From the Club for Growth blog, a posting about proposed protectionist trade policy with China:
In 1930, Congress passed and President Hoover signed into law the Smoot-Hawley Tariff Act. At the time, this protectionist measure was vigorously opposed by 1,028 of the nation?s top economists. They rightly predicted the tariffs would devastate the economy. And, in fact, the country subsequently plunged into the Great Depression.
Sounds good, right? Unfortunately, however, the Great Depression was already underway, as the economic downturn happened in 1929. Higher tariffs did little but further suppress international trade. I have a hard time taking a group seriously when they manipulate history to better support their contentions.
So why is Club for Growth making a stink about tariffs? I don’t mean in general – I get that – I mean right now. Because there is a bipartisan bill on the Hill right now that is threatening China with 27.5% tariffs.
Charles E. Schumer (D-N.Y.) and Lindsey O. Graham (R.-S.C.) introduced the bill, which calls for a 27.5 percent tariff on Chinese goods, in February. They delayed a vote on it last month, saying that Treasury Secretary John W. Snow and Federal Reserve Chairman Alan Greenspan had assured them that China would soon raise the value of the yuan.
Of course, something that’s being obscured here is the fact that tariffs went up by a whopping 2.5% points with the passage of Smoot-Hawley over the already-high rates being levied in the 1920s. In fact, falling world trade resulting in just 1/5th of lost GDP during the Great Depression, and given that the depression was world-wide, it’s debatable what percentage of that lost trade was due to Smoot-Hawley.
The current proposed rates are well south of the prevailing tariff rates in the 1920s. CfG’s petition signed by 1,028 economists is a bit of political theater.