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In fact, trade (exports and imports), especially from the PacRim countries other than China, have fallen off more than trade fell off as a result of Smoot-Hawley.

Like much of what passes for “facts” in economics, it now appears that we cannot say positively that Smoot-Hawley caused the collapse of trade in the 30’s when we’ve had “free trade” in this economic collapse and an even worse decline in trade.

See “Figure 3:”

http://www.voxeu.org/index.php?q=node/3421

Probably a closer mark to the truth is this: trade collapsed in the 30’s for the same reason trade collapsed now: consumers slammed their wallets shut. Banks withdrew credit and lending, which forced businesses to withdraw orders for as-yet-undelivered inputs. Consumers were (and are) not able to get new credit easily, so their rate of spending contracts. Things got so dire last October that banks were not honoring letters of credit. If you’ve got a shipload of goods ready to go and the seller calls you and says he’s placing a hold on the shipment because his bank won’t honor your bank’s LOC, I don’t care what the trade policy is, trade is going to be affected.

At this point, it is difficult to see what a “trade war” would do. Decrease trade more from current levels? Let’s pretend that could happen, since much of what China exports here is consumer schlock and dreck, and the US consumer is withdrawing their spending even as I write this.

So we slap on tariffs. OK, so what? Guess what decreasing imports from China will do to our GDP? (answer: Decreasing imports raises GDP). What will decreasing imports do to the dollar? (Answer: Since decreasing imports would improve our current account balance, the dollar would likely become stronger). Sounds like a win:win from here.

I’m sorry... I’m must be getting senile in my old age... what was the problem again?