Thursday, March 24, 2016

Introducing #Tariffs or Raising #Taxes into Global Economic Decline Bad Ideas

History reminds us that re-introducing tariffs, a policy intended to protect and restore balance/fairness in the game of global trade, is an extremely bad idea. Though the Smoot-Hawley Tariff Act of June 1930 conceived to protect US farmers from foreign agricultural imports by raising tariffs on over 20,000 imported goods was initial cheered as a success - surging payrolls, construction, industrial production, it as well as retaliatory tariffs severely restricted the flow of goods within the global economy. Cheers of 1930 were following by the protracted silence of 1931, 1932, 1933 and 1934 once the world realized Smoot-Hawley had triggered a global trade war.

Any plan using tariffs to protect the US against China, Mexico, or whomever would be economically dangerous as raising taxes into a global economic decline. Human behavior predicts repeats of both mistakes to thunderous applause.

Headline: Trump's tariff plan could boomerang, spark trade wars with China, Mexico

Donald Trump's threats to slap steep tariffs on Chinese and Mexican imports may have won him votes in Republican primaries but they would likely backfire, severely disrupting U.S. manufacturers that increasingly depend on global supply chains.

The Republican presidential front-runner's campaign pledges to impose 45 percent tariffs on all imports from China and 35 percent on many goods from Mexico would spark financial market turmoil and possibly even a recession, former trade negotiators, trade lawyers, economists and business executives told Reuters.



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