Over a thousand economists have written to Donald Trump warning his "economic protectionism" and tough rhetoric on trade threatens to repeat the mistakes the US made in the 1930s, mistakes that plunged the world into the Great Depression.
The 1,140 economists, including 14 Nobel prize winners, sent the letter on Thursday amid an escalating row over trade between the US and the European Union. Trump has imposed tariffs on steel and aluminium imports but has granted temporary reprieves to the EU, Australia and other countries.
"In 1930, 1,028 economists urged Congress to reject the protectionist Smoot-Hawley Tariff Act," the authors write, citing a trade act that many economists argue was one of the triggers for the Great Depression.
“Today, Americans face a host of new protectionist activity, including threats to withdraw from trade agreements, misguided calls for new tariffs in response to trade imbalances, and the imposition of tariffs on washing machines, solar components, and even steel and aluminum used by US manufacturers.
“Congress did not take economists’ advice in 1930, and Americans across the country paid the price. The undersigned economists and teachers of economics strongly urge you not to repeat that mistake. Much has changed since 1930 – for example, trade is now significantly more important to our economy – but the fundamental economic principles as explained at the time have not.”
On the campaign trail and since taking office Trump has threatened to dismantle decades of trade deals, including the North American Free Trade Agreement (Nafta). The president has blamed Nafta for hollowing out the US’s manufacturing base.
The letter is signed by Nobel laureates including lvin Roth, Richard Thaler, Oliver Hart, Roger Myerson and James Heckman as well as Jason Furman, former chair of the Council of Economic Advisors to Barack Obama, and James Miller, budget director to Ronald Reagan.
Bryan Riley, director of the National Taxpayers Union's Free Trade Initiative, which coordinated the letter, said Trump and the former Democratic presidential hopeful Bernie Sanders had both ratcheted up the argument against free trade ahead of the election, arguing that their rhetoric threatened the balance of the global economy.
He said many of the arguments against free trade were like “flat earth economics”. “People look at the changes that have gone on in the economy and blame free trade for, say, the decline in manufacturing when in fact the changes have more to do with automation,” he said.
“But if you look opinion polls, the [anti-free trade] message is not being driven by public opinion. This is not a grassroots movement against imports or Nafta. This is being driven from the top.”
Riley said that in comparison with the 1930s, international trade was now more important to the global economy than ever. If Trump’s rhetoric translated into a full trade war, the consequences could be dire, he said. “We rely more on international trade than at any point in world history,” he said.
