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...and from now on I will start calling it the "Echoes of Smoot-Hawley" Tariff. For those here who don't know, the Smooth-Hawley Tariff Act, signed into law ar

by cs702 9y ago

...and from now on I will start calling it the "Echoes of Smoot-Hawley" Tariff. For those here who don't know, the Smooth-Hawley Tariff Act, signed into law around a year after the Stock Market Crash of 1929, is widely considered to have exacerbated the Great Depression of the 1930's.[a] If I may quote George Santayana: "Those who cannot remember the past are condemned to repeat it."[b] Hopefully this tariff and China's retaliation will remain an isolated incident, without significant repercussions for global trade. One can hope. Ignorance is a scarily powerful force in world affairs. :-( [a] https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Ac... [b] https://en.wikiquote.org/wiki/George_Santayana https://en.wikiquote.org/wiki/George_Santayana

iooi 9y ago
Not sure that's relevant right now, since we're not in a recession?
- riffic 9y ago
  A recession started January 26, 2018. You weren't informed?
  - EpicEng 9y ago
    The word "recession" has many definitions (depends on who you ask), but in the US we tend to defer to the NBER. >The NBER defines an economic recession as: "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."[1] GDP was up 2.6% last quarter[2], so no, we're not in a recession. A stock market dip does not a recession make. [1] https://en.wikipedia.org/wiki/Recession#Definition https://en.wikipedia.org/wiki/Recession#Definition [2] https://www.nytimes.com/2018/01/26/business/economy/gdp-economy.html https://www.nytimes.com/2018/01/26/business/economy/gdp-econ...
    - dragonwriter 9y ago
      > GDP was up 2.5% last quarter, so no, we're not in a recession That both starts with a false premise and, more critically, is an invalid argument. First, the GDP grew at a 2.5% annualized rate last quarter (Q4 2017), it wasn't up 2.5%. Second, the definition you provide indicates that recession is normally visible in a set of variables, but not that it can be conclusively ruled out when it is not visible in one variable in that set. Third, and most critically, the condition of the economy last quarter doesn't tell you whether we are in a recession now, only, at best, whether we were last quarter.
    - riffic 9y ago
      >A stock market dip does not a recession make You're right, but it's a pretty good indicator. It's been 56 days since the DJIA's peak close of 26,616.71 Yesterday's close was 23,957.89 and there has been a sustained loss of 2658.82 in the time since. I'm not the NBER, but a dip lasting almost 2 months sure smells like the start of recession to me.
- dragonwriter 9y ago
  Recessions are usually identified by NBER long after they start (and sometimes after they are over.)
usaphp 9y ago
> Those who cannot remember the past are condemned to repeat it But time goes by and things change. Sometimes things that have not worked in the past might work today because of the changed environment. Don’t you agree? Remembering the past is one thing, being stuck in it is another.
- Analemma_ 9y ago
  > Something that have not worked in the past might work today because of the changed environment. Don’t you agree? Applied as you have described it, this advice would prevent us from ever learning from the past. Why not try Stalinism again? It might work today because of the changed environment. You need to explain specifically what has changed so that tariffs might be a good idea now even when they have repeatedly not been so in the past.
  - jryan49 9y ago
    Doesn't your argument also apply to the other side though? That we can't just say "It didn't work in the past so it won't work now" without any context or actual evaluation?
redm 9y ago
That's an interesting read. To be clear, the tariff rate on durable goods was increased from 40% to 59% in 1932. [1] That seems like a far cry from what we're talking about here. It's my understanding these tariffs are levied against a single country (China) who is (widely believed to be) manipulating trade to their benefit and engaged in widespread IP theft. If the former is true, the tariffs (to me, a non-economist) don't seem terrible. Perhaps you can further elaborate on why a focused and limited tariff targeted to a single country is such a bad idea? [1] https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Ac...
- pishpash 9y ago
  I don't think $60B matters a whole lot. The issue is always if it escalates. It's pulling the lever of economic sanction over mainly political disagreements (voters who support the optics), a little distraction, if you will.
belorn 9y ago
That would make for a interesting long term bet for 2020. In order to match the great depression we would need to see a worldwide gross domestic product drop of 15%, which by comparison is 15x worse drop than the one we had during 2008. International trade plunged by more than 50%, and crop prices fell by about 60% during 1930. How big should we estimate the risk that we will repeat 1930?
drak0n1c 9y ago
There's a difference. Smoot-Hawley was a massive and unprovoked tariff. China already taxes products made by US companies at similarly massive levels - I've been to China multiple times and everything from American brand toiletries to cars costs nearly 2-3x as much as they cost here in the US! Part of that is shipping and premium brand pricing, but a large part is Chinese protectionism aimed at putting our products out of reach of the masses. You can choose - either continue to suffer Chinese tariffs being 10x greater than ours, or engage in reciprocal rate matching that will motivate negotiations for mutual rate lowering.
googlryas 9y ago
I'll just paste the same thing I said the last time someone said 'this reminds me of smoot-hawley'[1]: > Some differences between the two being that Smoot-Hawley broadly applied tariffs to tens of thousands of products from most countries in the midst of a major economic depression in an attempt to help out American farmers and other related industries. [1] https://news.ycombinator.com/item?id=16599325 https://news.ycombinator.com/item?id=16599325

by cs702 9y ago

iooi 9y ago

Not sure that's relevant right now, since we're not in a recession?

