A Benjamin Cole post
When it comes to trade and protectionism, President Ronald Reagan (1980-1988) dwarfed in real life anything GOP candidate Don Trump has imaginatively proposed.
Trump wants a 45% tariff on China goods?
Hoo-haw. President Reagan slapped a 100% tariff on Japanese consumer electronics. And a 50% tariff on Japanese heavy motorcycles, as a favor to Harley Davidson, hog-makers. Forgotten today, Harley was about to go under. Reagan rode to the rescue, and Harley Davidson survives to this day. I guess if you like American-built huge motorcycles, protectionism has its merits.
Little was safe from Reagan’s protectionism, including sugar, textiles, roller bearings, machine tools, autos from Japan (limited by amount, not tariff. But that was OK because it went by the name of “Voluntary Export Restraint”!), steel, garments, lumber, forklifts, color TV tubes, and other items.
Sheldon Richman, writing for Cato Institute in 1988 (before latter-day hagiographers), reported, “Treasury Secretary James A. Baker III boasted last September (1987) that the administration ‘has granted more import relief to United States industry than any of [its] predecessors in more than half a century.’”
Richman concluded, “Ronald Reagan by his actions has become the most protectionist president since Herbert Hoover, the heavyweight champion of protectionists.”
The number of nations hit by trade restrictions reached into the dozens. Indeed, Reagan was such a ferocious protectionist that Milton Friedman wrote that the one-time actor was “making Smoot-Hawley look positively benign.”
William A. Niskanen, who was for a while acting chairman of President Reagan’s Council of Economic Advisers, reported, “The share of U.S. imports subject to some form of trade restraint increased from 12% in 1980 to 23% in 1988.”
Trump in contrast, has suggested tariffs on just one nation, and that as bargaining position.
Forgotten today is that Reagan conducted a global trade-war.
Moreover, Reagan didn’t just go crazy with tariffs—he repeatedly pressured other nations into increasing the value of their currencies, or, put it mildly, sought to cheapen the dollar.
As in September 1985, when the Reaganauts engineered the “Plaza Accord,” an international monetary straitjacket which mechanically depreciated the U.S. dollar against the Japanese yen and German mark.
Today, the punditry is in full-shriek mode at Trump-o-nomics. We are lectured The Donald’s trade policies will result in snowballing recessions or economic Armageddon.
But in the 1980s, the United States flourished behind rising walls of aggressive Reagan protectionism, much more pervasive than anything proposed by Trump.
Did Reagan’s wide-ranging trade-killing measures improve the domestic economy (in addition to saving Harley Davidson’s big motorcycles)?
It does not seem likely, but today Reagan is lionized by many, and the 1980s remembered as a period of prosperity.