Adam Smith vs Donald Trump

EXTYEAR WILL mark the 250th anniversary of Adam Smith's The Wealth of Nations (1776), where "the father of modern economics" argued in favour of giving everyone the freedom to produce and exchange goods as they pleased to foster greater prosperity.

- ATANU BISWAS

EXTYEAR WILL mark the 250th anniversary of Adam Smith's The Wealth of Nations (1776), where "the father of modern economics" argued in favour of giving everyone the freedom to produce and exchange goods as they pleased to foster greater prosperity. However, at present, US President Donald Trump is in a fierce battle with the theory of "free trade".

"Tariff" is "the most beautiful word in the dictionary", Trump believes. He frequently refers to the late 19th century, when tariffs accounted for over half of US federal revenues under the pre-income tax regime. And by imposing unusually high tariffs during his second term, Trump sparked a global trade war. On April 2, he declared what he referred to as a "reciprocal tariff" approach. Trump termed it "Liberation Day". Tariffs might have been modified a bit from that, but the spirit remains the same.

It was frequently likened to the Smoot-Hawley Act, a protectionist trade law that increased import levies to safeguard American farmers and businesses. It was signed into law by President Herbert Hoover in 1930. Many economists have criticised Smoot-Hawley for making the Great Depression worse. Before President Franklin Roosevelt lowered tariff levels and encouraged trade liberalisation and collaboration with foreign governments in 1934, America's overall global trade fell by about two-thirds in four years. However, given that trade is now far more critical to the global economy than it was a century ago, many analysts perceive that the effect of Trump's tariffs could be even worse than Smoot-Hawley.