riffic 9y ago
A recession started January 26, 2018. You weren't informed?
- EpicEng 9y ago
  The word "recession" has many definitions (depends on who you ask), but in the US we tend to defer to the NBER. >The NBER defines an economic recession as: "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."[1] GDP was up 2.6% last quarter[2], so no, we're not in a recession. A stock market dip does not a recession make. [1] https://en.wikipedia.org/wiki/Recession#Definition https://en.wikipedia.org/wiki/Recession#Definition [2] https://www.nytimes.com/2018/01/26/business/economy/gdp-economy.html https://www.nytimes.com/2018/01/26/business/economy/gdp-econ...
  - dragonwriter 9y ago
    > GDP was up 2.5% last quarter, so no, we're not in a recession That both starts with a false premise and, more critically, is an invalid argument. First, the GDP grew at a 2.5% annualized rate last quarter (Q4 2017), it wasn't up 2.5%. Second, the definition you provide indicates that recession is normally visible in a set of variables, but not that it can be conclusively ruled out when it is not visible in one variable in that set. Third, and most critically, the condition of the economy last quarter doesn't tell you whether we are in a recession now, only, at best, whether we were last quarter.
  - riffic 9y ago
    >A stock market dip does not a recession make You're right, but it's a pretty good indicator. It's been 56 days since the DJIA's peak close of 26,616.71 Yesterday's close was 23,957.89 and there has been a sustained loss of 2658.82 in the time since. I'm not the NBER, but a dip lasting almost 2 months sure smells like the start of recession to me.
dragonwriter 9y ago
Recessions are usually identified by NBER long after they start (and sometimes after they are over.)

usaphp 9y ago

> Those who cannot remember the past are condemned to repeat it But time goes by and things change. Sometimes things that have not worked in the past might work today because of the changed environment. Don’t you agree? Remembering the past is one thing, being stuck in it is another.

Analemma_ 9y ago
> Something that have not worked in the past might work today because of the changed environment. Don’t you agree? Applied as you have described it, this advice would prevent us from ever learning from the past. Why not try Stalinism again? It might work today because of the changed environment. You need to explain specifically what has changed so that tariffs might be a good idea now even when they have repeatedly not been so in the past.
- jryan49 9y ago
  Doesn't your argument also apply to the other side though? That we can't just say "It didn't work in the past so it won't work now" without any context or actual evaluation?

redm 9y ago

That's an interesting read. To be clear, the tariff rate on durable goods was increased from 40% to 59% in 1932. [1] That seems like a far cry from what we're talking about here. It's my understanding these tariffs are levied against a single country (China) who is (widely believed to be) manipulating trade to their benefit and engaged in widespread IP theft. If the former is true, the tariffs (to me, a non-economist) don't seem terrible. Perhaps you can further elaborate on why a focused and limited tariff targeted to a single country is such a bad idea? [1] https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Ac...

pishpash 9y ago
I don't think $60B matters a whole lot. The issue is always if it escalates. It's pulling the lever of economic sanction over mainly political disagreements (voters who support the optics), a little distraction, if you will.

belorn 9y ago

That would make for a interesting long term bet for 2020. In order to match the great depression we would need to see a worldwide gross domestic product drop of 15%, which by comparison is 15x worse drop than the one we had during 2008. International trade plunged by more than 50%, and crop prices fell by about 60% during 1930. How big should we estimate the risk that we will repeat 1930?

drak0n1c 9y ago

There's a difference. Smoot-Hawley was a massive and unprovoked tariff. China already taxes products made by US companies at similarly massive levels - I've been to China multiple times and everything from American brand toiletries to cars costs nearly 2-3x as much as they cost here in the US! Part of that is shipping and premium brand pricing, but a large part is Chinese protectionism aimed at putting our products out of reach of the masses. You can choose - either continue to suffer Chinese tariffs being 10x greater than ours, or engage in reciprocal rate matching that will motivate negotiations for mutual rate lowering.

googlryas 9y ago

I'll just paste the same thing I said the last time someone said 'this reminds me of smoot-hawley'[1]: > Some differences between the two being that Smoot-Hawley broadly applied tariffs to tens of thousands of products from most countries in the midst of a major economic depression in an attempt to help out American farmers and other related industries. [1] https://news.ycombinator.com/item?id=16599325 https://news.ycombinator.com/item?id=16599325