On the EDge: Trade wars, what are they good for? Absolutely nothing

July 9, 2018 Utah Channel 3

OPINION – The last time the United States waged a trade war, the nation was in the throes of the Great Depression.

President Herbert Hoover is credited with the economic misfortunes of the nation that led to Black Tuesday – Oct. 29, 1929 – the day when economies big and small crumbled and fortunes were lost overnight as the Great Depression launched into a cataclysmic economic event later exacerbated by a drought that crippled America’s farmlands. At the time, Hoover was desperate for a quick fix.

The result was the Smoot-Hawley Tariff Act, which hiked tariffs on more than 20,000 products imported into the United States. The legislation triggered retaliatory moves by the industrial world that crippled the global economy.

The tariffs were so severe that nobody bought much from anybody as a policy of international protectionism put the brakes on market trade.

The global economy was gut-shot, bleeding out revenues as the effects of nationalism and singular interests took hold. Imports and exports were halved. The global community was divided sharply. There were no winners.

The results were devastating.

Unemployment in the U.S. soared by more than 600 percent.

In the first year alone, 744 banks failed. By the time the Great Depression ended, more than 9,000 banks had closed.

Bankers called in all debts, but nobody had the money to pay them off.

Construction and capital investment came to a screeching halt.

Interest rates soared.

Prices and salaries were slashed by 20-50 percent, although the debt remained constant.

Industrial production in the U.S. plummeted by 46 percent; wholesale prices dropped 32 percent; crop prices were driven down by 60 percent; and foreign trade tumbled by 70 percent. The numbers were equally severe across the world economies.

Hoover begged businesses to hold the line, keep people employed and not cut salaries, all to no avail. Capitalism, you see, does not work that way. You go for every red cent you can lay your hands on and the rest of the world be damned.

The government felt the impact as the treasury found itself with empty coffers. But, you cannot tax people on money they do not earn, so the government was strapped for cash as well.

The system failed.

For all of the faux rah-rah talk today about the economy, those with some serious gray matter between their ears realize the U.S. is diving headlong into the shallow end of the revenue pool and that a serious recession is about to hit.

Now, even with all of the safeguards in place to prop up the market, the fact is that if there’s no money coming in, the system will become overburdened again, critically so, and we could be on the threshold of economic catastrophe.

In other words, now is not the time to start putting the squeeze on the nations of the world because, as we have seen already, nobody is willing to pay the price of higher tariffs without massive retaliation.

We study history to educate ourselves with lessons from the past to protect our future.

It seems, however, that the dog ate the president’s homework as he takes his wrecking ball into dangerous quarters.

It took the United States about 10 years and World War II to emerge from the Great Depression.

Although we have a potential enemy out there right now, an all-out conflict with North Korea would do almost nothing to refill the coffers. In fact, the expense of rebuilding the damage to that region from such a witless excursion would far outweigh any short term economic recovery within our borders.

While you may like the crude, “get tough” language being put forth by the president, understand that he’s whistling in the dark.

Already his tariffs are having a negative effect on farmers, particularly those who raise soybeans, who are being punished by high tariffs China. Farmers courted China heavily for years to open up trade only to see it crumble.

Pork exports are also beginning to fall because of retaliatory tariffs slapped on by Mexico and China – who both import large amounts from the U.S. It will hurt deeply because pork has a very low profit margin. The same fate awaits those who grow apples, potatoes or make cheese.

So you will soon be able to bring home the bacon for a lot less because they have to do something with the surplus. That is if you keep your job, your salary remains stable and you can afford it.

Then there are the losses that will be suffered when South Korea, Japan and greater Europe add on their retaliatory tariffs.

The hope, all along, has been that the rest of the world would not call the president’s bluff, that it would buckle at the tough talk and bluster of an administration that, we are learning, is actually not very adept at the art of the deal.

You see, the real art of the deal is when both sides walk away from the handshake satisfied that the other hasn’t picked its pocket.

You cannot stick a gun in somebody’s ribs, lift their wallet and expect them to remain a friend, which is what is happening in the global community, particularly with good and loyal neighbors like Canada and Mexico.

An American president should have more cred, more trustworthiness than a Times Square pickpocket.

An American president must realize that to hold a position of import and influence in the business world he or she must be fair, honest, trustworthy.

An American president must realize that blackmail, bullying and arrogance are the turf of despots and tyrants who hold the remainder of the world in little regard, unless they want to build new hotels in some foreign place or use cheap, slave labor working in Third World factories to manufacture their goods.

Nothing good is going to come from these tariffs, from this trade war.

There will be no good will built, no heightening of respect, no building upon years of friendly cooperation. It’s every man for himself, except the lifeboats are filled.

Ostensibly, this president was elected because he billed himself as the epitome of good business practices, an icon of industry, a wise and clever negotiator.

The reality, however, is that there really were no good business practices employed, his industriousness came on the backs of the impoverished in his employ and his negotiation skills are unremarkable, as evidenced by his getting taken during meetings with the North Korean strongman. I shudder to think what will happen when he meets with Vladimir Putin later this month, although we will likely not see the Russian president pull the president’s strings in public.

And, as far as the economic decisions being made, all we can say is trade wars, what are they good for?

Absolutely nothing.

No bad days!

Ed Kociela is an opinion columnist for St. George News. The opinions stated in this article are his own and may not be representative of St. George News.

Email: edkociela.mx@gmail.com

Twitter: @STGnews, @EdKociela