ICC boss: Tit for tat tariffs response risks return to Great Depression
A ‘tit for tat’ response to Donald Trump’s tariffs risks plunging the world into an economic slowdown redolent of the Great Depression, the head of the world’s largest trade body as warned.
Speaking to City PM, John Denton, secretary general of the International Chamber of Commerce (ICC), cautioned world leaders that any “thoughtless and knee jerk reactions” to the sweeping import levies announced by the Donald Trump on Wednesday would risk the the “economic disaster” of returning to conditions similar to the historic malaise of the 1930s.
“When you look at the dimension and increase in tariffs, this is 1930s level,” he said. “In fact, if you look at it in percentage terms, it’s actually greater.
“What happened in the 30s was the retaliatory effects basically snowballed throughout the global economy and caused what could only be described as an economic disaster for everyone that led to lots of problems.”
“We’re in that territory today,” he added.
The ‘Smoot-Hawley’ Tariff Act of 1930, which applied a roughly 20 per cent duty on all foreign imports to the US, is widely attributed as being one of the predominant drivers of the decade-long economic depression of the 1930s.
Over 25 countries responded to the levies applied by the Hoover administration by raising their own tariffs on US-produced goods, choking off global trade and worsening the financial downturn.
But the round of so-called ‘reciprocal’ tariffs announced by Donald Trump in the White House on Wednesday in many cases go further than those of the 1930s. US imports from countries like China, Vietnam Cambodia will now be subjected to charges in excess of 45 per cent as the US President looks to revitalise America’s industrial base and coax manufacturers to the country.
A tariff of 20 per cent will be applied to all imports from the European Union, the US’s largest trading partner.
Return to 1930s can be avoided
But even though the extent of this latest round of tariffs is in many cases more extreme than those of the 1930s, Denton, whose body the ICC represents 45m countries in over 170 countries, added that a return to the recessions of the 1930s could be avoided.
“The reality is that as important as the US economy is, its size as a trading nation needs to be understood,” he said.
“The US only accounts for 13 per cent of global trade… China is 17 per cent, the European Union is much larger. The reason I say that is that it’s very hard for the US on its own to actually engender a trade war. It will only happen if… the retaliation comes into play.”
European Commission President Ursula von der Leyen has said that the European Union is “prepared to respond” to America’s new levies, but committed to a round of negotiations before unleashing any response.
Meanwhile, the UK’s business secretary Jonathan Reynolds told Times Radio this morning that while the tariffs presented a “challenge”, the government would avoid rushing into any response.
And asked about whether a potential trade deal with the Trump administration would help avoid, the minister said signing the agreement it was “largely in the gift of the US”.
Improvements in other trade relations
Denton, who has held his role as the ICC’s secretary general since 2018, also raised the prospect of Trump’s tariffs acting as boon to global trade that precluded the US.
He told City PM that the move “should absolutely” lead to trade barriers between other countries coming down, adding “I think what it must do is… focus everyone’s mind.
“Because I know the political red lines of everyone are very difficult. But on trade facilitation [and] on the regulatory impediments which can actually be simplified, they need to double down on that as quickly as possible.”