Traders work at the New York Stock Exchange in New York, the United States, in the file photo taken on Feb. 6, 2018. With the United States retreating to the stronghold of protectionism and nationalism, concerns about a trade war are rising around the globe. (Xinhua/Wang Ying)

 
In 1930, the Smoot-Hawley Tariff Act sponsored by US Senator Reed Smoot and Representative Willis Hawley was signed into law. By raising US tariffs on more than 20,000 imported goods, Smoot and Hawley promised America would start winning again.

Sounds familiar? Eighty-eight years later, by announcing planned steep tariffs on steel and aluminum imports, US President Donald Trump made similar promises to defend US workers from what he calls the "carnage" of "terrible trade deals."

Smoot and Hawley's promise had turned out to be empty. Their act only exacerbated the Great Depression and further destabilized the international order. What is awaiting the United States this time?

BACKLASH AT HOME

The planned new tariffs mark a fresh endeavor for the "America First" policy. Moving from rhetoric to action, the White House said the United States is set to impose a 25-percent tariff on steel imports and a 10-percent tariff on aluminum imports to protect the US industry.

However, even core members of the US administration do not believe the measure will work. The latest repercussion of the protectionist stance came from Gary Cohn, who has decided to resign as Trump's top economic adviser.

The former Goldman Sachs executive, who had a steady influence on US economic policy, chose to leave due to a "fierce disagreement" over the president's decision on steel and aluminum imports tariffs.

"His departure raised questions about the direction of the Trump administration and sent Dow futures plummeting 300 points," said the CNN.

Prior to the move on steel and aluminum, the US administration in January approved tariffs of up to 50 percent on imported washers for the next three years and of up to 30 percent on solar cells and modules for the next four years.

The move marked the first time that the US government had ever used the so-called Section 201, an outdated tool under a rarely used Trade Act of 1974, to unilaterally impose tariffs or other trade restrictions on foreign imports since 2001.

Opposition ran high even before Cohn's departure. Levi's, known worldwide for its iconic jeans and one of the targets of the European Union's (EU) retaliation, said it was strongly against trade barriers.

"We support open markets and free trade where everyone plays by the rules. Unilateral tariff impositions risk retaliation and destabilize the global economy, in which case American brands, workers and consumers will ultimately suffer," said a spokesperson of Levi's.

Meanwhile, Business Roundtable, an association of chief executive officers of America's leading companies, said it strongly disagrees with the tariffs because it will hurt the US economy and American companies, workers and consumers and would lead to foreign retaliation against US exporters.

"Using 'national security' tools to implement tariffs could embolden other countries to impose 'national security' tariffs on US exporters or otherwise restrict US goods and services sold to their markets," said Joshua Bolten, president and CEO of Business Roundtable, in a statement.

KICKING HORNET'S NESTS WORLDWIDE

The Trump administration's aggressive move has unsurprisingly triggered furious reactions from the United States' trading partners, including many of its allies.

Believing the measures are "making no sense," "sending the wrong signal" or "absolutely unacceptable," they warned of serious damage by the planned tariffs to the international trade order, vowing to take "responsive measures" if necessary.

Criticism quickly came from America's largest source of steel imports,Canada. Canadian Prime Minister Justin Trudeau called the US plan "absolutely unacceptable."

"The United States has a 2-billion-Canadian-dollar (1.55-billion-US-dollar) surplus on steel with us, so we regard the imposition of any new tariffs or any tariffs on steel or aluminum between our two countries as absolutely unacceptable," he said.

It makes no sense for the United States to claim there is a national security imperative for imposing the duties, given the level of security cooperation between the two countries, he added.

Across the Atlantic, the air is also filled with fury. Commenting on the steep tariffs, the German Engineering Federation expressed concerns about the possibility of a "global trade war" creating a "spiral of reciprocal tariffs."

"Someone who talks so much about fair trade like President Trump should not resort to such unfair methods," said German Economy Minister Brigitte Zypries.

France also voiced its opposition to the move. Calling the planned duties unacceptable, French Finance Minister Bruno Le Maire warned of a coordinated European response, adding that "all options are on the table."

The EU is set to lay out plans on Wednesday to strike back against the US move. European Commission President Jean-Claude Juncker said, "We will now impose duties on motorbikes, Harley-Davidsons, on jeans, Levi's, on bourbon ..."

"We will not sit back and watch idly while our industry is hit by unfair measures which endanger thousands of European jobs," he added.

Meanwhile, the United States' largest trading partner, China, has pointed out that the practice will damage multilateral trade mechanisms represented by the World Trade Organization (WTO) and have a huge impact on the normal international trade order.

"If the final measures of the United States hurt Chinese interests, China will work with other affected countries in taking measures to safeguard its own rights and interests," said a Chinese Ministry of Commerce statement.

"We hope the US side respects the authority of the multilateral trade system, works with other countries to maintain the normal global trade order and consolidates the foundation for world economic recovery," it added.

A TRADE WAR SEES NO WINNERS

With the United States retreating to the stronghold of protectionism and nationalism, concerns about a trade war are rising around the globe.

"When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win," Trump tweeted one day after the announcement.

But his optimism is shared by few. Noting that the potential for escalation of tensions is real, WTO Director-General Roberto Azevedo said that "a trade war is in no one's interests."

"American trade protectionism -- even in the periods most often cited as 'successes' -- not only has imposed immense economic costs on American consumers and the broader economy, but also has failed to achieve its primary policy aims and fostered political dysfunction along the way," said Scott Lincicome, an international trade attorney.

"In no case can it confidently be said that American protectionism was a substantial cause of American prosperity or the flourishing of protected US industries," he said in a recent study titled "Doomed to Repeat It."

Lincicome said import restrictions most often turn to abject failures, and impose massive costs on US consumers, workers and companies without achieving their intended objectives.

"With increased US integration into the global economy, and new US trade agreement obligations, these historical failures would only be exacerbated today," said the trade expert.

For Stephen Roach, former chairman of Morgan Stanley Asia and the firm's chief economist, raising tariffs manifests the Trump administration's narrow fixation on an outsized bilateral trade imbalance with its partners, including China.

Lacking domestic savings and wanting to consume and grow, America must import surplus savings from abroad and run massive current account and trade deficits to attract foreign capital, he said in a recently published article, describing it as the root cause of the US trade imbalance.

"Consequently, going after China, or any other country, without addressing the root cause of low saving is like squeezing one end of a water balloon: the water simply sloshes to the other end," he said. "In this context, protectionist policies pose a serious threat to America's already-daunting external funding requirements -- putting pressure on US interest rates, the dollar's exchange rate, or both."

The Smoot-Hawley Tariff Act made the Great Depression worse for the United States than it might otherwise have been, mainly by inciting protectionist retaliation against US exports and creating a climate of economic nationalism around the world.

"Sadly, one of the most painful lessons of modern history has been all but forgotten," said Roach.