| America's infamous Smoot-Hawley Tariff Act of 1930 didn't trigger the Great Depression, notes economist Chad P. Bown. But it added poison to relations between nations, and helped prolong the agony for a decade. Are we doomed to repeat that tragic history? U.S. President Donald Trump's threat to impose new tariffs on China over its initial coronavirus coverup makes it more likely. (China says Trump is trying to deflect from his catastrophic failure to protect Americans, more than 64,000 of whom have died on his watch.) Business groups have been appealing to Trump for weeks to suspend tariffs on Chinese exports, which are effectively a tax on American consumers, not the Chinese. Those tariffs are now hitting the middle classes even harder, thanks to massive unemployment. But Trump doesn't want to hear it. Even worse, the Republican is now contemplating a move that would imperil the only, fragile gain his administration has made in relations with China: a trade truce reached last year. Even Trump acknowledges that deal has resulted in billions of dollars of additional Chinese purchases of U.S. agricultural goods.  The Tariff Act of 1930, sponsored by Senator Reed Smoot (right) and Representative Willis C. Hawley,was signed by President Herbert Hoover. Photographer: Library of Congress The Tariff Act of 1930, sponsored by Senator Reed Smoot (right) and Representative Willis C. Hawley,was signed by President Herbert Hoover. Photographer: Library of Congress This week in the New Economy
Just as in 1930, though, the wider danger is to international relations. Back then, Thomas Lamont, a partner at J.P. Morgan, begged President Herbert Hoover to veto the tariff bill. "That Act intensified nationalism all over the world," Lamont would later recall.
Today, nationalism is rising everywhere as the coronavirus lays waste to economies. Dozens of governments, including France and Germany, have imposed bans on exports of emergency medical equipment and pharmaceuticals. Countries are hoarding food: Vietnam halted rice shipments, and Russia and Ukraine want to do the same with wheat. Where will this stop? Nations everywhere are under mounting pressure to protect local industry and jobs. Nouriel Roubini, professor of economics at New York University's Stern School of Business, lists this as one of 10 trends propelling the world toward an L-shaped depression,"a perfect storm that sweeps the entire global economy into a decade of despair." Predictions like this one have earned Roubini the sobriquet "Dr. Doom." But you don't have to be a professional cynic to see how the response to Covid-19 endangers the fundamentals of globalization. Singapore Prime Minister Lee Hsien Loong, a famously sober analyst who presides over the world's most globalized economy, sees "major implications" for world trade and investment. "The movement of goods and people will be less free. Countries will strive to rely less on imports for food and essential items like medicines and face masks" he warns. As the U.S. and Chinese economies decouple (look for things to fall apart in the financial arena after the collapse of Nasdaq-listed Luckin Coffee), businesses are reorganizing their supply chains. Expect a more balkanized global economy. Faced with Covid-19 infection, the immune response of national economies is to separate; it's as though they're obeying the six-foot rule. "Distance is back," writes Kevin Sneader, the global managing partner of McKinsey and one of my guests on the next installment of Bloomberg New Economy Conversations. In that episode, we will focus on the outlook for global supply chains. See below for details. AI for Good You could say that Covid-19 is the first pandemic of the artificial intelligence era, the technology that promises to revolutionize everything from health-care systems to logistics. Has the reality matched the hype? That was a question I put to Kai-Fu Lee, a Beijing-based tech venture capitalist and author of "AI Superpowers: China, Silicon Valley, and the New World Order," on this week's New Economy Conversations. Lee said there's a more than 50% chance that AI will contribute to a vaccine breakthrough. More immediately, it's spawning products like robots that substitute for dangerous human tasks, such as food delivery. What's more, as the whole planet goes online, embracing tele-everything, the resulting explosion of data will drive the development of the next wave of AI products and services. "In the last two months, the degree of digitalization in the world has probably moved at a speed of two years," Lee said. Join us on Tuesday, May 5, at 10 a.m. EDT, for a special live edition of Bloomberg New Economy Conversations. Register here, and follow us on Twitter @neweconforum . __________________________________________________________ Like Turning Points? Subscribe to Bloomberg All Access and get much, much more. You'll receive our unmatched global news coverage and two in-depth daily newsletters, The Bloomberg Open and The Bloomberg Close. Something new in your inbox. The Weekly Fix is an email with the latest fixed income news, charts, and insights. Sign up here to start getting it in your inbox on Fridays. Download the Bloomberg app: It's available for iOS and Android. Before it's here, it's on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can't find anywhere else. Learn more. | 
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