Article 4HRAW Just like the 1930s, this trade war has the potential to turn nasty

Just like the 1930s, this trade war has the potential to turn nasty

by
Guardian Staff
from Economics | The Guardian on (#4HRAW)
Echoes of that decade are getting uncomfortably loud as Trump imposes tariffs and the eurozone devalues its currency

A trade war followed by a currency war. Tariffs used as a protectionist weapon followed by attempts to secure a competitive advantage by exchange rate manipulation. That was the story of the 1930s and, the way things are shaping up, it could easily be the story of the 2020s as well.

Consider the historical parallels. In 1930, the US Congress passed the Smoot-Hawley Act, which raised tariffs on imported goods. The next year, Britain became the first major country to come off the gold standard. Sterling quickly lost 25% of its value against the US dollar, making British exports cheaper on world markets. But the full benefits were short-lived. Soon after being sworn in as president in 1933, Franklin Delano Roosevelt unpegged the dollar from gold, eroding Britain's advantage.

If one currency is depreciating, another currency must be appreciating

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