Economic Disturbances and Equilibrium in an Integrated Global Economy

Chapter 22

Protectionism and Trade Policy

Abstract

The call for protectionist trade policies is tempered by the experiences of the Great Depression. In 1930, Congress passed the Smoot–Hawley tariffs, the largest tax increase on traded products in the history of the United States. The trade balance, which at the time had been deteriorating during the prior 10 years of rapid growth, improved. But the nation and the rest of the world were impoverished. That experience, more than any other, stands in the way of wholesale effort to limit foreign trade. This may go a long way to explain why many economists agree that, in the extreme, trade restrictions are self-defeating, impoverishing foreign countries and US citizens alike. The policy issue this centers ...