Front Burner - The last time the U.S. tariffed the world

Episode Date: April 10, 2025

On Wednesday, U.S. President Donald Trump announced a 90-day pause on his sweeping global reciprocal tariffs for all countries, except for China.Trump has long expressed his love of tariffs. Just last week, he spoke about how believes the U.S. was founded on tariffs, and that they could have helped the country avoid the Great Depression. Then, referring to the Smoot-Hawley Tariff Act of 1930, the President said: “They tried to bring back tariffs to save our country, but it was gone. It was gone. It was too late. Nothing could have been done — took years and years to get out of that depression.”Today on Front Burner, what lessons do the Smoot-Hawley tariffs offer during this moment of global economic chaos?Asa McKercher is the Hudson Chair in Canada-U.S. relations at the Brian Mulroney Institute of Government. He’s back on Front Burner to talk about that and much more.For transcripts of Front Burner, please visit: https://www.cbc.ca/radio/frontburner/transcripts

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No other president would have done what I did. No other president. I know the president, they wouldn't have done it. And it had to be done. Well, I thought that people were jumping a little bit out of line. They were getting yippy, you know, they were getting a little bit yippy, a little bit afraid. So, faced with economic catastrophe, Donald Trump retreated Wednesday and announced a 90-day pause on his sweeping global reciprocal tariffs for all countries, except for China. The two superpowers are now in an enormous trade war, with the U.S. levying a 125% tariff on Chinese goods and China reciprocating with 84%.

For much of the rest of the world, there remains a blanket 10% tariff. Canada specifically is still facing a bunch of our own. Now despite this walk back, where we have landed is still a massive story. And of course, we have no idea what else this administration is going to do moving forward. Today on the show, we're going to explore a time in history that has driven Trump's affinity for tariffs. The president talked last week about how the country was founded on tariffs and how he believes the continuation of them would have helped the U.S. avoid the Great Depression.

Then in 1929, it all came to a very abrupt end with the Great Depression. Then in 1929, it all came to a very abrupt end with the Great Depression. And it would have never happened if they had stayed with the tariff policy. It would have been a much different story. They tried to bring back tariffs to save our country, but it was gone. It was gone. It was too late. Nothing could have... Those tariffs that he mentioned, the ones that were brought in during the Great Depression, were part of the Smoot-Hawley Tariff Act of 1930. Look, if you had asked me a little while ago if I would be excited to have a conversation

about a nearly 100-year-old piece of tariff legislation, I would have looked at you like you had two hats. But here we are. Asa McCurtcher is back on the pod to discuss what lessons the Smoot-Hawley Terrace might offer this current moment that we're in. He's a historian and the Hudson Chair in Canada-U.S. Relations at the Brian Mulroney Institute of Government. And just a note to say that Asa and I spoke before Trump announced the 90-day pause.

Asa, hey, thank you so much for coming back onto the show. Hi, great to be here. It's really a pleasure to have you. I wonder if we can start the conversation today by listening to a clip from the movie Ferris Bueller's Day Off. This is a clip of the high school teacher in Ferris Bueller giving really a very boring lesson on the Smoot-Hawley tariffs. Here we go. In 1930, the Republican-controlled House of Representatives, in tariff bill, the Hawley Smoot Tariff Act, which anyone raised or lowered, raised tariffs in an effort to collect more revenue for the federal government.

Did it work? Anyone? Anyone know the effects? It did not work and the United States sank deeper into the Great Depression. Okay. Anything you want to take issue with, with that explanation? Only to point out that Ben Stein, who was the actor there, is actually a big Trump supporter now, so he didn't take his own history lesson, I guess. Oh, I did not know that. Okay. Okay. Why don't we start with an elaboration from you

on what these terrorists actually were at the time and the problems that they were trying to address when they were brought in in 1930? Yeah, so I think if people remember anything about the Great Depression, it's probably the stock market crash of 1929. Time came when the ticker tape in the broker's office told a new story. It was panic. 16 and a half million shares of stock sold in a single day, sold hopelessly, desperate

at any price. And then maybe, especially if they've seen the first Bueller, the smooth holiday tariff of 1930. So, the US had experienced the stock market crash in 1929 as a result of a big bubble in the stock market, a huge boom of the 1920s that I think you might be familiar with from sort of Great Gatsby as a kind of roaring 20s kind of thing. And then the stock market collapses and then sort of there's a panic that spreads sort of globally through kind of the global stock markets and really a drying up of

investment, you know, in the United States, but also around the world. And then, you know, the kind of knock-on effects of that, there's a drop in production or drop in consumption, layoffs, plant closures, those kinds of things. And so the US Congress in its wisdom, you know, there's a kind of a protectionist wing who's active, who's hoping to sort of protect US businesses and US workers. And then there's other members of the Congress who are looking to raise revenue essentially because of a kind of decline in revenue as a result. And so there's an effort then to raise money for the US treasury and protectionist measures. So we can see those kind of two strands in sort of Donald Trump's thinking today. Yeah, big time.

