Trade wars are nothing new for the US

|


With the Trump administration taking a hard line in international negotiations, talk of trade wars has been hitting the headlines for quite a while now. Tit-for-tat tariffs with China, the renegotiation of the NAFTA pact with Canada and Mexico, Iranian sanctions and dealings with the EU have all been in the news, but the fact is that the US has a long history of fighting economic battles with overseas friends and foes alike.

There have been numerous trade wars throughout American history, and although most have only had economic effects that are felt by the parties directly involved, sometimes they can also have political and diplomatic consequences that are worldwide.

The American Revolutionary War

The first, and arguably the most important US trade war started with the Boston Tea Party when American colonists pitted themselves directly in opposition to the British Parliament.

The rallying cry on 16 December 1773 at Griffin’s Wharf in Boston was “No taxation without representation,” and the taxes levied by Great Britain that affected everything from newspapers to paint, and of course tea, led to a rebellion that saw goods valued at around $1m (£750,000) at today’s prices destroyed. Those actions led directly to the American Revolutionary War starting in April 1775.

The Smoot-Hawley Act of 1930

Today’s spat with China is affecting an increasingly long list of goods and in 1930, thousands of goods traded between the US and other countries were hit by levies.

President Herbert Hoover proposed tariffs on agricultural imports to help deal with the effects of the Great Depression and. in return. Senators Reed Smoot and Willis C. Hawley put forward their own plans for wide-ranging industrial tariffs. The world responded by placing tariffs on US exports, and the result was a 61% decrease in exports in 1933.

The 1980s trade war with Japan

The US and Japan clashed in the 1980s when President Ronald Reagan doubled the import prices on Japanese electronic goods worth $300m (£231m). The reason given was a failure on Japan’s part to comply with an agreement allowing greater numbers of US imports into its markets.

Unlike the current situation with China, Japan decided not to strike back. At the time, Hajime Tamura, the minister of international trade, explained Tokyo’s reasoning: “Hoping to prevent this issue from causing severe damage to the world’s free-trading system, the Japanese government has decided, from this broader perspective, not to take any retaliatory measures immediately.”

The 1993 banana wars

The US only grows bananas domestically in Hawaii and Florida, although many banana farms in Latin American are owned by US companies. In 1993, Europe was imposing high tariffs on fruit imported from Latin America to give its various former colonies in the Caribbean a market advantage. This action led to the US putting tariffs on a wide range of items, including French fashion items, British materials and Danish meats.

The EU filed complaints with the World Trade Organization (WTO), and on the eighth attempt, the banana war finally ended in 2012. Madeleine Albright, the US Secretary of State at the time, said: “I never in my life thought I would spend so much time on bananas.”

The 2002 steel tariffs

Although metal tariffs have been a part of the recent round of trade wars, in 2002, President George W. Bush imposed temporary tariffs on steel imports in an attempt to strengthen the domestic industry. Although NAFTA meant Canada and Mexico were exempt, the EU was hit and responded with tariffs on Florida oranges.

The WTO found the US to be in violation of tariff rate commitments, and they were ended after 18 months instead of the three-year period that had been planned.

The current trade war with China

Stuart Malawer, a professor at George Mason University, published a paper in the China and WTO review recently where he wrote: “As President Trump recently imposed $34bn in new tariffs on imports from China and China took prompt retaliation against them, the US is now in its biggest trade war with China and other countries since the 1930s.”

Calling Trump’s tariffs “theatre, not policy,” he went on to warn that although there has been relative stability in international trade for the past 75 years, it doesn’t mean that this status quo will continue indefinitely.

Whether the trade tensions that are currently worrying stock market investors in the US and abroad will cause any long-lasting negative results is still uncertain, but what is obvious is that a resumption of trade aimed at achieving mutual beneficial effects is surely in everyone’s interests.

Brian Ducey

Brian graduated from Chaminade High School and the University Of Vermont Kalkin School Of Business with a concentration in Finance. He began his career with Knight Capital Markets, working his way to market maker. Brian later expanded his market repertoire, working with various sell-side research brokerage firms, such as Sidoti & Co., and William O’Neill & Co., as an Account Executive. With over 20 years-experience in the financial industry, Brian has built a unique perspective into “market intelligence” understanding an ability to read the tape and apply second level thinking in a fast paced environment. Brian also carried several market licenses, including the series 7, 24, 55, 65, and 63 licenses as well as previously passing The Connecticut Life and Health Insurance Exam


Tags: , ,