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Books

Clashing over Commerce: A History of US Trade Policy: You might be tempted to read this book to understand what's going on with tariffs right now, but by the time you get through the introduction you'll recognize that that's a terrible idea. The book's framework, which seems accurate, is that US tariff policy was historically driven by conflicts between different interest groups—concentrated ones that wanted their industry protected at the expense of consumers who were too diffuse to fight for their own interests, or cotton and tobacco exporters advocating free trade for their own benefit while manufacturers pushed for higher trade barriers to protect their interests. But there aren't that many big interest groups today that fight for tariffs, and a book where most of the action takes place in Congress doesn't tell you much about the world of improvisational executive orders, tweet-driven rumors, and re-Truthed policy pronouncements.

On the other hand, as a history of the tariff debate in the US as it existed from roughly 1776 through last month, it's very good. The book frequently refers to the economic impact of tariffs (and in a balanced way, noting that they probably didn't hurt consumers all that much when they were high, but that they probably didn't so much create as accelerate US manufacturing growth). But it's mostly about the Clashing, not the Commerce, i.e. how did politicians come up with their plans and how did they rope together electoral majorities to put those into action.

One of the fun contrasts in the book is that while there's a lot of vociferous rhetoric on both sides, there's also some surprisingly sophisticated economic analysis. At one point, the book quotes a 19th century politician who says that for every $1 of tax revenue produced by tariffs, there's $5 of private gain. And then, half a dozen pages later, estimates that the impact of tariffs on government revenue at the time as about 0.5% of GDP, but that the impact on producers was 2.5%. These politicians, operating with the benefit of much formal economic theory, also understood that tariffs on raw materials and intermediate goods get passed through to consumers of final goods, and that a tariff reducing inputs of manufactured products would reduce exports of agricultural ones.

Some of the political debates are quite familiar—Taft wanted a tariff board to identify countries with discriminatory trade policies so they could be subject to higher tariffs (the board couldn't find any, and was later disbanded). Some of them are surreal: high tariffs and high growth in the late 19th century meant that the US budget reached a crisis-level surplus that would have drained too much liquidity from the economy—Congress sprang into action to create an expanded and very easily-defrauded set of Civil War pensions to avert catastrophe.

The nature of the debates, and the general direction of US tariffs, shifts roughly a century ago. For most of the period covered, tariffs were the government's primary revenue source, in part because the government was small and in part because they were cheaper to administer than a sales tax. This led to a fun statistical artifact: throughout the 19th century, periods of high tariffs tended to have high economic growth, while lower tariffs often presaged recessions. But this was an artifact of tariffs as a tax source and inflexible monetary policies: governments imposed tariffs when the volume of trade declined to the point that the prior rate of tariffs didn't generate enough revenue, and when there was a budget surplus, they cut taxes. The book notes that the recessions in question usually started with financial crises, and weren't directly linked to trade—in fact, some of these crises involved declines in the value of farmland, an asset class that would be expected to outperform with low tariffs.

The more recent chapters in the book look at a time when trade barriers were coming down, both those imposed by governments and those imposed by the cost and inconvenience of actually moving goods from one place to another. That's a world where tariffs are less of a political question and more of a technocratic one. At least, most of the time.

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