Okay. So they do it. They put these tariffs in place. How big were the tariffs? And then what happened after they do it? Yeah. So the tariffs go in place on a big schedule of products, a thousand of them or so, but an average of about 20%. So we're seeing again, Mr. Trump's schedule of tariffs goes all over the place. Yeah. But they're bigger.

Yeah. Yeah. So I said, the benchmark for Donald Trump's schedule of tariffs goes all over the place. Yeah, but they're bigger. Yeah. Yeah. Yeah. So I said, you know, the benchmark for Donald Trump's tariffs is 10%. And then like, many of them, of course, go up, you know, far beyond that. So it's really, you know, what we're seeing now is potentially a much larger, a much larger tariff than this very famous one in 1930. Okay. And then what were the effects of the tariffs? Like what happened after they came into effect? Yeah, so the tariffs go in, protectionism becomes the sort of dominant kind

of position that the US government takes. And I should say that the US president at the time of Herbert Hoover had been sort of, not quite convinced that this was the right move to do, but he ended up supporting this bill. And the end result is that countries all around the world put in place retaliatory tariffs and essentially the global trading system collapses.

So, and indeed in terms of Canada, we are a major trader of the United States. The 1920s, it's in Canada, the United States become very close trading partners. We do essentially become kind of the number one market for Canadian exports. And so this really does a huge hammer blow to Canada, US trade. So in 1929, Canada, US trade, sort of two-way trade had been about $1.5 billion. And by 1933, it's at $400 million. So a huge retraction in Canada, US trade, but we see this more broadly with kind of trading picture around the world. And so this retaliatory tariffs that are put in is

the kind of things that seem to be what you do when you have a country that puts in place a terrace on you. But it kind of leads to this terrible spiral that really sees a collapse of, again, the global trading system and of course, a lot of economies around the world as a result of this. Right. And so when Ben Stein says that it made the Great Depression worse, the consensus among economists is that it absolutely did. Right? What economists will tell you is indeed that this sm-walled tariffs had this terrible effect on global trade. And the tariffs in general are punishing me for bad for economy. So the kind of received wisdom or the common wisdom again

is against tariffs amongst the vast majority of economists. Mr. Trump's policies are very much flying in the face of that. But again, this is an administration that doesn't really accept facts on things like vaccines or the efficacy of the US constitution and other sorts of things. So maybe you shouldn't be surprised there. The Great Depression would have never happened in the first place if there were more tariffs in place for the United States, I guess. He makes this argument that the US was founded on steep import taxes on foreign goods, but that the country abandoned them

when it created a federal income tax. You know, the United States in 1870 to 1913, all tariffs, and that was the richest period in the history of the United States. And that was all made through tariffs. As we had no income tax, the income tax came in in 1913. When the Smoot-Hawley tariffs were actually put in place in 1930, it was already too late

and it couldn't reverse the course of the depression. And just, I wonder if you could muse for me a little bit on that specific point. Yeah, I mean, George Washington, the first American president does bring in a tariff act. I think it's something like a 5% tariff in the 1790s. But Americans, you know, the founding fathers, you know, believed in essentially free trade.

One of the things they protested in against King George was that King George was essentially barring them from trading with different countries. So the idea of free trade was also fundamentally important to the founding fathers and many subsequent American presidents. But really by the late 19, 1800s, part of me is when there's this kind of tariff mania in the

United States and William McKinley, who of course, Mr. Trump really valorizes. When he was a Congressman in 1890, he put in place a 49% tariff called the McKinley tariff. That again led to this kind of spiral of retaliatory tariffs and those sorts of things. But then plunged the United States into what at the time was called the Great Depression between 1893 and 1897. That what used to be called the Great Depression, which was a brutal time in the United States.

So we have two big tariffs, two big depressions that we could point to as maybe cause and effect in terms of historical facts that again, Mr. Trump ignores. Obviously, these tariffs didn't stay in place. So how did they get undone? What happened? Yeah. I mean, so the effects of this are pretty dire. didn't stay in place. So how did they get undone? What happened? Yeah, I mean, so the effects of this are pretty dire. You know, 1933, probably the worst year of the Great Depression.

