Jonathan Marriott - Chief Investment Officer, LGT Vestra LLP
Before Trump goes for import tariffs he should think through the consequences and take some lessons from history. 200 years ago, import controls contributed to hardships that came close to bringing down the British government of the time. 1815 marked the end of Napoleon’s rule and ‘peace’ in Europe. Peace, as it turned out, caused as many problems economically as the war had. Some 300,000 men were no longer needed and returned home looking for work. Steel demand for weapons fell and the price collapsed. The industrial revolution was underway; in the textile industry weaving was being mechanised and no longer the cottage industry it had been. Agriculture was still a big employer and key to the wealth of the ruling class. As trade opened up across Europe, cheap grain imports pushed prices down in England. In 1815, the Corn Law was passed which put tariffs on imported corn unless the price was over 80 shillings a quarter, well above the market rate. At that time the staple food for the working classes was bread. The consequent rise in bread prices was unpopular but parliament was controlled by the landowners who benefited from the higher prices. The new law was presented as ‘in the interests of national security’. For the best part of the previous one hundred years, Britain had been at war and importing goods was difficult. As a result having a secure domestic food supply was deemed important. Protectionism was pushing up the cost of basic living and mechanisation was contributing to a lack of jobs.
This year is the 200th anniversary of one of the first big protests, the Blanket March. Led by a group of Lancashire weavers, 5,000 ‘Blanketeers’ marched towards London whilst carrying a blanket to symbolise their trade and also to sleep under. There had been protests in London and a bill was drafted to allow universal suffrage to reduce the landowners’ influence in Parliament which, despite the support of naval hero Thomas Cochrane, was rejected. The government was seriously concerned and passed a series of acts to gag protest including the suspension of the law of Habeas Corpus. 5,000 Blanketeers assembled in Manchester, along with what was said to be another 25,000 onlookers. Eventually the leaders were arrested causing considerable confusion. In the end, several hundred marchers set off but were pursued by cavalry and any survivors were arrested before they could get through. Many were held without trial and interrogated in secret. Protests continued and in 1819 15 people were killed and several hundred injured when cavalry charged a crowd of 80,000; known as the Peterloo Massacre. The government was rattled but held firm.
Protests continued but it was on this day (31st January) in 1846, over 30 years later, that the Corn Laws were finally abolished, following a rising pressure from the new industrialists who did not want to pay their workers more to pay for bread. Their abolition saw a considerable increase in free trade, the World Trade Organisation and various regional trade agreements are the modern conclusion of this start. A reversion to increased trade tariffs and anti-globalisation threaten to undo the progress over the intervening 170 years. President Trump may not like to listen to gainsayers but I do not think he can imprison them. If trade restrictions lead to profits for corporate America but higher prices on the street, rather than benefiting American workers he may just cause greater dissatisfaction.