Random Thoughts

According to one famous political leader, "tariff" is the most beautiful word in a dictionary. In this light, some historical parallels are worth remembering.

The Smoot-Hawley Tariff Act was passed by Congress in June 1930 and signed into law by President Herbert Hoover on June 17, 1930. On September 18, 1931, Japan invaded Manchuria and a bloody war followed. This was a direct consequence of said legislation, albeit an unintended one. Reciprocal tariffs from the rest of the world hit US exporters really hard too. Because the U.S. was a large net exporter it only worsened the already deteriorating economic situation. Back then the driving force behind tariffs were farmers, who had an overly naïve understanding of the economy, yet were extremely vocal constituents. It was MAGA before the term's existence.

To be fair, tariffs are a useful tool to hedge from beggar thy neighbor industrial, and by extension trade policies, of other countries. Just don't pretend they'll be cost-free.

U - Unintended consequences.

#economics
February 2025

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128 viewsFeb 18 at 22:43

According to one famous political leader, "tariff" is the most beautiful word in a dictionary. In this light, some historical parallels are worth remembering.

The Smoot-Hawley Tariff Act was passed by Congress in June 1930 and signed into law by President Herbert Hoover on June 17, 1930. On September 18, 1931, Japan invaded Manchuria and a bloody war followed. This was a direct consequence of said legislation, albeit an unintended one. Reciprocal tariffs from the rest of the world hit US exporters really hard too. Because the U.S. was a large net exporter it only worsened the already deteriorating economic situation. Back then the driving force behind tariffs were farmers, who had an overly naïve understanding of the economy, yet were extremely vocal constituents. It was MAGA before the term's existence.

To be fair, tariffs are a useful tool to hedge from beggar thy neighbor industrial, and by extension trade policies, of other countries. Just don't pretend they'll be cost-free.

U - Unintended consequences.

#economics
February 2025

BY Random Thoughts