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Tariffs & Republican Party
This week, the word ‘tariff’ was tossed around a lot much to the chagrin of some business leaders and many Republicans. However, it wasn’t always considered to be against Republican orthodoxy; on the contrary, the use of tariffs was once the center plank of the party’s economic policies. Abraham Lincoln was known to favor tariffs to protect the economy and to generate revenue.
But it was the landslide victory of William McKinley; after winning the election in 1897, he gained popularity as a champion for the use of tariffs and signed the Dingley Tariff.
America began an impressive rebound that began with the Panic of 1983, as business investments surged ultimately, resulting in McKinley’s victory by an even larger margin in the election. On a side note, McKinley was considered the first president to manage the media.
The Business of America is Business
Then, there were Warren Harding and Calvin Coolidge, who campaigned on trade protectionism as a way to pull the country out of a Depression. The Fordney - McCumber Tariff Act of 1922 allowed the President latitude to hike tariffs as high as 50%. For those that railed about inexpensive imports, President Coolidge would reply: “Cheap goods means cheap men.”
The roaring twenties ushered in a booming economy and it was the best decade for the stock market.
Smoot - Hawley
So, what changed the Republican Party from proud protectionists to free market disciples? In reaction to the economic turmoil that accompanied the stock market crash of 1929, President Herbert Hoover signed the Smoot-Hawley Tariff into law. The second highest tariff in U.S. history, itcovered 20,000 import items and soon triggered counter-tariffs from key trading partners.
Many economists think this act turned the aftermath from a stock market crash into the Great Depression.
FDR beat Hoover. Republicans moved away from the idea of tariffs as an economic weapon or revenue generator, but there was a time when it was a slam dunk. It is true the world is more intertwined than ever before, including ‘product sharing’ between Mexican and United States manufacturing.
It’s going to be interesting to see how this all plays out, but I suspect there will not be any additional tariffs.
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