In a short span of time, President Donald Trump’s aggressive tariff policy has effectively undone a century of trade liberalization in the United States, according to economists who predict that restoring previous trade conditions could prove to be a lengthy process.
Historically, protectionist phases have demonstrated that dismantling trade barriers can be challenging once established. Doug Irwin, a Dartmouth College professor with extensive experience in trade, notes that the rapid imposition of tariffs does not guarantee their swift removal. The comprehensive tariff hikes of the 1930 Smoot-Hawley Act, which many believe aggravated the Great Depression, were quickly reconsidered following a governmental shift yet took decades to fully reverse, Irwin explained.
Trump’s policy includes a broad imposition of 10 percent duties coupled with bilateral tariffs, which, upon implementation, could elevate the overall tariff rate on U.S. imports to its highest point since 1909. The U.S. President often refers to the “Gilded Age” of prosperity and disparity, a period predating federal income tax, and when future President William McKinley pursued legislation aiming to raise average tariffs to nearly 50 percent.
President Trump noted shortly after his inauguration that the United States thrived economically from 1870 to 1913, a period characterized by high tariffs. Economists acknowledge the inherent costs of trade wars and assert that tariffs could be even more disruptive in today’s interconnected global economy, where trade constitutes a significant portion of output.
The Trump administration might expedite de-escalation if they perceive tariffs as leverage to secure concessions, whether in trade or other diplomatic areas, suggests Irwin. This tactic mirrors Richard Nixon’s 1971 imposition of a 10 percent surcharge on all taxable imports to compel Germany and Japan into currency devaluation negotiations, a strategy that resulted in the swift removal of tariffs upon achieving the desired outcome.
Although there remains a limited opportunity for countries to gain reprieve from looming reciprocal rates set to activate on April 9, the universal 10 percent rate appears non-negotiable. However, if similar strategies prove ineffective, tariffs could persist for decades.
A notable instance of enduring tariffs is the 25 percent ‘chicken tax’ imposed on U.S. light truck imports in the early 1960s as retaliation against a European tariff on factory-farmed U.S. poultry. This tariff was never revoked and significantly influenced the global auto industry, arguably to the U.S.’s disadvantage, as it encouraged domestic producers to focus on large, fuel-inefficient vehicles rather than expand into growing markets for smaller cars.
Tariffs designed to protect domestic industries and encourage job repatriation are likely to become entrenched, even after the original political motivations diminish. This persistence is partly due to the emergence of new lobbying groups and a governmental interest in securing trade-offs to reduce the tariffs.
Politically sensitive tariffs, particularly those in agriculture, are notoriously resistant to removal. Kevin O’Rourke, a professor at Sciences Po, points out that European agricultural protectionism began in the 1870s-1880s and still persists. For example, Coca-Cola’s U.S. recipe differs from Mexico’s version due to quotas and subsidies that make high fructose corn syrup more economical than sugar.
Chad Bown, chief economist at the State Department under President Joe Biden, suggests that such protections facilitated the development of new products in the U.S. Economically, tariffs are also advantageous politically, as they resonate positively with voters. Alexander Klein, an economic historian, highlights how the tariffs introduced during the U.S. civil war for revenue generation persisted due to their popularity with the public and businesses alike.
Ultimately, when the Smoot-Hawley tariffs were comprehensively dismantled following World War II, it aligned with U.S. trade interests, particularly with Europe as the primary market. However, if Trump’s new trade policies result in tariffs being a major federal revenue source as they did in the 19th century, they might endure beyond his tenure.
Jeffrey Schott from the Peterson Institute for International Economics suggests that if tariffs were implemented as a source of revenue, reversing them would necessitate raising other taxes. Kris Mitchener from Santa Clara University believes that if Trump’s goal is merely to use tariffs as leverage or revitalize domestic industries, the approach may backfire, inciting international retaliation and fostering skepticism around U.S. policymaking stability. However, if the 10 percent universal tariff becomes the norm with a focus on revenue, a reversal seems unlikely.