There's something like 25% unemployment in the United States. In Canada, there's this kind of equal sort of figures. If we count sort of farmers who lose their farms and all kinds of things, it's probably about one in three people, about 33% of the population more or less is out of work. I mean, this is a brutal time. And Americans, in effect, really, really come to their senses. The election of Franklin D. Roosevelt offering a new deal for Americans, which includes sort of

state intervention, the beginnings of kind of a welfare state, but also the reduction of tariffs. This has seemed to be a key part of the kind of new deal program is to essentially liberalize trade, not only to sort of domestically free the kind of average working person from the ravages of the Great Depression, but to really free the American economy. And hopefully, the thinking is force other countries or encourage other countries to reduce their tariff barriers too. And so in 1934, FDR wins control in a limited way over the ability of the president to make tariffs. Before this, it had been largely Congress that had this power. And then proceeds to make some trade deals in Latin America. There's kind of the offer of trade deals to countries in Europe. And in 1935,

negotiations in a serious way between at the time the conservative government of R.B. Bennett and the FDR administration, those negotiations are petered out as Canada enters a federal election in 1935. But the William Lyme, Mackenzie King and the liberals then win that election. And just like the Bennett government, they've been hoping for some sort of trade agreement with the Americans. And so there's a, within two weeks of the election in October, McKinsey King was down in Washington, essentially inking a trade agreement, not a free trade agreement, but a trade agreement that reduced a lot of the Smoot-Hawley tariffs that had applied to Canada. And really this is the start of kind of the next 80 years of the slow kind of integration of the candidate in US

economies in a major way. Right, right. Yeah. And clearly it opened up the door to free trade. Fair? Yeah, exactly. Yeah. And within three years, there's another sort of Canada-US trade agreement in 1938, and then increasing kind of cross-border economic integration during the Second World War, and

then that accelerates during the Cold War years. On the 80th anniversary of the liberation of Auschwitz comes an unprecedented exhibition about one of history's darkest moments. Auschwitz, not long ago, not far away, features more than 500 original objects, first-hand accounts and survivor testimonies that tell the powerful story of the Auschwitz concentration camp, its history and legacy, and the underlying conditions

that allowed the Holocaust to happen. On now exclusively at ROM. Tickets at Rom.ca. I'm Zing Zing. And I'm Simon Jack. And together we host Good Bad Billionaire. The podcast exploring the lives of some of the world's richest people. In the new season we're setting our sights on some big names. Yep, LeBron James and Martha Stewart to name just a few. And as always, Simon and I are trying to decide whether we think they're good, bad or just another billionaire.

That's Good Bad Billionaire from the BBC World Service. Find it on BBC.com or wherever you get your BBC podcasts. He says, pretty shocking listening to you kind of lay out the consequences of these actions historically. Just if you look at what's happening right now, is it very different, the context, right? Like, do you see important differences that might be worth discussing? Yeah, I mean, with that kind of, you know, I think it's Mark Twain's kind of, you know, quote, history doesn't repeat it rhymes. I mean, there is some rhyming going on in the sense that

some countries are pursuing tariffs or consider sorry retaliatory tariffs against the United States But but a lot of countries aren't so, you know Canada as of right now Canada and China are really the only two countries to impose sort of retaliatory tariffs I should against the Americans. Although I think the European Union just before we came in here Yeah on aluminum and some other stuff The European Union is said to impose extra duties mostly of 25% on a range of US imports in response specifically to the US metals tariffs. It's still assessing how to respond to the car and border levies.

But I think, you know, maybe with the exception of the China ones, because there seems to just be a lot of sort of big numbers going on there. But the tariffs that Canada has put in place, the tariffs that the Europeans are talking about are relatively small because I think there's an awareness of what occurred in 1930. I think there's an awareness amongst economists and people who think about international trade and things that this is what happened. This retaliatory spiral really upset the global trading system and plunged the world into the Great Depression. So I think there's a kind of a caution about the level and nature of retaliatory tariffs and also just the sense that retaliatory

tariffs also punish consumers within your own country, which is one of the reasons why the Canadian government is being so targeted in applying to bourbon and Florida orange juice and other sorts of things. Right, right. Obviously when you have these big shocks, global shocks, the ramifications go beyond the economy, right? And so just tell me a little bit more about what kind of other reverberations we saw coming out of the Great Depression that historians have tied to the Smoot-Hawley

terrorist? Well, in the short term, none of the effects are really good. There's a huge destabilization of not only the global economy, but specifically in certain countries. Obviously, Canada and the United States, as I say, you know, had something like a quarter or 30% unemployment. I mean, similar numbers in Germany, which really plunge the political system there into chaos. The Nazis in the 1920s had been very much a kind of

