In 1930, the United States passed the Hawley-Smoot Tariff Act, which aimed to protect domestic industries as the country entered the Great Depression. The idea was straightforward: raise tariffs on thousands of imported goods to shield U.S. manufacturers and jobs from foreign competition. However, the result was not what lawmakers had hoped. Global trading partners retaliated, international trade collapsed, and the world economy worsened.

Fast forward nearly a century, and the U.S. is once again considering a similar approach. President Trump has used tariffs as a key tool in his “America First” economic strategy since re-entering office, with the goal of reducing the U.S. trade deficit, bringing manufacturing jobs back to the U.S., and addressing what he perceives as unfair trade practices by countries like China, Mexico, Canada, and the European Union. But does this approach risk repeating the protectionist mistakes of the past, or is his approach a necessary recalibration of global trade relations?

A 1930s Cautionary Tale
The Hawley-Smoot Tariff Act raised tariffs on over 20,000 goods, intending to protect struggling sectors like farming and manufacturing. Instead, it sparked a global trade war, with countries around the world retaliating by imposing their own tariffs. By the mid-1930s, global trade had plummeted by more than 65%. Far from boosting the U.S. economy, the tariffs deepened the economic downturn, worsening the effects of the Great Depression. Hawley-Smoot remains a defining example of how protectionist policy, in a globally connected economy, can have far-reaching negative consequences.

A 21st Century Repeat?
In 2025, the Trump administration is again using tariffs to reshape trade relations, particularly with China, Mexico, Canada, and the EU. The focus is on goods like steel, aluminium, electronics, and agricultural products. As expected, retaliatory tariffs from these countries have followed, creating new uncertainties and adding volatility to global markets. The situation bears some resemblance to The Hawley-Smoot Tariff Act, with strained international relations, fluctuations in investor confidence, and concerns about the broader economic impact.

Market Reactions
Markets have already begun to reflect these concerns. In the first quarter of 2025, both the S&P 500 and Dow Jones fell by 7-9%, with technology stocks experiencing significant losses—Apple and Microsoft, for example, saw drops of around 12%. In Europe, Germany’s DAX index lost 10%, as automakers like BMW and Volkswagen faced retaliatory tariffs. In China, the Shanghai Composite dropped by 15%, and major companies like Huawei and Lenovo saw declines of 12-14%. Even in Australia, the S&P/ASX 200 index has fallen 7%.

Economic Outlook
While the U.S. has the advantage of a large domestic market to cushion some of the effects, the broader global economic outlook is unclear. U.S. GDP growth projections for 2025 have been downgraded from 2.3% to 1.5%. In Europe, growth forecasts have dropped from 1.7% to 1.1%, with export-dependent industries like automotive and agriculture facing some of the heaviest impacts. In China, economic growth is also slowing, from 7% to 6.3%, as trade pressures disrupt the country’s export-driven industries.

Australia, despite its strong trade ties with the U.S., is also feeling the indirect effects of the global trade flux. While not as severely impacted as some other nations, Australia’s economic outlook has become more cautious, as global volatility begins to take its toll on investor sentiment and trade expectations.

What History Can Teach Us
While President Trump’s tariff strategy is motivated by a mix of economic and geopolitical factors, history offers important lessons. The Hawley-Smoot Tariff Act demonstrated that protectionism can disrupt global trade, trigger retaliatory actions, increase consumer costs, and slow economic growth. The long-term economic damage from protectionist measures often outweighs the short-term political benefits they may offer.

A Modern-Day Hawley-Smoot?
The Hawley-Smoot Tariff Act remains one of the most well-known mistakes of the Great Depression, highlighting the dangers of excessive protectionism. Although the world has changed since then, the core lesson remains; while tariffs may seem like a straightforward solution, they often create more problems than they solve.

Let’s hope that the world can avoid repeating the mistakes of the past.