In 1930, the US passed the Smoot-Hawley tariff in order to preserve US jobs. This was a fixed exchange rate world under the gold standard. There was full bore reaction by other countries, most significantly the British Commonwealth ones, but others as well, and world trade declined sharply, certainly exacerbating the plunge into the Great Depression, although the degree of its role remains a matter of debate. However, I am unaware of any economist anywhere who argues that American jobs were saved by this catastrophic policy. Now there is a hard international political economic reality here that is being ignored. The just-ended Davos conference included fiercesome denunciations of the US for having triggered what is now the most widespread global recession ever. Merchandise trade declined in November at an annualized rate of 45%, while the big conference in Washington supposedly agreed on avoiding protectionism for at least a year, and in mid-January the US put a bunch of trade sanctions on the EU (no more Roquefort cheese to be had in the US anytime soon). Without doubt, such a stupid move by the US would this time also trigger massive reactions and the very serious danger of a full-blown trade war. No way this is going to help the world economy, much less the US one, although certain sectors might do better in the short run (Krugman's argument).
To be fair, Paul Krugman is hoping for more expenditure-adjusting policies:
Now ask, how would this change if each country adopted protectionist measures that “contained” the effects of fiscal expansion within its domestic economy? Then everyone would adopt a more expansionary policy — and the world would get closer to full employment than it would have otherwise.
Whether or not such a global scale movement towards autarky would induce more global fiscal stimulus is an issue I’ll leave to those smarter about these things than me, but I thought it was interesting that even Mitch McConnell understands what Barkley is saying:
I don't think we ought to use a measure that is supposed to be timely, temporary, and targeted to set off trade wars when the entire world is experiencing a downturn in the economy
While we are experiencing some improvement in our net exports, the reason has more to do with our falling demand for imports than it does with rising exports. Real exports fell during 2008QIV and it is not surprising to see why if one reviews the information in table 1.1 of the IMF’s World Economic Outlook. World output slowed in 2008 – particularly among the advanced economies. This slowdown is projected to continue during 2009. The growth in world imports/exports also slowed – particularly among the advanced economies.
Any attempt by the U.S. to increase its aggregate demand via expenditure-switching policies will reduce the net exports of our trading partners. Given that our trading partners are also likely to face insufficient aggregate demand during 2009, Senator McConnell’s concern about setting off a trade war appears to be a legitimate one.