Trade tariffs have been tried before

The Trump administration is imposing tariffs on a number of products from both adversary countries and allies. The president insists that these tariffs are necessary because of trade deficits with certain countries (though not necessarily with those on whom the tariffs are being imposed). Canadian Prime Minister Justin Trudeau gave an emotional speech reminding Trump that Canadians have stood with U.S. troops for more than a century. How, then, he asked, could steel and aluminum exports from Canada be a threat to the United States.

Trade deficits and potential tariffs hearken back to the 1980s, when U.S. manufacturing was suffering from overseas competition. Factories were closing, and jobs were being exported to countries with low labor costs. Thirty years ago, it was the Democrats who were complaining about the loss of manufacturing jobs and calling for tariffs or import quotas to fix the imbalance in trade and recoup U.S. jobs. Rep. Dick Gephardt ran for the Democratic presidential nomination on that issue.

Despite the appeal of the trade complaints, tariffs were avoided, and American manufacturing adjusted by becoming more specialized. Textile manufacturing (the industry that gave jobs — and low wages — to generations of my family) mostly abandoned U.S. factories and thrived in low-wage countries. U.S. factories turned to more complex, intricate manufacturing, such as airplanes, and to research-oriented work in communication and computers. Entertainment and financial services became the new standard in U.S. exports. Automobile imports, which was one of the complaints of the fair trade zealots, has adjusted. Now most foreign vehicle companies have factories in the United States. The world's largest BMW plant is in South Carolina, not Germany. Complaints about foreign cars taking away U.S. jobs are rarely heard now.

Another predecessor of the current tariffs bubble is one President Trump would know about if he read history (he famously dislikes reading anything longer than one page). Few Americans today are old enough to remember the Great Depression, when whole industries collapsed, unemployment topped an estimated 25%, and many Americans went hungry. The proximate cause of the Great Depression was trade tariffs. Seeking to shore up their own industries, countries imposed tariffs, and international trade fell. Along with trade, jobs disappeared. A global financial crisis that lasted a decade ensued.

Maybe Trump's tariffs won't have the same effect, or maybe he's just bluffing and will back away from his threats once he has everyone's attention, but the risk he's taking on this gamble endangers more than his popularity, his presidency and his legacy. The global economy could end up in the fix it was in in 1930. Although there has been no stock market crash as a result of these tariffs, stocks will certainly tank if global trade collapses in a trade war.

Trump has always been a gambler. Now he's raising the stakes for everybody.