I think that your article is beside the point: what economic historians say is not that tariffs boost growth, is that tariffs protect nascent industries that would be killed in the cradle by trading freely with already-industrialized countries.
The classic example is of course the exchange of textiles between Britain and India: first Indian clothes were kept out the British market, and then British industries were strong enough to swamp the Indian market.
Another example is, of course, the industrialization of Japan and S Korea after WWII. I do not think you will find many historians thinking that tariffs were not key in their economic rise. FWIW, also the Italian economic miracle happened behind very high tariffs. same for the rest of the EU countries in the so-called "glorious thirties".
Think for a moment to the US as having lost their big auto industry (think Detroit and non Tesla) and needing to re-industrialize: has a regime of tariffs against foreign EVs would make sense: history has proven that many times over - but of course this would only be a necessary (not sufficient) condition: the time bought should be used by GM and Ford to develop advanced batteries, electric drive-trains and EVs competitive with the best Chinese, Japanese and European electric cars, instead of making bigger and bigger gas-guzzling trucks and using the tariff wall to keep EVs out.
This is also my understanding as outlined in Michael Hudson’s “America's Protectionist Takeoff, 1815-1914: The Neglected American School of Political Economy” and Ha Joon Chang’s “Bad Samaritans.”
The coefficient on tariffs in growth regressions is typically negative (though insignificantly), and the model used in the papers^ shows that it should be negative (!) even if tariffs were clearly welfare enhancing, making the result indistinguishable from when it is driven solely by rent-seeking! It can reject the protectionist case only if we (imho, insincerely) assume that the result is driven solely by state capacity and not by rent-seeking and social planning.
Your results are close to zero (also insignificantly) but (from what I understand—though IANAE, so correct me if I’m wrong) we still don’t learn much.
Even studies that find a positive effect from a randomly imposed trade barrier (see section 4 of the latter paper^ for some, if not all, of them) can’t resolve the question of how tariffs would work in real world circumstances where they’re not applied randomly.
I’m obviously not saying that I’m in favor of protectionist tariffs (I’ve not made up my mind), or that we can’t know anything (see section 4 of the latter paper^)—just that I think (and as I said, correct me if I’m wrong) merely doing what you did won’t tell us much.
I agree, the trade policy makes no sense. The Neocon plan has always been war to decimate Russia and China in their historical moments of demographic weakness to maintain unipolar dominance for the Western Plutocrats. This is the missing piece when you try to figure out if they're stupid or merely inflamed by MIC war-lust in wanting to "reindustrialize America" into total self-sufficiency, a Neocon Fortress of Solitude. Oil is China's Achilles' heel; in virtually every other regard they have already passed us in STEM industrial might. Oil is the reason Bibi has been told to bring chaos to the Middle East, to create a good old-fashioned energy crisis that will drastically curtail China's ability to get its oil by sea. The Neocons believe this will cause famine in China. The last hurrah for the US Navy will be interrupting oil shipments to and from Russia and China. This is the hypothesis I am working from.
You have stated that the US needs to become even more competitive and the path forward needs to include exposure to Chinese products. Was that the case during the Cold War?
You fail to answer the question of what ultimately motivates China.
Is Taiwan the end of the line? Or, like Russia, does it want a return to the 19th century? If the latter is the goal, then why should we make the path easier in the short term (even if it hurts in the medium term) when we have to make painful medium to long term changes anyway?
Imperialism is not a tool of economic nationalism, but an ideology and objective in itself. Given its actual history as state capitalism, we can say that Communism was mostly Russian imperialism behind "benign" rhetoric.
Even if imperialism was subordinate to something, it would be to political expediency and not economic necessity.
"Specifically, the thesis—as correct now as it was back then—was that the tariff walls erected by the satisfied powers, America and England, during the Great Depression, forced the dissatisfied powers, the Soviet Union, Germany, Italy, and Japan, to seek economic security through conquest and autarky."
That statement is a questionable oversimplification.
