The Trump Trade War? Or, Back to Henry Clay: Tariffs Win Votes, but Tariffs Are Always a Bad Idea

We are hearing a lot about President Donald Trump’s trade war with China, which does not seem to be going according to plan. There is nothing new about this. Back when I used to teach a course in the history of American public speaking, I required my students to read portions of an 1832 speech by Kentucky Senator Henry Clay called “The American System.” Clay advocated government expenditures on public works, such as canals and other transportation methods, but mostly he spoke for a protective tariff that would shield American industry against European competition. Like many politicians who followed him, Clay wrapped himself in the flag and made tariffs sound like all-American patriotism.

Clay’s ideas should sound familiar: Donald Trump ran in 2016 on an infrastructure plan (hopelessly stalled in Congress) and the protective tariff. From the standpoint of basic economics, infrastructure investment should be a no-argument success, while the protective tariff is among the worst zombie economic ideas in history. Conservative economist Greg Mankiw wrote last year that: “The tariffs just imposed by President Trump are, of course, terrible policy. Mr. Trump deserves the first line of blame for making decisions that no sensible economist would advocate.” 

Yet, although tariffs are always a terrible idea, they always win votes.

Henry Clay, US Senate photo

So, let’s take a brief look back at some of the things that Clay said in his three-day-long speech (he took breaks). Clay began by complaining about the pre-tariff past, when “the general distress pervading the whole land” was marked by “a deficit in the public revenue” while “our commerce and navigation were threatened with a complete paralysis.” Other than the use of big words, that sounds very much like something Trump would say. He claimed that all those evils had been removed by the “tariff of 1824.” He argued that the tariff, which he called part of “The American System,” had the benefit of “fostering American industry, instead of allowing it to be controlled by foreign legislation, cherishing foreign industry.” Clay went on to cite an astonishing array of mostly irrelevant facts and figures to support his pro-tariff ideas.

As Brad Radcliffe points out, “International trade increases the number of goods that domestic consumers can choose from, decreases the cost of those through increased competition, and allows domestic industries to ship their products abroad.” At the same time, tariffs invite retaliation (witness the trade war with China, which seems to be crushing American farmers, since farmers export much of their harvest).

At the same time, although tariffs are always a bad idea, they always get votes. A pro-tariff policy worked for Henry Clay. Pro-tariff speeches helped William McKinley win the presidency. They helped get Mr. Trump into the White House. Voters, however, never seem to learn. Economics can be an intimidating subject, and, alas, bad economic ideas (of which tariffs are only one) flood the political marketplace while politicians and media pundits ridicule good economic ideas.

Henry Clay – William McKinley – Donald Trump – there is nothing new under the sun. People give speeches about bad economic ideas, and they win elections because of them. 

We can learn a lot from history. But are we willing to do so? 

P.S. In my book about public speaking in the 1896 presidential campaign, I analyze the  hundreds of persuasive speeches that McKinley (protective tariff and gold standard) and his opponent William Jennings Bryan (bimetallic currency) gave about their awful economic ideas.

 

American flag image: Sen. Mike Round's office