© 2024 254 North Front Street, Suite 300, Wilmington, NC 28401 | 910.343.1640
News Classical 91.3 Wilmington 92.7 Wilmington 96.7 Southport
Play Live Radio
Next Up:
0:00
0:00
0:00 0:00
Available On Air Stations

'The Indicator From Planet Money' explains why tariffs are back

A MARTÍNEZ, HOST:

Tariffs seem to be the campaign promise du jour this election season, but it's not the first time they've been popular. So our colleagues over at The Indicator From Planet Money put together a little history lesson. Here are Darian Woods and Adrian Ma.

ADRIAN MA, BYLINE: You can roughly think of the history of U.S. tariff policy as falling into three distinct eras. So first would be the revenue era of tariff policy. It began back in the late 1780s when the U.S. was still a baby nation. Doug Irwin is a professor at Dartmouth College who's written lots of books on international trade.

DOUG IRWIN: So the second act passed by Congress was a tariff act. And that's because the most important problem that was facing the country was the government had no money. And, of course, we were very long from having an income tax, so tariffs were sort of the only way of raising revenue for the federal government.

DARIAN WOODS, BYLINE: When a ship came into port carrying foreign tea or spices or whatever, you could stop them right there and say, if you want to unload that cargo, you have to pay Uncle Sam first.

MA: But by the mid-1800s, around the time of the Civil War, Doug says this began to change.

IRWIN: So U.S. industry had begun to grow up during this period. Steel producers and others wanted to keep foreign steel and foreign textiles out of the U.S. market.

WOODS: Tariff policy shifted from being about revenue to being about restriction.

MA: In the ensuing years, this protectionist approach to trade policy grew and grew and grew until 1930, when it finally boiled over with an infamous piece of legislation known as the Smoot-Hawley Tariff Act.

WOODS: Now, initially, the tariff was supposed to protect just U.S. farmers, but as it made its way around Congress, lawmakers said, oh, I want a piece of that.

IRWIN: If you vote for my tariff, I'll vote for yours. And so things sort of spun out of control, and the tariff levels went up quite a bit.

MA: In the end, Congress raised tariffs on thousands of goods, and other countries saw this and were like, OK, you want to play that game? And a global trade war ensued.

WOODS: By the late 1940s, policymakers looked back on that era of tariffs gone wild, and they thought, well, that was a mistake. And this began a third era of U.S. tariff policy - reciprocation.

MA: In the era of reciprocation, countries said, OK, let's ratchet things down. Let's put down the tariffs and work together to promote freer and fairer trade. And the biggest way this manifested was the World Trade Organization, basically a big trade club.

WOODS: By the 1990s, the world had become increasingly globalized. But not all was blissful in the era of reciprocation. In recent decades, many Americans working manufacturing lost their jobs as their work was moved overseas, and this has paved the way for tariffs to make a comeback.

MA: Luis Baldomero-Quintana is a professor who teaches international trade at William & Mary. And his take on tariffs is similar to what most economists would probably tell you, which is they're generally not a good idea.

LUIS BALDOMERO-QUINTANA: My first reaction is, who's going to pay for those tariffs? Tariffs are taxes, and someone pays for those taxes.

MA: And in a lot of cases, who pays for it is American businesses and consumers. But maybe for the 2024 election, that won't matter because the research shows while tariffs might not be good for consumers, they can be good for votes.

WOODS: Darian Woods.

MA: Adrian Ma. NPR News.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Adrian Ma
[Copyright 2024 NPR]
Darian Woods is a reporter and producer for The Indicator from Planet Money. He blends economics, journalism, and an ear for audio to tell stories that explain the global economy. He's reported on the time the world got together and solved a climate crisis, vaccine intellectual property explained through cake baking, and how Kit Kat bars reveal hidden economic forces.