MICHEL MARTIN, HOST:
President Trump speaks fondly of a predecessor - William McKinley. McKinley is credited with imposing tariffs to save the American tinplate industry in the late 19th century, but were those tariffs successful? Our colleagues from The Indicator, Darian Woods and Wailin Wong, have one economist's take.
DARIAN WOODS, BYLINE: There are lots of motivations that drive governments to consider tariffs. One rationale is called the infant industry argument.
WAILIN WONG, BYLINE: Doug Irwin is an economist at Dartmouth College.
DOUG IRWIN: If you gave it some temporary protection, eventually, it would learn how to produce better, produce more efficiently. Its cost would go down, and lo and behold, it would become internationally competitive.
WOODS: And there's a historical example of infant industry protectionism that Doug has studied in depth - the American tinplate industry in the late 1800s.
WONG: This metal is used for products like canned food, and the history of the tinplate industry in the U.S. is pretty quirky. So in the 1860s, a new law slapped tariffs on a bunch of imported goods. Foreign-made tinplate was supposed to be included in that group. Here's what the law originally said.
IRWIN: On tinplate, and iron galvanized or coated with any metal, 2 1/2 cents per pound. So that was the tariff, 2 1/2 cents per pound on tinplate.
WOODS: But Doug says the treasury secretary at the time decided this didn't make sense the way it was written, and he decided to move a crucial comma.
IRWIN: He said it shouldn't be on tinplate - comma - and iron galvanized. He said it should be on tinplate and iron - comma - galvanized. And this changes the meaning because you would never galvanize tinplate. Tinplate's already galvanized. It's already been coated.
WOODS: So just moving this comma meant that tinplate was excluded from these higher tariffs. And as a result, American tinplate wasn't sufficiently protected, and this kind of doomed U.S. tinplate makers.
WONG: But there were entrepreneurs from Ohio that wanted to change this. Ohio's a big iron and steel state, and these businessmen found a champion in William McKinley. He was the congressman representing Ohio at the time, and he successfully pushed for legislation that became the McKinley Tariff of 1890. That put a tariff of more than 70% on imported tinplate.
IRWIN: It allowed the domestic industry to start up and operate profitably. And lo and behold, they start taking over the market within five or 10 years, and within 20 years, were actually exporting tinplate. So it would seem to be a great case where we protected this industry. They didn't really need it after five or 10 years. They sort of do extremely well and stand on their own two feet. Success.
WOODS: Or was it? Doug decided to test whether it really was the McKinley Tariff that allowed the tinplate industry to flourish.
IRWIN: I run a bunch of different scenarios, and what it turns out is that if we didn't protect the tinplate industry at all, it would have come about anyway. It would have come about about 10 years later.
WONG: The same end result just shifted by a decade.
IRWIN: So the question becomes, was the cost incurred by all the consumers of tinplate in that 10-year period worth the price of getting the tinplate industry 10 years before we would have otherwise gotten it? Turns out, according to my simulations, that it wasn't worth the price.
WOODS: These tinplate consumers were food companies making canned goods and oil companies that used the material for oil drums. After McKinley became president in 1897, he shifted his thinking. And he gave a speech in September of 1901, shortly before his assassination, which said this.
IRWIN: Commercial wars are unprofitable.
WONG: Wailin Wong.
WOODS: Darian Woods. NPR News.
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