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Speaker 1: Welcome to brain Stuff production of iHeart Radio, Hey brain

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Speaker 1: Stuff Lauren Vogel bamb here. In May of twenty nineteen,

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Speaker 1: the Trump administration increased tariffs on two hundred billion dollars

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Speaker 1: worth of Chinese exports, raising them from ten percent to

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Speaker 1: The increase is the latest skirmish in a trade war

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Speaker 1: that's been rapidly escalating since eighteen, a trade war in

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Speaker 1: which President Trump has attacked what he views as unfair

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Speaker 1: Chinese trade practices and demanded that the country by more

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Speaker 1: American products to reduce the US China trade deficit, which

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Speaker 1: total three hundred and seventy six billion dollars in sev

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Speaker 1: The Chinese responded to the latest increase by expressing quote

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Speaker 1: deep regret over the development and said they planned to

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Speaker 1: take quote necessary countermeasures. These tariffs aren't the first that

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Speaker 1: the Trump administration has imposed against China. In July eighteen,

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Speaker 1: the administration hit China with ten percent tariffs on two

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Speaker 1: hundred billion dollars worth of imports, a penalty that has

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Speaker 1: since affected the prices that US consumers pay for scores

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Speaker 1: of products ranging from computers to luggage. A Chinese officials

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Speaker 1: quickly responded, adding their own tariffs on US products and

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Speaker 1: stepping up border inspections of US goods and holding up

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Speaker 1: licenses for US companies to do business in China. And

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Speaker 1: Trump is also waging trade wars on other fronts. In

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Speaker 1: May of twenty eighteen, his administration imposed steel and aluminium

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Speaker 1: tariffs on Canada, Mexico, and the European Union. The US's

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Speaker 1: neighbor to the north immediately counterpunched, with Canadian Prime Minister

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Speaker 1: Justin Trudeau announcing that it would slap retaliatory tariffs on

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Speaker 1: U S exports to Canada. A tariff is a border

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Speaker 1: tax on the buyer. When the United States levies a

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Speaker 1: tariff on products imported from other countries, it is the

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Speaker 1: U S importer who pays the tariff, not the foreign exporter. So,

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Speaker 1: for example, when the Trump administration orders a tariff on

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Speaker 1: Chinese tech products, the U S importer of those tech

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Speaker 1: products will pay the increasing cost, not the Chinese. Ultimately,

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Speaker 1: these tariffs make it more expensive for Americans to import

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Speaker 1: Chinese goods or goods from whichever nation the tariff is

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Speaker 1: being imposed on. The money is collected by customs and

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Speaker 1: border protect and the proceeds go to the U. S.

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Speaker 1: Treasury to become part of the nation's general budget. It's

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Speaker 1: hardly the first time that the US and other nations

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Speaker 1: have become involved in such a conflict over trade. Trade

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Speaker 1: wars can happen for various reasons. It could be that

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Speaker 1: one nation decides that it's getting a raw deal because

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Speaker 1: another nation provides subsidies to its manufacturers so that they

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Speaker 1: can export goods that are priced too low for local

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Speaker 1: producers to compete with. Or it could be the nation

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Speaker 1: decides that wants to nurture its own industries by hindering

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Speaker 1: their foreign competitors with protective tariffs. Centuries ago, trade wars

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Speaker 1: often involved actual violence. In the seventeen and early eighteen hundreds,

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Speaker 1: for example, China sold a lot of tea and porcelain

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Speaker 1: to the British Empire, so much that the British got

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Speaker 1: concerned about the outflow of silver to pay for it.

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Speaker 1: They decided to fix the trade and balance by getting

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Speaker 1: China to import large quantities of opium that the British

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Speaker 1: produced in India. When the Chinese government eventually bulked at

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Speaker 1: this arrangement, the British sent in their warships and forced

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Speaker 1: China to sign an eighteen forty two treaty. The not

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Speaker 1: only open China to British trade, but gave the territory

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Speaker 1: of Hong Kong to the British. This conflict became known

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Speaker 1: as the First Opium War. But even a bloodless trade

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Speaker 1: war can caused plenty of suffering. A lot of observers

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Speaker 1: are seeing unsettling parallels between Trump's multifront trade warfare and

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Speaker 1: the trade war that erupted in the nineteen thirties after

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Speaker 1: President Herbert Hoover signed into law the Smoot Holly Act,

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Speaker 1: which raised US tariffs by an average of sixteen percent.

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Speaker 1: Other countries enacted their own tariffs in response, leading to

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Speaker 1: a disastrous global decline in trade. We spoke via email

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Speaker 1: with Dartmouth College economics professor Douglas A. Irwin, author of

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Speaker 1: the twenty eleven book Peddling Protectionism, smoot Holly, and the

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Speaker 1: Great Depression. He said, initially, smoot Holly was not a

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Speaker 1: response to the Great Depression. It was passed by the

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Speaker 1: House in the spring of nineteen twenty nine, before the

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Speaker 1: business cycle peak, at a time when the economy was

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Speaker 1: doing well and the unemployment rate was low. However, it

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Speaker 1: got held up in the Senate and by that time.

