Failed tariffs and sanctions

John Mangun

TARIFFS and trade sanctions have been a critical part of modern foreign relations going back to the Opium Wars between 1839 and 1842.

The Smoot-hawley Tariff Act of 1930 raised US import duties to protect American farmers and industries from foreign competition. It is now widely blamed for worsening the severity of the Great Depression by disrupting the global goods and commodity supply.

The 1962 Chicken War began when the six member nations of the Common Market raised tariffs on US poultry to 13.43 cents a pound from 4.8 cents a pound.

That was followed by the 1985 ‘Pasta War’ when Europe refused to respond to complaints of discrimination against American citrus products. The Reagan administration increased tariffs on pasta. The Europeans came back with increased tariffs on American lemons.

As for trade sanctions, in October 1973, the Organization of Arab Petroleum Exporting Countries implemented a total oil embargo against countries that had supported Israel. That embargo lasted five months and the crude oil price increased by nearly 300 percent.

There is not any country that can rely on its own domestic production for basic commodities and goods. There is not any country that does not need exports to provide the income to pay for its imports. However, the US is the exception even though its monthly trade balance has been positive only six times since 1980. The US funds its trade deficit by borrowing money from those nations that it imports from.

China owns $859.4 billion (down from over $2 trillion) in US government debt. The US trade deficit with China in 2023 was $279.4 billion.

But tariffs are only useful if the targeted country wants or needs the trade. Trump imposed global—not just on China—tariffs on solar panels, washing machines, steel, and aluminum, for example. These were met with retaliatory tariffs on American goods from China, India, Canada, the European Union, and Mexico.

The Biden administration, in an obvious effort to sway voters in the American steel and aluminum industry, will call to triple the current 7.5 percent China tariff rate on steel and aluminum imports. But this is 2024.

Business Insider: “Commerce between the two countries [China and Russia] climbed 26 percent from $190 billion to $240 billion in 2023. China has been snapping up cheap Russian oil since the Kremlin invaded Ukraine. Russia has loaded up on smartphones from Chinese retailers after US and European brands exited the market. Chinese exports to Russia jumped 47 percent in 2023.”

Here is the dilemma for those particularly in the US that do not have a shred of understanding how the global economy works in the 21st century. The US is no longer the Godfather who controls neighborhood “trade,” offers protection, settles disputes, and expects to be paid off.

China is no longer as dependent on the US for its trade. Americans are low on cash, and the country’s consumer population is declining. Biden will make it less appealing for nations like China to sell to the US.

Russia does not need the US, Canada, or Europe for trade, as they have a precious natural resource that is in higher demand than supply. Russia has effectively been selling oil to nations like India who then turn around and sells it to the West at a premium.

The IMF believes Russia’s economy will grow by 3.2 percent in 2024. In comparison, the US is expected to grow by 3 percent, while Germany is expected to grow by 0.2 percent. Cutting off Europe from Russian energy backfired in a major way. Foreign investments have been pouring into Russia from the rest of the world.

A nation has only two “weapons” to enforce its foreign policy—its military and its economic power.

The US sent its Vice President to the Munich Security Conference in 2022. She went off-script and blurted out that Ukraine should join Nato. Three days later, Zelenskyy said

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