Ronald Reagan was the protectionist Donald Trump might want to be, yet didn’t provoke market panic or a trade war.
Reagan slapped import quotas on cars, motorcycles, forklifts, memory chips, color TVs, machine tools, textiles, steel, Canadian lumber and mushrooms. There was no market meltdown. Donald Trump hit foreign steel and aluminum, and the Dow Jones Industrial Average fell more than 600 points on Thursday and Friday.
Reagan was no genius administrator ( Herbert Hoover was), so that’s not the difference. Though he promised Michigan auto workers help with Japanese imports and was grateful when they voted for him, he never kidded himself that America’s problems were somebody else’s fault rather than homegrown.
Trade was less important in those days, before China’s rise and the globalization of the world’s assembly line, but that wasn’t the reason either. The 1987 crash proved soon enough that investors were ready to panic if trade partners (Germany and the U.S.) got into a serious tiff.
The real difference is that Reagan’s protectionist devices were negotiated. They were acts of cartel creation, not unlike the cartels that have been known to spring up illegally when industries under strain seek to preserve capacity while avoiding price wars. Mr. Reagan used quotas, not tariffs. He kept the peace by inviting America’s trade partners to share in excess profits at the expense of American consumers. (Recall that one upshot was a nationwide bribery-and-kickback scandal when Honda Accords were in short supply.)