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Tariffs, retaliation, and the flu

Health officers
Health officers in protective clothing culled poultry at a wholesale market, as trade in live poultry was suspended after a spot check at a local street market revealed the presence of H7N9 bird flu virus, in Hong Kong in 2016.

History shows that “easy” tariff wars are not all that easy. In the current battle between the Trump administration and China, the EU, Mexico, Canada, and others, the conflict has seemed to be about economics such as tariffs. However, the administration has now linked them, in the case of Mexico, to immigration and drug policy and even a salve to farmers hurt by ongoing tariff wars — all in non-specific and seemingly ad hoc terms. But tariffs wars may soon careen into issues of public health.

Specifically, China has signaled that in part in response to President Trump’s trade tactics, it has stopped the process of sharing information concerning Avian flu viruses emanating from its chicken farmers. These viruses travel annually westward, and will again this year, to infect human populations. The most important strain, H7N9, is lethal to 40 percent of the people who contract it.

photo of article author
Carlisle Ford Runge
In a report in the New York Times late in the summer of 2018 (Aug. 27), Emily Baumgartner noted that despite repeated requests, China has not provided samples of H7N9, usually exchanged readily by the World Health Organization (WHO). Unlike shortages in aluminum or rare earth minerals or soybeans, the article cites Dr. Michael Callahan of the Harvard Medical School, who noted that such restrictions on access to new flu strains could counter our ability “to protect against infections which can spread globally within days.” As Andrew C. Weber, who was responsible for biological defense programs in the Obama administration said, “not sharing it immediately with the global network of WHO laboratories like CDC is scandalous. Many could die needlessly if China denies international access to samples.”

Noteworthy impact

While the interface of trade policy and public health is not often mentioned, the impact of trade disputes on the transmission of human illness — both direct and indirect — is noteworthy. While economic disputes over soybeans or aluminum or other goods and services may seem unconnected to dying from the flu, they are not. The Trump administration’s tariff measures, announced by the U.S. against China and more recently in immigration-linked threats against Mexico, have been driven by an extraordinary naiveté about and ignorance of history.

In the early 1930s, the U.S.-imposed Smoot-Hawley tariff led to an escalating series of countermeasures from Europe that deepened and prolonged the Great Depression. It also led to privation in Europe in which Fascism festered, and encouraged, if it did not cause, World War II. Millions of lives were spent. The realization that tariffs played such a role led to a set of rules which reduced net effective rates of protection from close to 50 cents on the dollar after World War II to about 5 cents in the mid-1980s. Since then, however, especially after the successful conclusion of the Uruguay Round of multilateral trade negotiations (MTN) in the early 1990s, the postwar consensus on trade liberalization has broken down, as memories fade and grievances mount.

Despite the World Trade Organization (WTO) agreement, paired with NAFTA in 1992 and 1993, these grievances, especially in the U.S., have created fertile ground for protectionists such as Trump to exploit. It is striking how much of his rhetoric over NAFTA and trade, claiming that American workers have been cheated by globalization, resembles the exhortations to Germans in the 1930s to rise up against their betrayal by the Versailles Treaty and the ill-advised reparations imposed by the Allies after World War I. While NAFTA and other trade agreements have surely encouraged sectoral reallocation and some unemployment, they are not prime movers compared to robotics, informatics and other technological changes.

An invitation to retaliation

Specifically, they fail to appreciate the basic game-theoretic idea that the countries targeted by U.S. tariffs will not sit still and simply take it. In addition, economic theory strongly suggests that tariffs are most effective when you pick on someone smaller (perhaps it’s no coincidence Melania has taken an interest in juvenile bullying, domestically). But to pick on someone nearly your economic equal, like China, is to invite retaliation you may grow to regret. In the case of Mexico, while U.S. threats are credible, the impact of NAFTA, by encouraging growth in the Mexican economy, has actually been to ease the economic motive for migration.

China has shown itself to be both restrained and sophisticated in response to U.S. provocations, targeting commodities for retaliation, especially in the agricultural Midwest, where Trump’s electoral base largely resides. But Chinese retaliation and resentment runs deeper, indicating the profound damages that brusque trade-bullying tactics may incite, to potentially lethal effect if the world’s largest nation turns toward breaking down international collaboration on issues of health security.

One of the great challenges of government policy in this century is understanding the links from politics to science. In this respect, quite apart from Trump’s inability and unwillingness to acknowledge the threats of climate change, the current administration has failed the country. Whoever runs against him in the next election would do well to note that Trump has not only failed to competitively position the U.S. in the world economy, but toward external threats to health security, he has made our defenses weaker.

