Is History Repeating Itself? The Political Game of Tariffs – You Won’t Believe What Could Happen Next!

As the second term of the Trump administration unfolds, there is growing concern over the economic policies being implemented. The concept of "tendentious history," as coined by Lawrence Freedman, is looming large, with echoes of past mistakes resurfacing in current decision-making processes. It seems that the intricate dance between economic policy and political strategy may be the ultimate downfall of this administration.

1. Biden’s Struggle with Inflation:
   • The impact of the Biden administration’s economic policy on inflation cannot be overlooked. The aftermath of the Covid restrictions left a fractured economy, with disparate sectors generating income that consumers were unable to spend conveniently during the pandemic.

     Reverting to the playbook of traditional Democrats, Biden sought to stimulate demand by injecting massive amounts of government cash and creating government jobs to address what seemed to be a demand-side problem. However, history shows us that the solutions of the past may not always align with the complexities of the present.

     Franklin Roosevelt’s approach during the Great Depression involved a multi-faceted strategy that evolved as circumstances required. A direct injection of cash into an already flooded economy resulted in rampant inflation, causing lasting damage that voters were quick to remember.

2. Trump’s Tariff Philosophy:
   • The Trump administration’s focus on tariffs as a means to bolster domestic production reveals a similar tendency towards selective historical interpretation. By making consumers pay more for imported goods, the hope was to spur domestic manufacturing and job creation, echoing old protectionist sentiments.

     However, the historical context of tariffs and their role in shaping the American economy suggests a more nuanced approach is needed. The legacy of tariffs, from Hamilton through McKinley, shows a cyclical pattern of reliance on protectionist measures that have not always yielded the desired outcomes.

     Trump’s decision to enforce tariffs against Mexico and Canada, despite previous trade agreements, underscores a recklessness that risks economic stability. The threat of recession looms large, exacerbated by the uncertainty created by erratic policy shifts and inflammatory rhetoric.

3. The Peril of Economic Vandalism:
   • The recent escalation in tensions over tariffs between the US and Canada serves as a stark reminder of the fragile nature of economic relations. Disrupting established trade flows and imposing punitive measures can have far-reaching consequences that go beyond mere economic ramifications.

     Detroit-based auto manufacturers, with intricate supply chains spanning multiple states and international borders, are particularly vulnerable to the repercussions of such policies. The interconnectedness of economies and the history of collaborative trade agreements underscore the dangers of unilateral actions that disrupt the delicate balance of global commerce.

     Just as "transitory" inflation proved to have lasting effects, a "little disturbance" in trade relations can escalate into political malpractice, unleashing unforeseen consequences that reverberate through the economic landscape.

In conclusion, the lessons of history serve as cautionary tales for shaping economic policies in the present. By embracing a more nuanced understanding of past events and their implications, policymakers can navigate the complex terrain of global economics with greater foresight and prudence. The time has come to transcend the confines of tendentious history and embrace a more holistic approach to economic decision-making.