It manages the achievement of being an apologetics for Nazi German, Soviet Russian, fascist Italian and imperial Japanese narratives all at once.
It divorces World War II from the history leading up to World War I.
It ignores the agressive history of Germany and Russia, including their pacts to divide Poland and Eastern Europe.
The problem with Germany and Austria-Hungary was the imposition of multinational empires during the age of nations. Same with the USSR.
(Same with UK and other European empires, as well as the US -which eventually gave up the Philippines-.)
German and Japanese Lebensraums are justifications for imperialism. It is deterministic to say that how you manage economic vulnerabilities is a question of either accomodation from foreign powers or invasion of your neighbors.
Nations have become the only tools for self-government (specially of democracies) in the modern era. (Supranational institutions to replace empires with the consent of the governed are in their infancy.) Given Russia and China don't believe in liberal democracy, why should they respect the concept of equal sovereignity of nations?
WWI and WWII punished Germany and Japan, but not Russia or China. (Yes Japan and Germany reindustrialized but their societies were actually transformed -specially via the expulsions of Germans-.)
Russia was allowed to become a victorius power even though it contributed to starting WWII. It was even allowed to expand its empire via the occupation of Eastern Europe.
China was also allowed to remain a multinational empire.
After the end of the Cold War, Russia democratized and mostly dissolved as a multinational empire (with the exception of some smaller nations inside it). (One of the mistakes of the post-Soviet dissolution was to force smaller nations to remain inside other new nations or as part of the wrong nations -the so called frozen conflicts-).
China was offered preferential trading status in exchange for keeping away from Russia. After the Cold War ended, this status was enhanced under the premise that it would follow the USSR and eventually democratize.
Hong Kong and Macau were returned to it, the West mostly stopped engaging with Taiwan, Xinjiang/Turkestan separatism was ignored and the Tibetan question was buried.
What does the West have to show for its contemporary overtures to China?
If your premise was true then Western openness to China should have led it into a different path.
"What is clear is that growth has a strong tendency to spill over. We should like our trade partners to grow faster because that gives a big boost to our own economic performance."
We should like our *political* partners to grow faster because that solidifies our societal model and our economic performance.
The US should not like our adversaries to grow, even if there are relatively minor positive spillovers into our economy.
"There is no evidence that tariff protection helps boost growth, but there is some evidence that tariffs hurt other countries at the margin."
And this is why higher tariffs should be favored, not only on China but also on those who choose China over the West.
"American political elites have blown the threat posed by China all out of proportion to justify hawkish policies that guarantee that China will be a committed adversary, without doing the math on whether we can prevail in a protracted struggle against the combined industrial might and geopolitical influence of the three power alliance we have foolishly forced into existence."
So which is it? Is the Chinese threat blown out of proportion or is it so high that we probably can't prevail?
But most importantly, why is the US to blame for forcing it into existence?
China and Russia are and have been partners because they are not liberal democracies and because they still believe in autocratic multinational empires.
"Last but not the least, by hunkering down behind a great big tariff wall, we’re quite literally ceding the world economy to China."
There is not only a single binary choice on how to deal with these issues.
I don't know if China's rise as most countries most important trading partner (and therefore most important political influence) can be stopped, much less reversed.
I think some countries will naturally gravitate to the West politically (basically Latin America because of culture).
But many others have such big divergences with the secular West (mostly the Muslim world) or such historical grievances against it (Africa and India) that they will either gravitate towards China or try to keep neutral.
I think the neutral ones would see their economic development slowed because the West doesn't have any instruments of actual economic development or actual technology transfer or actual long term policy backed by sufficient resources and then the pressure to follow China would even increase more (so Africa caves to China and India becomes more resentful of both China and the West becoming increasingly isolated and maybe backsliding against democracy in an attempt to follow the Chinese model).
Without Latin America and India, the Western model is kind of marginal in a geopolitics that looks just beyond the next couple of decades.
What can the West (specially the US) do about it?
