More than 1,100 economists have made public a letter they signed to U.S. President Donald Trump and the U.S. Congress that warns against growing protectionism of U.S. trade policies.
The group includes 15 Nobel laureates and former economic advisers to U.S. Presidents Reagan, Clinton, Bush and Obama. It echoes a letter in 1930 by 1,028 economists urging Congress to reject the protectionist Smooth-Hawley Tariff Act, which turned out to worsen the Great Depression after lawmakers refused to heed the economists' advice.
The letter says that today Americans face a host of new protectionist activity, including threats to withdraw from trade agreements, misguided calls for new tariffs in response to trade imbalances and the imposition of tariffs on washing machines, solar components, and even steel and aluminum used by U.S. manufacturers.
"We are convinced that increased protective duties would be a mistake. They would operate, in general, to increase the prices which domestic consumers would have to pay. A higher level of protection would raise the cost of living and injure the great majority of our citizens," the letter says.
It also warns that few people could hope to gain from the protectionist measures and U.S. export trade would suffer in general. "Countries cannot permanently buy from us unless they are permitted to sell to us, and the more we restrict the importation of goods from them by means of ever higher tariffs the more we reduce the possibility of our exporting to them," the economists say.
They also point out that U.S. action would inevitably provoke other countries to pay back in kind by levying retaliatory duties against U.S. goods. "A tariff war does not furnish good soil for the growth of world peace," the economists say.
Bryan Riley, director of the Free Trade Initiative at National Taxpayers Union, a Washington-based organization which arranged the letter, said "very few policy areas generate as much consensus among professional economists like free trade does. Protectionism is flat-earther economics".
"This letter is absolutely necessary at a time when the White House is considering the implementation of new tariffs that would harm Americans at home and other economies abroad," he said. "The voices of these economists should be heeded by Congress and the Trump administration,"
The letter comes as a senior U.S. economic delegation led by Treasury Secretary Steven Mnuchin is in trade talks in Beijing with Chinese officials on thorny trade and investment issues between the two countries.
Concern about a trade war has grown after the U.S. threatened to impose tariffs on $150 billion worth of Chinese imports under the Section 301 of U.S. Trade Act of 1974, following a probe into China's intellectual property policies and practices. China has proposed countermeasures with tariffs on U.S. soybeans, cars and planes. China has also imposed retaliatory tariffs in response to the U.S. tariffs on steel and aluminum imports in the name of national security, a clear violation of World Trade Organization rules.
Douglas Holtz-Eakin, the founding signatory of the letter and who is president of the American Action Forum and former director of the Congressional Budget Office, said "tariffs are never good, and a necessary evil to be used as sparingly as possible".
"The anniversary of the Smoot-Hawley tariffs is a useful reminder that even seemingly well-intentioned tariff policies can snowball into damaging trade wars that no country can win," he said.
The letter coincided with a report in which 500 CFOs from around the world expressed their deep concern about U.S. policies that would restrict the flow of goods, capital and people.
A total of 68 percent of CFOs surveyed expect U.S. protectionism to increase in the next one to three years, and 46 percent fear this growth will negatively impact investment, according to the report titled "Borders vs Barriers: Navigating Uncertainty in the U.S. Business Environment" prepared by the Zurich North America, Ernst & Young LLP, the Atlantic Council and the Organization for International Investment (OFII).
"What we're saying is that we are going to get better growth from internationalism… But please don't be isolationist, because that's not really in anyone's interest," Fred Kempe, president and CEO of the Atlantic Council, said at the report's launch on Thursday.
Nancy McLernon, president and CEO of OFII, said the current environment reminds her of 1990 when there was a lot of concern about Japanese investment in the U.S. and there were probably two dozen bills on Capitol Hill that would impact those companies to succeed in the U.S..
"I haven't seen this level of concern from our member companies since the organization first started," she said, referring to OFII's founding 30 years ago. "So it is a highly uncertain time,"
Deborah Lee James, secretary of the U.S. Air Force from 2013 to 2017 and also a former businesswoman, noted Trump's "bilateralism", saying that he is trying to get something from each of the countries on a bilateral basis or he will retaliate.
"It's time for a rocky road ahead for U.S. companies doing business in China as well as for China investing more in this country," she said.