When the Past Judges the Present: Reagan vs. Trump in the Trade War
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On October 23, 2025, President Trump terminated all trade negotiations with Canada. The reason? A television advertisement. Yes, you read that right – negotiations between two critically important trade partners ended because of a one-minute commercial.
But this was no ordinary ad.
Reagan vs. Trump – When the Past Judges the Present
The government of Ontario spent 75 million Canadian dollars on an advertising campaign in U.S. media – Fox News, NBC, ESPN, Bloomberg. The ad features... Ronald Reagan, a conservative icon for modern Republicans , who in his radio address on April 25, 1987, warned against exactly what Trump is currently doing.
"When someone says 'let's put tariffs on foreign imports,' it sounds patriotic, protecting American products and jobs," Reagan says in the original recording. "And sometimes it works, but only for a short time. However, in the long run, such trade barriers hurt every American worker and consumer."
Reagan then adds something that sounds like a prophecy of what's happening right now: "High tariffs inevitably lead to retaliation from foreign countries and trigger devastating trade wars. That's when the worst happens – markets shrink and collapse, businesses close, and millions of people lose their jobs."
But there's a certain irony here.
Reagan spoke these words a week after he himself imposed tariffs on Japanese semiconductors. He defended this move as a "special case" aimed at unfair competition, while emphasizing that his administration "maintained its fundamental, long-term commitment to free trade."
The difference between Reagan and Trump? Scale and intent.
Reagan used tariffs selectively, as a negotiating tool in specific disputes, with the intention of lifting them quickly. His tariffs on Japanese semiconductors were a response to the violation of a specific trade agreement. What's more, when American companies – like Harley-Davidson – got back on their feet, Reagan himself initiated the removal of their protective tariffs, saying: "these American companies, confident in themselves and their product, asked for the removal of special tariffs so they could compete face to face."
Trump? He implements tariffs wholesale, as a permanent economic policy, with no clear mechanism for lifting them. Reagan warned Congress against "protectionist legislation that destroys prosperity". Trump calls his tariffs "Liberation Day."
This is a fundamental difference between pragmatism and populism.
Reagan knew that protectionism is destructive in the long run – that's why he warned against it even when he used it carefully and temporarily himself. Trump completely ignores this lesson, building his economic policy on a mechanism that Reagan called "dangerous".
Sound familiar? Check out my previous article on Trump's tariff policy. The mechanisms described there are already materializing.
A Paradox That Shouldn't Exist
Trump called the ad "FAKE" and accused Canada of "egregious behavior." The Reagan Foundation protests, claiming that the Ontario government distorted the message and used the speech without permission.
However, speeches by U.S. presidents delivered in their official capacity are public domain. Reagan spoke these words as president, in an official radio address to the nation. This wasn't his private opinion – it's part of the official position of a head of state on economic policy.
Moreover, Reagan's words weren't changed or distorted. The ad uses authentic fragments of the speech. The Foundation may be unhappy with the context, but facts remain facts: Reagan warned against trade wars and their consequences.
The irony of the situation is overwhelming. A conservative icon critiques a conservative president – not because someone is manipulating facts, but because the facts speak for themselves.
The Numbers Don't Lie – Predictions Come True
When I wrote my previous article on U.S. tariff policy, economists from the Peterson Institute warned that the average American would pay $1,200 more annually for basic goods.
Since then, U.S. inflation rose to 3% in September 2025 – up more than 0.3 percentage points in a single month. Trump's tariffs have reached the highest level since the 1930s, hitting 35% on many Canadian goods. These are levels comparable to those that deepened the Great Depression after the introduction of the Smoot-Hawley Act.
Canada responded exactly as predicted: retaliatory tariffs on $155 billion. The escalation spiral is unfolding precisely as Reagan forecast.
When Theory Becomes Reality – Economic Consequences
What effects do we see after 9 months of trade war? Exactly what had to happen given this scale of interventionism and political escalation:
For Canada: Exports fell 3% in August (the first decline since April), and the trade deficit grew from 3.8 billion to 6.3 billion Canadian dollars in a single month, with the Bank of Canada predicting drastic GDP growth slowdown. Although at the same time, Prime Minister Mark Carney announced doubling exports to non-U.S. countries within a decade. In September, Canada's exports to other countries rose 8.3%, reaching a record 328.6 billion dollars. However, this doesn't compensate for the declines that appeared in August. Exactly what I wrote happened: "the rest of the world will find alternative trading partners, bypassing the American market."
For U.S.-Canada relations: Travel between countries fell nearly 30% year over year. This isn't just a statistic – it's a sign of social resentment and loss of trust. Canadians are boycotting American goods and limiting trips to the U.S. The situation isn't helped by President Trump's repeated declarations about wanting to annex sovereign Canada as the 51st U.S. state – which in his view "would make sense" and be a "great idea": "Canada is suffering because of tariffs, so why don't they just join us?"
