Both Foolish and Immoral: Tariff Wars and Aid Shutdowns

Someone really oughta tell Trump about the history of tariffs

About 95 years ago, the Smoot-Hawley Tariff Act aimed to protect American industries by imposing record tariffs on imported goods. Despite warnings from economists, President Hoover plowed ahead, triggering swift retaliations from major trading partners. U.S. exports plummeted, global trade shrank and the Great Depression deepened, worsening global economic instability, contributing to turmoil that fueled World War II. Not great.

Recognizing its failure, the U.S. reversed course with the Reciprocal Trade Agreements Act of 1934, promoting international trade instead of protectionism, and the whole sordid episode serves as a textbook example of how trade wars backfire, choking commerce and harming economies rather than helping them.

But President Trump doesn’t seem to know it, and so he’s threatening a brutish tariff war with America’s democratic neighbors (as well as China – less indefensible) while also abandoning the world’s most vulnerable by shutting down USAID and halting nearly all foreign aid. It is a masterclass in how to be both stupid and immoral at the same time.

The decision to impose 25% tariffs on Canada and Mexico have now been suspended for one month after these countries threatened counter-tariffs and offered some concessions to Trump’s demands. Let’s hope that Trump pockets the fake win and does not return to an attitude that violates existing free trade agreements and would harm U.S. consumers.

The signs are not good. Other tariffs followed — 25% on steel and aluminum starting next month, which has already sparked the credible threat of counter-tariffs from the European Union. Trump’s acolytes will doubtless claim that this is brilliant brinksmanship and haggling. But even if it’s meant that way in part, there are costs to a global spasm of bad karma; export-oriented countries like Germany could plunge into recession, which does not always work out well, including for ambitious exporters like the U.S. (who need buyers). It’s idiocy whose real driver is not any patriotism or wisdom but a constant agitation to fuel the ego of a pathological disrupter (a.k.a. bully).

Trump’s justifications for the tariffs range from the absurd to the incoherent. Trump initially framed them as a way to combat fentanyl trafficking, a scourge that has devastated American communities. Yet Canada plays almost no role in the fentanyl crisis, and Mexico had already taken significant steps to curb trafficking.

The real impact of these tariffs will be higher consumer prices, disrupted supply chains, and job losses.