Trade wars can be ‘fantastically disruptive,’ the IMF’s historian warns

As countries around the world face the possibility of escalating tariffs, history serves as a reminder that trade wars are nothing new.

Harold James is a professor at Princeton University and an official historian of the International Monetary Fund (IMF). In an interview at the IMF in Washington, he recalled the lessons learned, and perhaps forgotten, by the international community in recent trade wars.

The Smoot-Hawley Trade War (1930-1934)

"One of the big narratives at least was that the Great Depression had its origins in a trade conflict," James said. "It started with a tariff in the United States, the Hawley-Smoot tariff."

The Smoot-Hawley tariffs were named after two U.S. lawmakers: Senator Reed Smoot and Representative Willis Hawley. James said their original legislation was intended to protect American farmers in an era of increasing protectionism. The law, officially called the U.S. Tariff Act of 1930, ended up placing tariffs on thousands of imported U.S. goods.

"Every congressman wanted to add something on for their district, and so it became this immense compendium of tariffs on any product that you can think of," James said.

The aim of the Smoot-Hawley tariffs, he said, was to make foreign products more expensive to encourage Americans to buy domestic products. In fact, it raised the prices of goods for ordinary Americans as other countries retaliated with their own tariffs. ...