Tariffs have been used before by countries around the world to try to revitalize domestic industrialization. What can we learn from revisiting that history? Have past tariffs attempts succeeded?

Paul Krugman, a professor of economics at the City University of New York and Nobel laureate, says that the results from the past century have not been positive. Krugman spoke with “Marketplace Morning Report” host Sabri Ben-Achour about this, and the following is an edited transcript of their conversation.

Sabri Ben-Achour: So we are not the first country to try to use tariffs to promote development of homegrown industry. President Trump's not the first leader to promise prosperity through tariffs. Where else have we seen this in history?

Paul Krugman: You can go back to 19th century America, 19th century Germany. Many developing countries tried to industrialize with tariffs in the sort of 35 years that followed World War II. There's a lot of evidence on this, though nobody has ever imposed tariffs this big, this fast.

Ben-Achour: Well, in the cases where it has been tried before, I guess on a smaller scale — in Latin America after World War II, in Africa after World War II — how did it work out for them?

Krugman: Well, yeah, Trump likes to talk about 19th century America, but if we look at the experience of tariff-driven industrialization in the postwar world, it's pretty bad. By and large, countries abandoned that approach in the 1980s because it hadn't panned out. It produced some manufacturing, yeah, but it was inefficient. It was uncompetitive. It wasn't the route. And it turned out that more open economies, economies that were oriented toward world markets, performed better than countries that tried to build manufacturing by looking inwards.

Ben-Achour: Because I think to a lot of people, it probably sounds intuitively correct that, “Oh yeah, sure. Let's protect our domestic industry. Let's just make more stuff here.” Why did it not work out in the cases where it was tried?

Krugman: First of all, manufacturing — it's not as if most countries, most of the time, have lots of spare labor, lots of spare resources. If you are going to build up manufacturing behind tariff walls, it's going to divert resources away from other uses. And then the question is, is this going to be a good use of workers, good use of capital or not? And if you try to only produce stuff for yourself, if you forgo the benefits of international trade, then that industry is inefficient. You're producing things you really shouldn't be producing, and you end up producing stuff, also, at inefficiently small scale. So you end up with low efficiency because you fragmented the industry.

Ben-Achour: Is there a way to make it work? And the reason why I asked that is because, you know, Korea, China, they seem to have used a certain amount of trade barriers along with other tools. And they took their economies from 10 to 100 in just a few decades. Is there a way to do it?

Krugman: To the extent that they have done stuff, it has tended to be … yeah, there are tariffs, but the really important tools have been industrial policy. [It] has been subsidizing, promoting industries which can work if you can figure out the industries that have positive spillovers to the rest of the economy.