a fringe political party. But in elections in the early 1930s, they're able to say essentially, the kind of existing political classes failed us, the economy as it's kind of constructed has failed us. And there's of course, the people to blame are the Americans and who controls the Americans and the Nazi worldview. It's Jewish people, Jewish bankers and things on Wall Street. And that appeals to many, many Germans. And so throughout Europe, we see a number of other extremist regimes come to power in other countries in Eastern Europe. So it's a really dire situation. And so when we see political, more economic chaos like this, it can obviously lead to political chaos that follows often in

unexpected ways. And so in the short term, this is the sum of the problems. So the longer term, um, there is a kind of a turn away, um, from, from protectionism. There's a kind of a turn to, to open markets and free trade and what becomes the kind of growth of eventually globalization. Um, and so it's no, no, no coincidence that in the 1940s, as the great powers led by the United States think about how to reorder the world, there's an emphasis on building international institutions, whether it's the United Nations or the World Bank or something called the General Agreement on Trade and Tariffs,

which was meant to essentially open markets around the world to prevent a return to the Great Depression and the kind of destabilizing protectionism that had occurred as a result of the Smutali tariffs. And so there's, again, kind of an American led world order from 1945 onwards had essentially open markets as a sort of central plank. And now we're seeing in many ways the unraveling of that with Donald Trump. You know, when I think about the rise of the Nazis, I really have always thought about the punitive deal

that Germany got coming out of World War I, right? The terms of the Treaty of Versailles. But it's just really fascinating to listen to you talk about the role that these tariffs and the continued or worsened economic hardship that they caused, the reverberations of them. Music As I think that this is something that you and I have talked on the show before, but this affinity that Trump has for this time in history, you know, I just, I just wonder if you could just talk to me a little bit more about that before, before we go and how you're thinking about it right now.

Yeah, it's really weird because this period is one of kind of, you know, huge American economic kind of power and dominance, which is obviously the growth of America's industrial power. But for conditions for average people were pretty bad. Working in the dangerous coal mines getting black lung, or 12 hours on an assembly line or something, was backbreaking labor. The whole mindset from people working in these things was I'm going to work really hard so that my kids don't have to necessarily do this, this kind of thing.

Um, you know, this Brian, I'm at the Brian Mulroney Institute here, there's Brian Mulroney has this been quote that's on the wall from his father. Apparently the only way out of a, out of a lumber town is through a university door. So I think it's this weird kind of mindset to go back in time to a period that, that really wasn't all that, that great. I mean, if you want to talk about American sort of prosperity and stuff, it's really been the forties and fifties and sixties when America was trying to learn a lot of the lessons from the great depression.

Listening to you talk about that, I don't know if you've seen, but there's this exchange through reporting that's been making the rounds on social media. And it's this discussion between Trump and his former economic advisor, Gary Cohn, who worked for him during the first administration, and who was largely seen as kind of a check on his love for tariffs. And he's changed, you know, I'm paraphrasing, but it's like basically Cohn is bringing Trump all of this data about how people in the United States

are leaving these manufacturing jobs. They do not want to work in these factories. And Trump just like doesn't understand it. And Gary Cohn's like, why would they want to work in a factory when they could just work a job in an office? And he like still doesn't understand it. And he keeps going to Gary Cohn, you're wrong, you're wrong. I'm right about all of this. And Cohn's like, look, like I thought I could be a professional football player for 15 years and I was wrong. Just because you think that you're right doesn't mean that you're right. And then that's just where the exchange ends. He never actually

convinces Trump, obviously. It's, yeah, it's, it's really weird. Again, I like Howard Letnick, the commerce secretary, he said, you know, these armies, millions of Americans will be screwing in screws on cell phones. That kind of thing is gonna come to America. It's gonna be automated and great Americans, the trade craft of America is gonna fix them, it's gonna work on them.

They're gonna be mechanics. I don't think there's that many jobs bringing screws on cell phones anyway, but you know, who's gonna wanna do that for eight hours a day? I just don't know. And again, Donald Trump is someone who's spent his life as far as I'm aware of in air conditioned offices and on golf courses, not on a factory floor

for eight hours on his feet. So. Yeah. Asa, thank you very much for taking us through that history lesson. It was really interesting. Like I said in the intro, I wouldn't have thought that this is something I would have been very excited to talk to anybody about.

But it was really interesting. Thank you. Pleasure to be here. Ferris Bueller should have paid more attention, I guess. Yes, totally. All right. That is all for today. I'm Jamie Poisson.

Thanks so much for listening and we'll talk to you tomorrow.