The Political Impact of Protectionism

In the final minute of this video on trade deficits, I explained that protectionism is a political loser for the Republican Party.

But I didn’t delve deeply into the politics of protectionism.

I merely noted that today’s Republican lawmakers were concerned.

And for good reason, as illustrated by the chart from the video showing how the GOP suffered serious losses after adopting the Smoot-Hawley trade taxes in 1930.

Hoover made many mistakes that hurt the economy and contributed to big Republican losses, so it would be an exaggeration to blame protectionism for every defeat. But the tax increases on trade definitely played a role.

I’m not the only one who thinks protectionism is a political loser.

In a column last month in the Wall Street Journal, former Texas Senator Phil Gramm and Professor Don Boudreaux of George Mason University looked at electoral history.

While protectionists portray the 18th and 19th centuries as a happy period when Americans prospered behind tariff protections, nothing is further from the truth. Americans have historically hated high tariffs and never suffered them for long. Almost 300 years ago American colonists revolted against repeated British efforts to impose tariffs on American imports. …the “Tariff of Abominations” in 1828…imposed an all-time high average tariff rate of 57.3%. In the following elections tariff supporters suffered devastating electoral defeats as Andrew Jackson and the Democrats were swept into power. …In 1842 Congress adopted and Whig President John Tyler signed the so-called “Black Tariff”…. But less than three months after the enactment of this tariff, the Whigs lost their majority in the House and three seats in the Senate. …The McKinley Tariff, enacted in October 1890, triggered a political bloodbath a month later when William McKinley and 92 other Republican representatives lost their seats and four Republican senators suffered the same fate. In 1892 Democrat Grover Cleveland was elected in a landslide. …In 1909 Republicans again raised tariffs with the passage of the Payne-Aldrich Tariff, and voters again revolted, taking the White House, 117 House seats and 13 Senate seats away from the Republicans in the 1910 and 1912 elections. …In 1922 Congress passed the Fordney-McCumber Tariff… The tariff failed to provide relief to farmers and in the 1922 elections Republicans lost 77 seats in the House and seven in the Senate.

The column also cites Smoot-Hawley and the 1930s, of course, but no need to beat a dead horse.

The message is abundantly clear. Higher taxes on trade have backfired every time they’ve been imposed.

Trump is a lost cause, but other Republicans need to realize that voters get very antsy when they feel their living standards are stagnant or declining.

I pointed this out several times when Biden was in the White House, explaining that people were unhappy because wages were not keeping pace with inflation.

With Trump’s protectionism, something similar will happen. Protectionism will increase the prices of many products, while also undermining overall economic efficiency.

The net effect is to put downward pressure on per-capita, after-tax income. And that won’t be good for Republicans seeking reelection.

In closing, I’ll offer my GOP-leaning readers two reasons to be hopeful.

• First, Trump is famous for “chickening out,” so perhaps he’ll get rid of some of his tax increases on trade and thus limit the damage.
• Second, the potential economic benefits of the “Big Beautiful Bill” are being greatly exaggerated, but it will help if it gets enacted, thus offsetting some of the damage of protectionism. And Trump’s deregulation agenda also will help.

Needless to say, the smart approach (politically and economically) is to embrace free trade. But there’s no chance of that with “Tariff Man” in the White House.