NAFTA's overhang is still a major problem. It is inexcusable that it took Trump's initiative to renegotiate it and apply left wing proposals about including labor standards.
America needs to rethink global trade:
1. A simple principle: Fair trade with US allied countries and tariffs on adversaries and neutrals.
2. Tariffs on China and Russia while protecting vulnerable US consumers (Trump lite).
3. Even higher tariffs on China and others if they don't comply with climate change objectives.
4. Stricter rules on origin to close loopholes.
5. Continue the Trump policy of renegotiating trade agreements to include labor, environmental and free speech standards and include even stronger standards (Trump plus).
5a) This would cover the current network of free trade agreements: Australia, Singapore and South Korea, Latin America (Central America -including Panama and Dominican Republic-, Colombia, Peru and Chile) and Middle East (Israel, Jordan, Oman, Bahrain, Morocco).
5b) And expand the global network with some remaining allies: Taiwan, New Zealand, Ecuador, and the small islands of the Caribbean and the Pacific.
6. Allied countries with fair trade agreements with US would be excluded from rise in general tariffs that would continue into the future (Trump lite).
7. New approach to trade with long standing allied countries: Japan and Europe (including non-European Union countries like the United Kingdom). First with a goods-only trade agreement (including coordination of some industrial policies -cars and defense foremost-).
8. Use the World Trade Organization to promote US standards.
9. Reform "Most Favored Nation" standard so that it doesn't apply if no compliance with minimum standards (similar to Generalized System of Preferences).
10. Stronger sanctions on countries used for money laundering, terrorist financing, tax evasion/avoidance, drug trafficking and human trafficking.
The Cold War was won not because of the type of statistics and graphs economists love but because the systems had different legitimacies.
The Western model had more and more varied goods for consumers with less restrictions against citizens.
I think that your article is beside the point: what economic historians say is not that tariffs boost growth, is that tariffs protect nascent industries that would be killed in the cradle by trading freely with already-industrialized countries.
The classic example is of course the exchange of textiles between Britain and India: first Indian clothes were kept out the British market, and then British industries were strong enough to swamp the Indian market.
Another example is, of course, the industrialization of Japan and S Korea after WWII. I do not think you will find many historians thinking that tariffs were not key in their economic rise. FWIW, also the Italian economic miracle happened behind very high tariffs. same for the rest of the EU countries in the so-called "glorious thirties".
Think for a moment to the US as having lost their big auto industry (think Detroit and non Tesla) and needing to re-industrialize: has a regime of tariffs against foreign EVs would make sense: history has proven that many times over - but of course this would only be a necessary (not sufficient) condition: the time bought should be used by GM and Ford to develop advanced batteries, electric drive-trains and EVs competitive with the best Chinese, Japanese and European electric cars, instead of making bigger and bigger gas-guzzling trucks and using the tariff wall to keep EVs out.
This is also my understanding as outlined in Michael Hudson’s “America's Protectionist Takeoff, 1815-1914: The Neglected American School of Political Economy” and Ha Joon Chang’s “Bad Samaritans.”
(Edit: check out the replies to https://x.com/vinamrsachdeva/status/1849065632702374118 and https://x.com/vinamrsachdeva/status/1849072749727166923 by both Anusar and me.)
Have you read https://scholar.harvard.edu/files/dani-rodrik/files/why-we-learn-regressing-nothing-by-regressinggrowthonpolicies.pdf, or section 4 of https://drodrik.scholar.harvard.edu/sites/scholar.harvard.edu/files/dani-rodrik/files/the_new_economics_of_ip_081423.pdf?
The coefficient on tariffs in growth regressions is typically negative (though insignificantly), and the model used in the papers^ shows that it should be negative (!) even if tariffs were clearly welfare enhancing, making the result indistinguishable from when it is driven solely by rent-seeking! It can reject the protectionist case only if we (imho, insincerely) assume that the result is driven solely by state capacity and not by rent-seeking and social planning.
Your results are close to zero (also insignificantly) but (from what I understand—though IANAE, so correct me if I’m wrong) we still don’t learn much.
