From the Desk of a Male, Pale and Stale

Recently we have seen a wave of historical illiteracy wash through the ‘economics community’. Comments like ‘this tariff strategy is reckless and never been seen before’^{1, 2, 3, 4} have been blasted across media in all forms. It is simply untrue.

It would pay these people to do a little research. In the early years of the United States tariffs were a cornerstone of economic strategy, particularly under the first US Secretary of the Treasury Alexander Hamilton. Hamilton advocated for tariffs to raise federal revenue and protect emerging American industries from foreign competition – just as China would 200 years later. His vision was articulated in the Report on Manufactures (1791) where he argued that tariffs and subsidies were essential to fostering domestic manufacturing and achieving economic independence. The Tariff Act of 1789 became one of the first legislative actions towards this.^{5, 6}

· This strategy worked and, throughout the 19th and early 20th centuries, tariffs remained central to US trade policy.

Just like now, there was controversy, despite the claims by current media that this is ‘a new and unknown thing’.^{7, 8}

Debates occurred between protectionists and advocates for free trade – as ‘free trade theory’ developed – to the extent that, after World War II, the United States began to shift towards trade liberalisation. The creation of the General Agreement on Tariffs and Trade (GATT) in 1947 marked a turning point, laying the foundation for international cooperation in reducing trade barriers.⁹

· Over subsequent decades, US tariffs were significantly reduced, particularly as the country became a leading proponent of free trade agreements and a member of the World Trade Organisation (WTO) in 1995.¹⁰

US trade tariffs became less common as the US engaged in global trade negotiations, balancing protection of domestic interests with commitments to international trade agreements. However, by 1970 cracks began to appear, in part because of currency changes: e.g., the US became the default global currency and many countries wanted US dollars and the way to get them was to sell products, (cheaply and often through subsidised production) into the US market – providing these countries with US foreign exchange dollars and, by imposing tariffs on US goods into the country, retain these foreign currency advantages. This change, combined with increased domestic consumption of imported goods and a consequent decline in US manufacturing employment, contributed to persistent US trade deficits.

Then, things got worse. The establishment of the World Trade Organisation (WTO) in 1995 marked a turning point in global trade policies, aiming to promote even more free trade and further reduce trade barriers.¹⁰

The United States embraced the WTO framework: it significantly reduced tariffs and pursued free trade agreements to integrate into the global economy. These measures made imported goods cheaper, increased domestic consumption of foreign products and shifted the economic focus toward technology and services – often at the expense of the US manufacturing sector, particularly in the Midwest, which, as outlined in JD Vance’s Hillbilly Elegy, was gutted.¹¹ This structural adjustment led to job losses, greater reliance on imports and also contributed to the persistent US trade deficit.

In contrast, China and several other countries implemented WTO guidelines selectively. High tariffs on US exports made American goods less competitive and dampened demand in those markets. Simultaneously, these countries subsidised their domestic industries – such as steel, automotives and home appliances – providing an artificial advantage in global trade by allowing them to undercut US manufacturers and flood the American market with cheaper goods.¹²

Critics of Trump’s tariff strategy often overlook that it was these long-standing distortions – foreign tariffs and subsidies – that created an uneven playing field, not the tariffs themselves.

· While the US generally adhered to free trade principles, protectionist policies by China and others undermined the intended reciprocity. And in his presentation of the TTS – Trump specifically simply asked for “reciprocity”.

In conclusion, the combination of US tariff reductions, broad adoption of free trade policies and other countries’ persistent use of protectionist measures has played a central role in shaping the US current trade deficit.¹³

· Misrepresenting this history is deeply misleading – especially when these tariff responses were only introduced in the past few days – given that the underlying imbalance has been building since 1947 and worsening since 1995 through the uneven application of WTO policies.

Here is the potential ‘looming disaster’ – and it’s what mainstream media in their hysteria are missing because they would rather ‘score points’ against Trump:

· what happens if the US debt balloon, currently around 122 per cent of GDP and standing at approximately $36.2 trillion,¹⁴ surges to 150 per cent or approximately $40 trillion?

The repercussions would likely ripple through global trade with devastating effects. A debt-to-GDP ratio of this magnitude would:

· strain the US Government’s ability to manage its obligations, leading to soaring interest payments that could divert funding from critical public and international services

· investor confidence could falter, prompting even higher borrowing costs and further risking (global) financial instability

· the US dollar, as the global reserve currency, could face devaluation pressures, further shaking international markets

A depression would be almost guaranteed as the US economy, constituting 26.5 per cent of the global GDP,¹⁵ plays a pivotal role in international trade and investment

· A spiralling debt crisis in the US would slow economic growth worldwide, disrupt trade relationships and undermine the stability of the global financial system.

All this would make the ‘global financial crash of 2008’ look like a ‘walk in the park’ (ironically, many of the commentators^{16, 17} on TTS were involved or architects of that crash).

At the current rate of debt growth, which has been averaging around six per cent annually, with the US still running trade deficits, the US could reach $40 trillion in approximately two to three years.¹⁸

This timeline underscores the urgency of addressing the nation’s fiscal trajectory. We cannot afford to NOT come to the negotiation table…As things stand, today, over 70 countries¹⁹ have come to the US trade negotiation table, so there is hope for TTS.

References

1. https://truthout.org/articles/trumps-tariffs-are-a-ploy-to-further-consolidate-power-says-sen-chris-murphy/

2. https://euroweeklynews.com/2025/04/07/markets-tumble-as-trumps-tariff-threats-shake-global-confidence/

3. https://www.msn.com/en-us/money/markets/trump-officials-struggle-to-explain-tariff-strategy-but-claim-americans-won-t-feel-big-effect/ar-AA1CoC4x

4. https://www.msn.com/en-in/money/topstories/as-stock-markets-tank-and-the-global-economy-heads-toward-recession-following-donald-trumps-tariffs-heres-how-the-crisis-could-be-resolved/ar-AA1Csvit

5. https://en.wikipedia.org/wiki/Report_on_Manufactures

6. https://en.wikipedia.org/wiki/Tariff_of_1789

7. https://www.nbcnews.com/politics/trump-administration/live-blog/trump-netanyahu-tariffs-live-updates-rcna199871

8. https://www.cnbc.com/2025/04/03/trump-tariffs-live-updates-stock-market-trade-war.html

9. https://legal.un.org/avl/ha/gatt/gatt.html

10. https://en.wikipedia.org/wiki/History_of_tariffs_in_the_United_States

11. https://en.wikipedia.org/wiki/Hillbilly_Elegy