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Speaker 1: The stock market had crashed in the fall of nineteen

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Speaker 1: twenty nine and the economy was moving into a recession,

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Speaker 1: which later became the Depression. The economy continued to get

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Speaker 1: worse after the passage of Smoot Holly, and the brutality

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Speaker 1: gation against you as exports that occurred because of it

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Speaker 1: is thought to have contributed to the severe economic difficulties

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Speaker 1: at that time. So there is a cautionary tail here.

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Speaker 1: Just because the economy is doing well and close to

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Speaker 1: a peak does not mean that things cannot go badly

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Speaker 1: if one moves in a protectionist direction. Smote Holly also

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Speaker 1: helped stimulate a surge of angry nationalism in other countries.

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Speaker 1: Irwin explained it this way. If one country slaps tariffs

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Speaker 1: on your goods, the usual response is to take offense

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Speaker 1: and retaligate, rather than to turn the other cheek. Both

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Speaker 1: in nineteen thirty and today, Canada was very upset with

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Speaker 1: US terrorf action and retaliated nationalists gain strength unperceived slights.

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Speaker 1: And just think about how China still remembers being humiliated

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Speaker 1: by Western powers during the Opium Wars of the nineteenth

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Speaker 1: century and its vow to never be so weak again.

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Speaker 1: When the Trump administration bullies countries today on trade, it

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Speaker 1: naturally leads other countries to stiffen their resolve to resist

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Speaker 1: the US. Another big problem with trade wars is that

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Speaker 1: there's a lot of collateral damage. As Philip I. Levey,

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Speaker 1: a Senior Fellow on the Global Economy for the Chica

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Speaker 1: GO Counsel on Global Affairs, recently pointed out on vox,

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Speaker 1: poor people tend to suffer disproportionately since basic necessities that

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Speaker 1: they already struggle to afford food, shooes, and clothing can

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Speaker 1: become more expensive. We also spoke with Levy via email.

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Speaker 1: He added that certain sectors of the economy can be

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Speaker 1: hit worse than others. Quote, if you are in a

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Speaker 1: steel using sector like an auto parts of manufacturer, you

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Speaker 1: are more likely to be hurt by the steel tariffs.

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Speaker 1: If you're in the construction sector, you're likely hurt by

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Speaker 1: tariffs on steel and on Canadian softwood lumber. These are

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Speaker 1: hits to income and employment, which are in addition to

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Speaker 1: the hits people take as consumers. However, the producers of

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Speaker 1: the products that a government is waging war over and

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Speaker 1: their investors stand to benefit. Levy said to be fair.

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Speaker 1: If you're a shareholder in US steel, you're pretty happy

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Speaker 1: you don't have to face as much competition. True for

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Speaker 1: workers as well, but much of the job loss has

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Speaker 1: been to automation, not trade, so the tariffs don't fix that.

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Speaker 1: Though the world economy and global trade are stronger today

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Speaker 1: than they were in the early nineteen thirties, Levy argues

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Speaker 1: that a trade war today might be even more damaging.

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Speaker 1: He said, there's this unusual argument about why this is

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Speaker 1: a great time for a trade war. It's a little

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Speaker 1: like saying that today is a good day for me

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Speaker 1: to slam my hand in the car door since I

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Speaker 1: don't have to give a piano performance in the near future.

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Speaker 1: While that may be true, it's still not a good

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Speaker 1: idea to slam my hand in a car door. He continued,

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Speaker 1: Why might now be worse than the nineteen thirties for

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Speaker 1: the United States? Back then everyone was doing it and

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Speaker 1: we didn't really have global supply chains. Now it is

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Speaker 1: not the case that all countries are raising trade barriers

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Speaker 1: against everyone else. It's the United States that's carving itself

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Speaker 1: out of global supply chains. The rest of the world

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Speaker 1: is still striking trade deals, whether it's the European Union

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Speaker 1: in Canada, the European Union in Japan, or the Comprehensive

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Speaker 1: and Progressive Agreement for a Trans Pacific Partnership. In Levy's opinion,

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Speaker 1: Trump's trade war quote will uniquely disadvantage US business. Today's

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Speaker 1: episode was written by Patrick J. Tiger and produced by

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Speaker 1: Tyler Klain. Brain Stuff is a production of I Heeart

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Speaker 1: Radio's How Stuff Works. For more on this and lots

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Speaker 1: of other economical topics, visit our home planet, how stuff

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Speaker 1: Works dot com, and for more podcasts. For my heart Radio,

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