Tags: Donald Trump | Financial Markets | Money | morrill | tariff | trade | war

Tariff Increases Perilous for US Economy

Image: Tariff Increases Perilous for US Economy

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Wednesday, 25 Jan 2017 10:12 AM Current | Bio | Archive

A recent trial balloon was launched by President Trump’s staff, one advocating a drastic U.S. increase in import duties to 25 percent across the board. Such a move would hurt not only China but also other countries, like Japan and Europe — and would lead to drastic price increases in consumer goods sold at Wal-Mart.

More seriously, it would lead to an open trade war with disastrous consequences for the world economy.

During its history the U.S. has taken similar steps with unforeseen catastrophic results.

In the 19th century, the eastern seaboard states tried to protect their own fledgling industry from cheaper and sometimes better manufactured goods from England.

The apparently simple solution was to impose a 35 percent import tariff on British goods as proposed by Rep. Justin Smith Morrill, of Vermont. On March 2,1861, this law was adopted during the administration of Pres. James Buchanan, a Democrat.

It passed Congress and was signed into law by the newly elected President Lincoln the day after his inauguration.

However, the Morrill Tariff turned out to be an economic disaster for the Southern states which for years relied on a type of barter trade: selling cotton to England and, in turn, imported machinery from England. All of a sudden this whole economic system collapsed due to the suddenly high prices for British goods.

In desperation, the Southern states decided to seceded from the North as the only way to get rid of the Morill Tariff.

As we all know, the result was a terrible civil war in which close to a million people perished.

In 1929 the U.S. government tried a similar tactic to stimulate the U.S. economy, which then was in a recession caused by the collapse of the U.S. stock market.

Partly in desperation (the U.S. unemployment rate was 25 percent) Congress, in 1930, passed the Smoot-Hawley Tariff Act raising the import traffic on 20,000 imported items to record levels in order to stem the developing depression. This in turn caused a retaliatory action by our trading partners resulting in a worldwide economic depression.

The world’s GDP decreased by 15 percent.

From this depression the U.S. only fully recovered after World War II.

Mr. President, please read this. If you have to raise customs tariffs do it slowly and gradually.

A reduction in corporate income taxes would be much more effective for the economy.

Hans Baumann is a licensed engineer in four states and a member of Sigma Xi, the Scientific Research Society. He is an adviser to the dean of the University of New Hampshire Business School. Baumann has published manuals on valves and was a contributor to many works including the "Instrument Engineers' Handbook" and the "Control Valves Handbook." He has also published several books on business management and German history. His book "Hitler's Escape," suggests that Adolf Hitler did not commit suicide and survived World War II. For more of his reports, Go Here Now

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HansBaumann
A trial balloon was launched by President Trump’s staff, one advocating a drastic U.S. 25 percent increase in import duties. This would lead to drastic price increases in consumer goods sold. More seriously, it would lead to an open trade war with disastrous global economic consequences.
morrill, tariff, trade, war
488
2017-12-25
Wednesday, 25 Jan 2017 10:12 AM
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