How the US lost the tariff war before

 

Thanks to Donald Trump, everyone now knows this economic term called tariff. A tariff is basically a duty that a country imposes on goods imported from another country. In ancient Greece, a 2 percent duty was imposed on grain imports. That is called the first tariff in the world. Initially, this tariff or duty was mainly imposed to increase revenue collection. Apart from this, tariffs were imposed to protect local industries. And now tariffs are being used more as a weapon to implement trade policy.

Tariffs were once the main source of revenue worldwide. Let's take the case of the United States. From 1798 to 1913, tariffs accounted for 50 to 90 percent of total federal revenue. Now, that revenue has fallen to 2 percent. For example, in 2024, the U.S. Customs and Border Protection Department's import tariff revenue was $77 billion, which is only 1.57 percent of the country's total government revenue.

In fact, the United States has been slowly moving away from protectionism since the Great Depression of the 1930s. The United States played a key role in the negotiations to establish the World Trade Organization (WTO). 70 percent of goods in the country go duty-free. It is the same United States that has now started a tariff war around the world. Disasters have happened before. The United States introduced the federal income tax in 1913 to increase revenue. At that time, the main source of revenue was various types of import duties. However, the United States began a large-scale tariff war during the Great Depression of 1930. Before that, however, the United States had imposed high tariffs. In September 1922, Congress passed the Fordney-McCumber Act, through which the tariff rate was increased to 40 percent. The US president at that time was Warren G. Harding. He was the 29th president of the United States. European countries immediately spoke out against it. However, it did not have much impact on the United States. In the meantime, however, Europe began to overcome the losses of World War I and agricultural production also began to increase. This increased the problem in the United States. American agricultural producers faced intense competition and due to overproduction, the prices of agricultural products also decreased. At that time, strong demands began to be made to protect the country's agricultural products.

Herbert Huber was the Republican candidate in the 1928 election. During his campaign, he promised to protect agricultural products. However, after winning the election and becoming president, pressure from members of his own party to protect all sectors of the economy increased. However, the law related to this could not be passed in the Senate.

The situation changed when the stock market crashed in 1929. This crash led to the Great Depression. Protectionists emerged as the strongest party, and the Smoot-Hawley Tariff Act, which increased tariffs and protected American goods, was passed by a vote of 44-42. At least 1,000 economists petitioned the president to veto the law. But no one listened. The law went into effect on June 17, 1930. It increased tariffs for all countries by another 20 percent.

How the United States was defeated

However, the US tariff war did not end well; rather, it turned into a bitter trade war. Within two years of the passage of the Smoot-Hawley Tariff Act, the major economies of Europe imposed an equal number of counter-tariffs. As a result of the imposition of counter-tariffs, world trade decreased by two-thirds between 1929 and 1934. Many banks collapsed. It is said that the United States was left alone in world trade. Herbert Hoover lost the 1932 election. The new President Franklin D. Roosevelt took responsibility and began negotiations to reduce tariffs and get out of it. Finally, in 1934, the Reciprocal Trade Agreements Act was passed. Through this, President Roosevelt reduced tariffs and promoted trade liberalization. In other words, the United States was defeated in the first tariff war.

It is true that the Smoot-Hawley Tariff Act did not cause the Great Depression of 1930. The Great Depression began with the stock market crash. However, this act was deepening the Great Depression. The United States has started a tariff war again. Will the outcome be the same as in 1930? Will history repeat itself? That remains to be seen.