration, capital, technology transfer, and other structural factors. Smoot-Hawley was not inevitable; it was a political own goal driven by mistaken efforts to protect farmers and equalize tariff burdens, despite predictable foreign retaliation. The postwar low-tariff multilateral system was not inevitable either; it emerged from the combined shocks of the Great Depression and World War II, which made U.S. leaders reject isolationism. Trump’s trade policy is most strongly about restriction—protecting manufacturing and jobs—rather than revenue or true reciprocity. Tariffs do not reliably reduce the overall trade deficit because trade balances are shaped by macroeconomic forces like growth, capital flows, and exchange rates. The main practical brakes on aggressive tariffs are likely to be market reaction, business opposition, farm-state harm, consumer prices, and retaliation, not legal limits. Even though the Biden administration is more multilateral in rhetoric, it has largely kept Trump’s tariffs on China, suggesting a durable bipartisan shift. Exemptions and carve-outs are a major feature of tariff politics because firms lobby for relief when they lack domestic substitutes, making tariffs highly political and transactional. The broader conflict with China is geopolitical; tariffs are one tool in a larger struggle over industrial policy, technology, and strategic power.

Data Points: Estimated chance of a new high-tariff era: 6/10 - Doug Owen’s estimate that the U.S. may be at an inflection point in tariff history Tariff revenue share of federal revenue: about 90% - Tariffs’ contribution to U.S. federal revenue in the first 70 years after the Constitution Period of tariff dominance before Civil War: roughly 70 years - From the founding until the Civil War, tariffs were primarily a revenue instrument Tariffs before Civil War: about 20% - Tariffs had fallen to around this level right before the Civil War Trump’s first-term tariff increase era: biggest increases since the 1970s - Opening framing of Trump’s first-term tariff policy Proposed China tariff in mid-2000s: 27.5% - Senator Charles Schumer’s legislation targeting China for currency manipulation Nixon across-the-board import surcharge: 10% - Comparison used to show similarity between Nixon’s and Trump’s trade tactics Smoot-Hawley timing: 1928-1929 - Tariff discussions occurred before the Great Depression while the business cycle was at a peak Protective tariff example under Trump/NAFTA renegotiation: U.S.-Mexico-Canada framework retained and adjusted - Trump renegotiated NAFTA rather than fully withdrawing Biden tariff on Chinese EVs: 100% - Example of continued tariff use aimed at strategic industry protection Early 1980s Reagan protectionism period: temporary aberration - Used as an example of a protectionist blip that later reversed World War II impact on trade policy: major shift - War helped drive U.S. leaders toward open, reciprocal trade institutions

Pivotal Quotes: "Tariffs are back and we owe it to tariffman Donald Trump himself for bringing them back." — Doug Owen: On the revival of tariffs as a central trade-policy issue "It's my philosophy that foreigners are out to screw us. It's our job to screw them first." — John Connolly (quoted by Doug Owen): Used to illustrate the Trump-like rhetoric of the Nixon administration "I think, despite sort of all three R's being in play, the one that's most important to him is restriction." — Doug Owen: On Trump’s underlying motivation for tariffs

Implications: The episode suggests tariffs are likely to remain a lasting feature of U.S.-China policy. Businesses should expect exemptions battles, retaliation risk, and more politicized trade decisions. The biggest uncertainty is whether tariff escalation becomes a brief episode or a new durable regime.