Even studies that find a positive effect from a randomly imposed trade barrier (see section 4 of the latter paper^ for some, if not all, of them) can’t resolve the question of how tariffs would work in real world circumstances where they’re not applied randomly.
I’m obviously not saying that I’m in favor of protectionist tariffs (I’ve not made up my mind), or that we can’t know anything (see section 4 of the latter paper^)—just that I think (and as I said, correct me if I’m wrong) merely doing what you did won’t tell us much.
I agree, the trade policy makes no sense. The Neocon plan has always been war to decimate Russia and China in their historical moments of demographic weakness to maintain unipolar dominance for the Western Plutocrats. This is the missing piece when you try to figure out if they're stupid or merely inflamed by MIC war-lust in wanting to "reindustrialize America" into total self-sufficiency, a Neocon Fortress of Solitude. Oil is China's Achilles' heel; in virtually every other regard they have already passed us in STEM industrial might. Oil is the reason Bibi has been told to bring chaos to the Middle East, to create a good old-fashioned energy crisis that will drastically curtail China's ability to get its oil by sea. The Neocons believe this will cause famine in China. The last hurrah for the US Navy will be interrupting oil shipments to and from Russia and China. This is the hypothesis I am working from.
You have stated that the US needs to become even more competitive and the path forward needs to include exposure to Chinese products. Was that the case during the Cold War?
You fail to answer the question of what ultimately motivates China.
Is Taiwan the end of the line? Or, like Russia, does it want a return to the 19th century? If the latter is the goal, then why should we make the path easier in the short term (even if it hurts in the medium term) when we have to make painful medium to long term changes anyway?
Imperialism is not a tool of economic nationalism, but an ideology and objective in itself. Given its actual history as state capitalism, we can say that Communism was mostly Russian imperialism behind "benign" rhetoric.
Even if imperialism was subordinate to something, it would be to political expediency and not economic necessity.
"Specifically, the thesis—as correct now as it was back then—was that the tariff walls erected by the satisfied powers, America and England, during the Great Depression, forced the dissatisfied powers, the Soviet Union, Germany, Italy, and Japan, to seek economic security through conquest and autarky."
That statement is a questionable oversimplification.
It manages the achievement of being an apologetics for Nazi German, Soviet Russian, fascist Italian and imperial Japanese narratives all at once.
It divorces World War II from the history leading up to World War I.
It ignores the agressive history of Germany and Russia, including their pacts to divide Poland and Eastern Europe.
The problem with Germany and Austria-Hungary was the imposition of multinational empires during the age of nations. Same with the USSR.
(Same with UK and other European empires, as well as the US -which eventually gave up the Philippines-.)
German and Japanese Lebensraums are justifications for imperialism. It is deterministic to say that how you manage economic vulnerabilities is a question of either accomodation from foreign powers or invasion of your neighbors.
Nations have become the only tools for self-government (specially of democracies) in the modern era. (Supranational institutions to replace empires with the consent of the governed are in their infancy.) Given Russia and China don't believe in liberal democracy, why should they respect the concept of equal sovereignity of nations?
WWI and WWII punished Germany and Japan, but not Russia or China. (Yes Japan and Germany reindustrialized but their societies were actually transformed -specially via the expulsions of Germans-.)
Russia was allowed to become a victorius power even though it contributed to starting WWII. It was even allowed to expand its empire via the occupation of Eastern Europe.
China was also allowed to remain a multinational empire.
After the end of the Cold War, Russia democratized and mostly dissolved as a multinational empire (with the exception of some smaller nations inside it). (One of the mistakes of the post-Soviet dissolution was to force smaller nations to remain inside other new nations or as part of the wrong nations -the so called frozen conflicts-).
China was offered preferential trading status in exchange for keeping away from Russia. After the Cold War ended, this status was enhanced under the premise that it would follow the USSR and eventually democratize.