I hardly need mention how sharply Canadian leaders reacted to these suggestions. Prime Minister Mark Carney firmly responded: "It will never happen. Never, never, never."
Absurdity as Foreign Policy
Let's think for a moment about what just happened. The President of the United States terminated trade negotiations with his second-largest trading partner over a television ad. Not over fundamental policy differences. Not over irreconcilable positions. Over an advertisement that, worse yet, quotes authentic words of a Republican president.
Trade negotiations between countries whose daily exchange exceeds 3.6 billion Canadian dollars (about 2.5 billion USD) were ended impulsively, in the evening, the day before the start of the World Series baseball finals featuring the Toronto Blue Jays.
This isn't strategic thinking. This is an emotional reaction that costs both economies billions of dollars.
Use by Other Global Players
Interestingly, Canada isn't alone in using Reagan's words. The Chinese embassy in Washington also quoted this same speech in its materials opposing Trump's tariffs in spring 2025.
Reagan, the patron of free-market conservatism, has become an unexpected hero of the campaign against American tariff policy – led by communist countries and Western democracies simultaneously.
This clearly shows how far Trump has departed from the fundamentals of Republican economic doctrine.
Nvidia – A Case Study in the Costs of Protectionism
And since we're talking about the consequences of trade wars, it's worth looking at a specific business example that perfectly illustrates the theses I presented in my previous article.
On October 6, 2025, Nvidia CEO Jensen Huang delivered shocking news at the Citadel Securities event: American export restrictions completely eliminated the company's presence in the Chinese advanced AI chip market. Nvidia's share dropped from 95% to... zero.
"Right now we are 100% out of China," Huang stated, calling this policy a "mistake." He added something that echoes Reagan's words: "I can't imagine any policymaker thinking this is a good idea – that any policy would cause America to lose one of the world's largest markets to zero."
Nvidia now assumes zero revenue from China in all financial forecasts. The company's losses related to the Chinese market already reach $4.5 billion.
But that's not the end of this story.
China responded symmetrically – exactly as Reagan warned and as I predicted in the context of trade wars in my previous article. In September 2025, the Cyberspace Administration of China (CAC) ordered Chinese companies to withdraw orders for Nvidia RTX Pro 6000D cards – a special model developed precisely to circumvent American sanctions.
Some companies had placed orders for tens of thousands of units. All were canceled. Moreover, Beijing launched an antitrust investigation against Nvidia, accusing the company of market monopolization.
The result? China is accelerating the development of its own AI chips through Alibaba, Baidu, and other local companies. American technology is being replaced by Chinese. Nvidia loses the market probably forever, while China builds a competitive industry from scratch.
This is exactly the same mechanism I described in the context of Canada: "the rest of the world will find alternative trading partners, bypassing the American market". Except that in the case of AI chips, China isn't looking for alternative suppliers – they're becoming them themselves.
Jensen Huang found himself between a rock and a hard place. American sanctions on one side, Chinese retaliation on the other. And while he diplomatically says he "understands that larger plans stand behind the tensions between China and the United States," the frustration is evident.
Nvidia – the biggest beneficiary of the AI revolution, a company with a valuation exceeding $3 trillion – just lost access to one of the three largest technology markets in the world. Not because its products are inferior. Not because competition has surpassed it. Because tariff policy and sanctions destroyed the foundations of trade cooperation.
Gary Hufbauer was right: protectionism harms not only consumers but also the most innovative companies. Reagan warned: trade wars lead to retaliation and market closures. Nvidia's story is perfect proof of this – and in real time.
What's Next? Future Scenarios
History and economics are relentless in their predictions. As I wrote in my previous article – the Smoot-Hawley Act led to the collapse of global trade and the deepening of the Great Depression. The current situation repeats the same pattern: imposition of tariffs, tariff retaliation, escalation, cooperation breakdown.
The Bank of Canada warns that maintaining current tariff levels could push the Canadian economy into recession within six months. Quebec predicts the loss of up to 100 000 jobs in that province alone. In the U.S., prices for lumber, steel, vehicles, and electronics will rise, compounding already high inflation.
Gary Hufbauer from the Peterson Institute was right: "Tariffs are a tax on consumers," while Reagan was right in warning against the spiral of protectionism.
Markets are nervously reacting to the escalation – the S&P/TSX index in Toronto shows volatility, and investors are asking not «if», but «when» a recession will occur.
The Ultimate Lesson
Reagan warned: "High tariffs inevitably lead to retaliation and trade wars". Trump clearly didn't hear this lesson, and populist narrative won't change the fundamental laws of economics.
Today, nearly 40 years later, these words sound like an epitaph for a policy that was supposed to "liberate" America but instead is plunging it into economic chaos whose effects we'll feel for years to come.
The painful lesson continues. The only question is whether anyone will learn from it before it's too late.
Read also my previous article, in which I predicted the scenario described today: "Trump's Tariffs – Populism vs. Economic Reality"
Jacek Pobłocki
Financial Analyst of Markets and Securities
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