Carlisle Ford Runge is Distinguished McKnight University Professor of Applied Economics and Law at the University of Minnesota. The views expressed are those of the author and not the University of Minnesota.


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Comments (3)

  1. Submitted by Raj Maddali on 07/09/2019 - 03:43 pm.

    Millions of American Industrial / Rust Belt jobs have been relocated to China. Now the same with technology etc. If the fear is that China will retaliate, and we shouldn’t provoke such retaliation, then what leverage does the United States have in such talks.

    The past twenty years of “negotiations” have produced middling results. The Chinese Govt strategy has been pretty clear. Buy farm products etc which they absolutely need, while taking American manufacturers and technology houses to the cleaners. Its like playing poker where the other side can see your cards. They knew the American President (until Trump came along) wouldn’t “provoke” them, cause after all its global cooperation and all that foo foo at stake. The results are there for all to see. A hollowed out middle class in the United States.

    If the Prof is going to draw out an econometric model, then he surely should factor in all the millions of jobs lost without the same level of entry into the the Chinese market. And if he still disagrees, then whats’ his solution ? Negotiations like the past ? I don’t think so.

    Whoever the next President is , isn’t going to back down. Trump for all his nastiness has called the Chinese on their eternal bluff.

  2. Submitted by William Duncan on 07/10/2019 - 08:45 am.

    So now Trump’s tariffs are going to kill you and your kids with Avian flu?

    So then maybe we shouldn’t be sending chickens to China to be processed and chlorinated, another one of those GREAT globalist free trade ideas?

    Maybe you should come eat some of my rotten sour cherries still on the tree, which are rotten because there is a new Asian fruit fly in America. D. Suzuki, which has a serrated ovipositor so it can plant it’s larva inside the not-yet-ripe fruit, any soft fleshed fruit from blueberries to raspberries to cherries?

    As for NAFTA encouraging growth in the Mexican economy, tell that to the million plus farmers driven from the land into destitution because NAFTA flooded Mexico with GMO industrial corn – and the drug gangs that filled that void. Come work in the trades like I do and tell me to my face that illegal immigration as a result of neoliberal policies in Central America and Mexico hasn’t reduced wages and benefits, and hasn’t displaced American citizens?


    Hopefully I can do that before Trump kills me with Avian Flu….

  3. Submitted by James Murphy on 07/29/2019 - 06:44 pm.

    ‘History shows that “easy” tariff wars are not all that easy. ‘

    The author’s gentleman’s “C” in history is showing. From 1816 until well after World War II the USA was the most tariff protected nation on earth. The history of tariffs goes much farther back than Smoot-Hawley. It is a myth that tariffs have been harmful. Beginning with the Tariff of 1816 and lasting until the Kennedy Round of Tariff Reductions in 1967 we were the most tariff protected country on earth. The Tariff of 1816 was our first protective tariff. It was followed by an improved economy. Tariff protection was increased in 1824 and the Tariff of 1828 was the highest tariff we ever had. The economy improved after both tariff increases. The Compromise Tariff of 1833 lowered the 1828 tariffs over a period of ten years. In 1842 Whigs, blaming the Panic of 1837 on low tariffs (most blame Andrew Jackson’s veto of a central bank), increased tariffs and the economy recovered. The election of 1844 put democrats in charge and they lowered tariffs to about 20 percent with the Tariff of 1846. From the Tariff of 1861 until the Tariff of 1913 tariffs averaged more than 40 percent. During that time we became the most prosperous nation on earth. Eclipsing free trade advocate Great Britain. Grover Cleveland was elected president in 1892 just in time to get blamed for the Panic of 1893. His response was to lower tariffs with the Tariff of 1894. It did not work and the Democrats dropped Cleveland in favor of William Jennings Bryan who lost to ardent protectionist William McKinley. McKinley restored tariffs with the Tariff of 1897. Prosperity ensued. In 1913 tariffs were lowered. The same bill created income taxes. After World War I the USA went into a steep depression. Congress responded with the Fordney–McCumber Tariff of 1922 raising tariffs. The resulting economic prosperity is generally referred to as the “Roaring Twenties.” In June 1930 Congress responded to the Great Depression with the Smoot-Hawley tariff of 1930. This remains the only tariff increase passed by Congress in the entire history of the country that did not result in an improved economy.

    It is wrong to blame the Great Depression on Smoot-Hawley. Primarily because international trade was only 6 percent of GDP at its June 1929 peak. Second, international trade had been in decline for a full year before it passed. It was passed in response to the Great Depression. Moreover, Smoot-Hawley was only a modest increase in the existing tariff. It was a 6 percent increase. An imported good that cost $1 would sell for $1.40 before Smoot-Hawley and $1.46 after, an increase to the consumer of about 4 percent. No big deal.

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