Hong Kong and Macau were returned to it, the West mostly stopped engaging with Taiwan, Xinjiang/Turkestan separatism was ignored and the Tibetan question was buried.
What does the West have to show for its contemporary overtures to China?
If your premise was true then Western openness to China should have led it into a different path.
"What is clear is that growth has a strong tendency to spill over. We should like our trade partners to grow faster because that gives a big boost to our own economic performance."
We should like our *political* partners to grow faster because that solidifies our societal model and our economic performance.
The US should not like our adversaries to grow, even if there are relatively minor positive spillovers into our economy.
"There is no evidence that tariff protection helps boost growth, but there is some evidence that tariffs hurt other countries at the margin."
And this is why higher tariffs should be favored, not only on China but also on those who choose China over the West.
"American political elites have blown the threat posed by China all out of proportion to justify hawkish policies that guarantee that China will be a committed adversary, without doing the math on whether we can prevail in a protracted struggle against the combined industrial might and geopolitical influence of the three power alliance we have foolishly forced into existence."
So which is it? Is the Chinese threat blown out of proportion or is it so high that we probably can't prevail?
But most importantly, why is the US to blame for forcing it into existence?
China and Russia are and have been partners because they are not liberal democracies and because they still believe in autocratic multinational empires.
"Last but not the least, by hunkering down behind a great big tariff wall, we’re quite literally ceding the world economy to China."
There is not only a single binary choice on how to deal with these issues.
I don't know if China's rise as most countries most important trading partner (and therefore most important political influence) can be stopped, much less reversed.
I think some countries will naturally gravitate to the West politically (basically Latin America because of culture).
But many others have such big divergences with the secular West (mostly the Muslim world) or such historical grievances against it (Africa and India) that they will either gravitate towards China or try to keep neutral.
I think the neutral ones would see their economic development slowed because the West doesn't have any instruments of actual economic development or actual technology transfer or actual long term policy backed by sufficient resources and then the pressure to follow China would even increase more (so Africa caves to China and India becomes more resentful of both China and the West becoming increasingly isolated and maybe backsliding against democracy in an attempt to follow the Chinese model).
Without Latin America and India, the Western model is kind of marginal in a geopolitics that looks just beyond the next couple of decades.
What can the West (specially the US) do about it?
NAFTA's overhang is still a major problem. It is inexcusable that it took Trump's initiative to renegotiate it and apply left wing proposals about including labor standards.
America needs to rethink global trade:
1. A simple principle: Fair trade with US allied countries and tariffs on adversaries and neutrals.
2. Tariffs on China and Russia while protecting vulnerable US consumers (Trump lite).
3. Even higher tariffs on China and others if they don't comply with climate change objectives.
4. Stricter rules on origin to close loopholes.
5. Continue the Trump policy of renegotiating trade agreements to include labor, environmental and free speech standards and include even stronger standards (Trump plus).
5a) This would cover the current network of free trade agreements: Australia, Singapore and South Korea, Latin America (Central America -including Panama and Dominican Republic-, Colombia, Peru and Chile) and Middle East (Israel, Jordan, Oman, Bahrain, Morocco).
5b) And expand the global network with some remaining allies: Taiwan, New Zealand, Ecuador, and the small islands of the Caribbean and the Pacific.
6. Allied countries with fair trade agreements with US would be excluded from rise in general tariffs that would continue into the future (Trump lite).
7. New approach to trade with long standing allied countries: Japan and Europe (including non-European Union countries like the United Kingdom). First with a goods-only trade agreement (including coordination of some industrial policies -cars and defense foremost-).
8. Use the World Trade Organization to promote US standards.
9. Reform "Most Favored Nation" standard so that it doesn't apply if no compliance with minimum standards (similar to Generalized System of Preferences).
10. Stronger sanctions on countries used for money laundering, terrorist financing, tax evasion/avoidance, drug trafficking and human trafficking.
The Cold War was won not because of the type of statistics and graphs economists love but because the systems had different legitimacies.
The Western model had more and more varied goods for consumers with less restrictions against citizens.