20.1Tariffs, retaliation, and world trade button

20.1 Tariffs, retaliation, and world trade button

(c)Topham/The Image Works;

We have all seen actual or recreated movie footages of airplanes shot down in combat. Sometimes these aircraft experience a tragic "death spiral" in which the plane plummets downward in tighter and tighter circles. Something similar happened to world trade in the early stages of the Great Depression when world output and income plummeted and nation after nation enacted retaliatory tariffs against one another to reduce imports. The contracting spiral of trade that resulted is vividly illustrated in the corresponding diagram, which traces the monthly volume of world trade in millions of dollars. As noted by the dollar amounts along the "January ray" on the diagram, world trade fell from $2,998 million in January 1929 to $992 million in January 1933.