>>It’s as if the Smoot-Hawley Tariff Act of 1930, perhaps the most daunting of tariffs on international transactions, is haunting us all over again. Remember, if you will, this was the Act that imposed high tariffs, which resulted in European nations resorting to protectionism (as the U.S. is doing with China). This, in turn, forced international trade to rapidly decrease, which eventually lead to a global economic slowdown.<<
China (and Japan) are the biggest creditor nations to the US. The US owes China money, not the other way around. That means that if the US puts up tariffs, China cannot continue to re-lend the money it earns from its exports to the US back into the US economy. Further, with its US trade blocked by US tariffs, China can recall its US loans. Then the US economy faces a default upon its loans, just like all the Europeans did in the 1930s. |
