Trump's Tariffs – Populism Versus Economic Reality
In his speech today (around 10:00 PM), Donald Trump announced the introduction of so-called "reciprocal tariffs" on goods imported from most countries worldwide. The new tariffs include 20% for the European Union (including 25% on all cars produced outside the USA), 34% for China, 23% for Japan, 26% for India, and at least 10% for the rest of the world.
Is this a bold move in the national interest, or a repeat of past mistakes that once led to a global trade collapse?
In his speech today (around 10:00 PM), Donald Trump announced the introduction of so-called "reciprocal tariffs" on goods imported from most countries worldwide. This decision continues his earlier protectionist policy, initiated in 2018 by imposing tariffs on steel and aluminum. The Trump administration has long argued that the American industry suffers due to unfair trade practices, especially from China, and that actions are necessary to level the playing field.
The new tariffs include 20% for the European Union (including 25% on all cars produced outside the USA), 34% for China, 23% for Japan, 26% for India, and at least 10% for the rest of the world.
"Liberation Day" According to Trump
Trump, like a typical populist, called this day a "liberation day" and emphasized its historical significance for the revival of American industry. In his speech, he argued that the new tariffs are expected to bring several benefits:
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Restoration of jobs in the industry,
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Reduction of the trade deficit,
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Forcing foreign companies to relocate production to the USA.
Sounds promising? Many analysts have a completely different opinion – among them Nobel laureate in economics Paul Krugman, who has repeatedly warned that tariff policies can lead to a recession.
"Protectionism doesn't work – it's a myth that always leads to the same outcomes: more expensive products, less export, and worse growth prospects," Krugman stated in an article in "The New York Times".
Experts also emphasize that similar actions in the past – as in the case of the Smoot-Hawley Act – ended in economic disaster that affected the entire world. The effect of these decisions may be exactly the opposite of what is intended.
The Price of Protectionism – Inflation and Recession on the Horizon?
Economists warn that the new tariffs may negatively impact not only global trade but primarily the American consumer. It is estimated that the average American will pay over $1,200 more annually for basic goods (according to an analysis by the Peterson Institute for International Economics).
"Tariffs are a tax on consumers. When we impose tariffs, the consumer has to pay more for the same goods. This is not a way to protect jobs, but a way to raise prices for consumers."
— Gary Hufbauer, Peterson Institute for International Economics
In his analyses, Hufbauer points out that tariffs can lead to increased inflation and reduced purchasing power of American consumers, which may have a negative impact on the economy in the long term.
Main consequences of this decision:
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Increased trade tensions – history shows that trade wars lead to stock market declines and financial market destabilization.
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Higher prices for consumers – particularly in the automotive and electronics sectors, but also for imported food and everyday items.
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Retaliatory tariffs – reactions from US trading partners may further weaken global trade and increase investor uncertainty.
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Inflation spiral – higher tariffs mean increased goods prices, leading to inflation, which may result in an economic recession.
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Decline in household purchasing power – rising prices hit the middle and lower classes the hardest, leading to reduced consumption.
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Investment halt – uncertainty about future trade relations discourages entrepreneurs from making new investments.
In the long term, these decisions may lead to changes in supply chains, further affecting production costs and the dynamics of economic growth on a global scale.
Trump Versus Economic Reality
Economists remain skeptical about the declared budgetary benefits associated with the new tariffs. In reality, protectionism rarely brings long-term positive effects. On the contrary – history shows that such actions most often lead to economic slowdown, job losses, and growing social frustration.
While Trump presents his decision as a patriotic act of rebuilding American industry, experts see it merely as short-sighted policy that, in the long run, may plunge both the US economy and the global trade system.
Ultimately, populist rhetoric cannot override the fundamental laws of economics. One only needs to recall the Great Depression of the 1930s, when the Smoot-Hawley Tariff Act raised import duties and triggered a collapse in global trade. As a result, the U.S. recession deepened, and other countries introduced retaliatory tariffs, further exacerbating the global economic crisis. Imposing tariffs will not make American products cheaper or more competitive—quite the opposite. U.S. citizens will end up paying more, while the rest of the world will turn to alternative trade partners, bypassing the American market.
Historical Echo – The Smoot-Hawley Act and the Dramatic Consequences of Protectionism
The Smoot-Hawley Tariff Act, signed on June 17, 1930, by President Herbert Hoover, aimed to protect American farmers and entrepreneurs by raising tariffs on over 20,000 imported goods. In practice, it increased average tariff rates from about 40% to a record level reaching up to 60%. It was the largest scale of protectionism in US history.
The act prompted immediate retaliatory actions from over 25 countries – including Canada, France, the United Kingdom, and Germany – which also imposed high tariffs on American goods. As a result, the value of international trade decreased by about 66% between 1929 and 1934. US exports halved, which had catastrophic effects on the economy and labor market. Industrial production fell by 46% between 1929 and 1933, and the prices of many products rose due to the lack of foreign competition. Unemployment in the US then reached over 25%, and farmers' incomes fell by about 60%.
For the average American, this meant job loss, increased living costs, and limited access to everyday goods. Many people fell into poverty, and social frustration grew with each month of the deepening crisis.
Selected Economic Data (1929–1934)
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Decline in US exports
🔹 Decline in U.S. exports: -50%
🔹 Decline in global trade value: -66%
🔹 Decline in U.S. industrial production: -46%
🔹 Rise in U.S. unemployment: up to 25%
🔹 Drop in farmers’ incomes: -60%
🔹 Number of countries imposing retaliatory tariffs: over 25
More than a thousand economists protested against the act, warning that instead of offering protection, it would deepen the crisis. Their appeals were ignored, and the Smoot-Hawley Act became one of the key symbols of misguided economic policy during the Great Depression. The act also contributed to the rise of economic nationalism and political tensions across Europe, which, in the following years, had tragic consequences—most notably fueling societal radicalization and paving the way for Hitler's rise to power in Germany.
It wasn't until 1934 that President Franklin D. Roosevelt’s administration, responding to the consequences of the act, introduced the "Reciprocal Trade Agreements Act", which allowed for tariff reductions through bilateral agreements and marked the beginning of a new era of trade liberalization in the U.S.
Today, the Smoot-Hawley Act is widely recognized as a cautionary tale about the dangers of populist and isolationist decisions in economic policy.
What Comes Next?
Has Trump truly "liberated" America, or has he pushed it toward economic turmoil? Are we witnessing a historical echo of the Smoot-Hawley moment? Can we afford to ignore the lessons of the past? Are today’s political decisions guiding us toward stability—or toward another crisis?
We will find the answers to these questions in the months to come. But history clearly shows that protectionist policies often lead to severe economic downturns. In recent years, we’ve also seen how inflation alone can shake the foundations of the global economy. All signs suggest that the consequences of this decision may prove far more painful than the Trump administration currently anticipates.
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