More than 1,100 leading economists across the U.S. are concerned the worst economic downturn in the history of industrialized Western world will make a comeback if President Donald Trump isn't thwarted from imposing outrageous trade policies.
The economists, together with 14 Nobel Prize winners and former presidential advisors, have written a letter to the commander-in-chief, urging him to backpedal his recent trade tactics before any severe damage is rendered to the economy.
In order to convey the intensity of the situation to the president, the experts cited a 1930 letter that warned Congress about the protectionist measure, Smoot-Hawley Tariff Act, which started the U.S. on the path to the Great Depression.
Unfortunately, the cautionary measure went unheeded at that time.
“Congress did not take economists’ advice in 1930, and Americans across the country paid the price,” the economists said in the letter. “Much has changed since 1930 — for example, trade is now significantly more important to our economy — but the fundamental economic principles as explained at the time have not.”
The letter, arranged by the Washington-based National Taxpayers Union, came as the members of Trump administration are about to fly to China to discuss the dreaded trade war and are also apparently weighing the possibility of exempting allies from steel and aluminum tariffs.
Economists aren’t wrong to draw a parallel between the severe economic depression of 1930s and Trump’s tenure, since the commander-in-chief defends his draconian tariff measures by asserting he is trying to protect the countries’ industries — which is exactly what Smoot-Hawley tariffs claimed to do, and it massively backfired.
The letter also quoted the repercussions of tariffs: They raise prices for consumers; hurt the livelihood of American farmers; “injure the great majority of citizens,” including construction, transportation and public utility workers along with professionals who produce nothing that could be protected by trade barriers; and finally result in retaliation measures from other countries.
"Such action would inevitably provoke other countries to pay us back in kind by levying retaliatory duties against our goods," they wrote.
It's alarming that these economists see history possibly repeating itself, considering the widespread misery, poverty and deprivation during the Great Depression — which only really ended with World War II.
"Finally, we would urge our government to consider the bitterness which a policy of higher tariffs would inevitably inject into our international relations," the letter continued. "A tariff war does not furnish good soil for the growth of world peace."
Banner Image Credits: Reuters, Lee Jin-man