Date of the podcast: March 30, 2018
Date listened to the podcast: June 1, 2018
The podcast is about the impact of imposition of trade tariffs on the economy. This podcast therefore provides insight into the impact that the trade policy shift initiated by Trump administration is likely to have on the local and state economies. Change of trade policies usually have ripple effects on the larger economy as can be seen through history. Economists have explained time and again the probable results of imposing trade tariffs on imported goods. The main arguments made in favor on such moves are that foreign producers who flood the markets with products profit at the expense of American producers who are put at a disadvantage when they supply their steel and aluminum products at lower prices. However, trade tariffs on these commodities may put the local and state economies at a disadvantage for various reasons including retaliatory tariffs by other countries on products made in America.
According to the podcast, the imposition of trade tariffs has been done before, causing undesirable consequences for the economy. In 1930 the Republican-controlled House of Representative passed the Smoot-Hawley tariff Act, which would raise tariffs as a means of collecting more revenues for the U.S. government. This move didn’t work out well but only served to worsen the world economy while pushing the country further into economic depression. This represented the worst tariffs ever, and may serve as a lesson to the Trump administration to start what the economists feel is a start of a trade war. According to the economists, free trade is the best way for stabilizing the economy.
A few weeks ago the Trump administration imposed new tariffs of 10 per cent on aluminum and 25 per cent on steel. He would also impose tariffs on products such as washing machines, solar panels. This is a political move by the Trump administration to punish China for its alleged dirty tactics in world trade. The move is also a protectionist tax to help people who were represent the biggest part of President Trump’s voting bloc such as manufacturers who feel that they were left behind by globalization. This move is comparable to the Smoot-Hawley Act of 1930. This tariff Act increased almost 900 of American duties and was later considered as one of the major causes of the Great Depression that happened in 1930s. Yet a thousand economists tried to warn the government against the consequences of the tariff Act. It would take more than a decade to undo the damage caused by the Smoot-Hawley Tariff Act.
Imposition of tariffs may cause far-reaching consequences to the U.S. economy. Other countries may react by imposing tariffs on American export industries targeting various export products from the country. Further, the imposition of tariffs may trigger the increase in the price of other commodities. This is because steel and aluminum are critical inputs for a diverse range of industries such as construction, manufacturing, brewing etc. Hence, these tariffs will negatively cause disruption the industries that rely on aluminum and steel imports. Trade shock might become widespread if other countries that trade with U.S. react with retaliatory tariffs.
Malone, K. & Helm, S. “Episode 833: Worst Tariffs Ever”. Planet Money Podcast. March 30, 2018. Retrieved from https://www.npr.org/sections/money/2018/03/30/598365735/episode- 833-worst- tariffs-ever [Accessed June 1, 2018].