It was August 15, 1971, when President Richard Nixon delivered a speech to the nation to define a new economic approach for a country plagued by economic worries and challenges linked to the US dollar.
A key part of his plan was a 10 percent “import surtax”—effectively a new tariff—in U.S. trade relations to support U.S. businesses in the face of what Nixon called unfair exchange rates.
“This import tax is a temporary measure, it is not directed against any other country,” Nixon said. “When the unfair treatment ends, import taxes will also stop.”
The measure was implemented by decree but disappeared at the end of this year. The episode is informative as former President Donald Trump campaigns around a surprisingly similar idea for “universal base tariffs” of 10% that would apply to most foreign products entering the United States.
“I love China, I love everyone, but they can’t take advantage of us,” Trump said at a recent conference. rally in New Hampshire.
The episode also illustrates the ties between Trump and Nixon, which include a political allegiance that spans their decades apart in the political arena. The two men socialized at least once and often we wrote to each other towards the end of Nixon’s life.
Like Todd Tucker of the Roosevelt Institute once rated on X: “Love it or hate it, like many of Trump’s ideas, the idea of a 10 percent import surcharge comes from what Nixon actually did.”
The import surcharge as a “negotiating tactic”
The other elements of Nixon’s 1971 plan – new limits on the exchange of dollars for gold and a 90-day freeze on wages and prices – became financial history milestones.
Nixon’s monetary measures ultimately marked the beginning of a new era of floating exchange rates and the end of the so-called Bretton Woods international monetary system, in place since World War II.
Today, the import surcharge is perhaps less remembered, largely because it did not last long enough to have a significant economic impact. It also disappeared after being “fiercely opposed by the United States’ trading partners,” as the New York Times reports. noted at the time.
But it appears to have played an important role as a negotiating tactic.
Japan was a priority for Nixon at the time as his administration attempted to pressure the country into negotiating a revaluation of the yen. Germany was also a priority, says Richard Baldwin of IMD Business School.
“The United States was angry at the Germans for keeping the value of the German mark low,” he explained in a recent interview.
Nixon’s import surcharge forced the Germans and Japanese to reexamine their currencies. The import surcharge ended in December 1971 as part of the so-called Smithsonian agreement among G-10 countries, which included significant initial monetary gains for the Nixon administration.
But Baldwin warns there may be fewer escape routes when it comes to Trump’s approach to a 10% tariff this time around, especially given the focus on China .
“The Chinese can’t do anything that will make us happy,” he said, emphasizing that the current rivalry is essentially over the financial structures of the two superpowers and who will be the global economic engine in the decades to come.
Trump is also considering much more aggressive measures against China, beyond anything proposed for Nixon. The current GOP hopeful has publicly discussed an effort rapidly decouple from China from 2025 and “phase out all Chinese imports of essential goods”. SATURDAY, The Washington Post also reported that Trump is privately discussing the possibility of imposing a flat 60% tariff on all Chinese imports.
China has “become more competitive and that’s what bothers all people like Trump and there’s no cure for that,” Baldwin notes.
As he travels across the country for his current campaign, Trump often promises that he can “solve the problems” with China, but gives few details on what that would look like and how long any tariffs might be. imposed. significant economic consequences if left in place for an extended period, may be necessary.
Instead, the candidate whose historic victories this month in Iowa and New Hampshire appear to put him on the path to a third straight GOP nomination is talking about his tariffs as ones that could be in place at long term.
He compared them to “a ring around the collar” of the United States, adding that they would be a boon for the US Treasury as businesses would be hit by the new tariffs. The Tax Foundation recently fixed the product customs duties of 10% to $300 billion per year.
A populist tactic
The 1971 episode with Nixon also demonstrates the power of the idea of a tariff to influence public opinion.
Future Federal Reserve Chairman Paul Volcker – who in 1971 was Under Secretary of the Treasury for Monetary Affairs – later recalled that the surcharge was seen as two-pronged: “both an essential negotiating tactic and a means of attracting public support.”
Nixon’s import surcharge was also seen as a way to ward off the protectionist impulses infiltrating the Capitol at the time.
Tucker of the Roosevelt Institute also emphasized the importance of the surcharge as a public relations tool, writing in a book from 2009 with Lori Wallach that the surtax did almost nothing to change the American trade balance. “However,” he writes, “the underlying political objective had been achieved: Nixon had established his populist credentials” and increased his poll numbers.
This time around, it’s Trump who is pushing the debate in a more protectionist direction, to the detriment of many in his own party who may be wary of a new wave of global tensions.
Trump often presents his tariff plan as evidence of how he is the candidate who seeks to protect Americans, even though economic studies The trade wars he waged during his tenure suggest mixed results. His tariffs have effectively protected some U.S. jobs, but at the cost of higher prices for everyone, according to some findings.
Nonetheless, as Trump said at a recent rally, “we will impose tough sanctions.”
Ben Werschkul is Yahoo Finance’s Washington correspondent.