cross-posted from: https://lemmit.online/post/5566633
This is an automated archive made by the Lemmit Bot.
The original was posted on /r/todayilearned by /u/MechCADdie on 2025-04-04 08:19:11+00:00.
cross-posted from: https://lemmit.online/post/5566633
This is an automated archive made by the Lemmit Bot.
The original was posted on /r/todayilearned by /u/MechCADdie on 2025-04-04 08:19:11+00:00.
There is some nuance here. Smoot-Hawley didn’t cause the great depression, and there a lot of economists who say it didn’t have that much of an effect at all.
Tarriffs can have some useful effects when used for protectionism, diplomatic coercion, or trade barrier reduction coercion. However, Trump’s tariffs are way dumber than anything that came before, because he’s trying to do all three of these at once. All of these have conflicting effects on each other, and it is literally impossible to design a tariff strategy that can accomplish all three, since raising a tariff for one purpose means that you need to lower tariffs for other purposes. All he’s doing by raising across the board is causing instability in the economy and convincing all partners to ditch the US.
All he’s doing is exactly what Putin wants. Systematically isolating and weakening America while weakening the West at large and any other competing countries to his power and new accumulation of wealth.
Source? To my knowledge Smoot-Hawley is pretty widely regarded as the worst possible move at the worst possible time. Protectionism doesn’t work when domestic purchasing power is already collapsing. Agreed on the rest though.
https://en.wikipedia.org/wiki/Smoot–Hawley_Tariff_Act
yeah maybe my nuance leaned too much to the no side, but I wanted to explain tariffs a bit. Trump tariffs are not protectionism or coercion, they’re just stupid.
I was thinking about the protectionism though… like in order for the tariff to work, the us would have to also manufacture the good that is being tariffed. But we don’t produce a lot here…and also even if we did… i guarantee the us business would jack up the prices to be competitive with the foreign price After tariffs and pocket the money. Making the whole thing moot.
The “protectionism” falls flat the moment you consider that the tariffs blanket all goods. If you want to dramatically expand American industry, you don’t start by raising the price of steel and raw materials.
Yea no matter how you slice it, there are no good use of tariffs, and if one were to insist, then it would only be like just barley enough to push up the price above parity, and only on very select items. But then if the other country does it back it goes in favor to the nation that is more industrial.
Correct! That’s what Cavallo et al found when the Trump administration tariffed China in 2018. US profit margins decreased on both imports AND exports, while China’s remained largely unchanged.
According to their analysis, American tariffs hurt Americans more than literally anyone else.
Fun fact, the Trump Administration cited Cavallo et al as supporting evidence for their tariff calculations.
The soybean tariffs, china found other countries quite quickly into counter the tariffs, and they largely abandoned the US of soybeans export
Yeah, sorry to say you were pretty off base friend. Smoot-Hawley didn’t start the fire, but it poured fuel all over the flames and locked the firemen out of the building.
Friedman was an advisor to Reagan and Thatcher. He was a libertarian who genuinely believed that economic prosperity hinged almost entirely on just printing more money. His economic theories are all over the place, but even he acknowledges that tariffs generally don’t work:
I think you can make a very good argument that the Smoot Hawley tarrifs were the main cause of Great Depression
Most people here love blaming Stalin for more than he is responsible for. The Soviet famine, was a global famine, and its roots are in this Smoot Hawley tariff act. Stalin gets blamed for upholding communist principles instead of submitting to Kulak farmer extortionist pricing. But he was also saddled with US pressure to repay debts with food. The tariff origins are that throughout the world, reciprocal tariffs meant not growing any surplus food, because you couldn’t sell it abroad, and then making too much food just made prices lower. A bit of a drought somewhere, and FUBAR.
“both sides” but the two sides are “it was bad” and “it was disastrously bad”
Europe has a some tariffs on Chinese EV brands. The reason is that they get subsidized by their government and can easily dump them on our markets, ruining our own industries. The tariff calculation is based on what we think those subsidies are and how to make it fair compared to our prices.
This is what is funny for me. I would like tariffs to discourage trade with countries that have less democracy, rights for its citizens, and high income disparity (which unfortunately we are not a paragon of currently) and encourage trade with countries that are the reverse of that.
There is good economic theory that Smoot Hawley actually was responsible for the initial bank failures that led to the Great Depression.
https://www.youtube.com/watch?v=JOvWS_xzRbc
Can skip to about 15 minutes into if ya want.
No one thing triggered it but the tarifs contributed almost as much as the out of control stock market. All the controls put in place to prevent this have been changed. So stupid tarifs(Are there any other kind) and a unregulated market system has us primed for some serious times.
There are some that work in order to protect national interests, mainly local producers and services. Whether they are stupid or not depends on implementation and end results
But these local companies just jack up their price to be competitive to the new tariffed foreign price and pocket the money.
Dunno, what usually happens without tariffs is that the bigger multinational companies drive the prices so low as to destroy local competition, after that they jack up the prices