Chicago, 1931. Men line up at an establishment where free food was provided to the unemployed during the Great Depression
Donald Trump doesn’t seem to learn anything from history. The impact of the tariffs imposed by the US leader may have an impact on US life and society very similar to what the Smoot-Hawley Tariff Act law has caused.
Imagine you wake up in 1932 in any American city. As you ask for your usual coffee cup, you discover that the price has doubled over the previous year. Not because coffee is scarce, but because the importation of Colombian grains is now much more expensive due to New commercial barriers.
This situation is repeated with sugar, tea and cocoa, everyday consumer products that suddenly became high-range products.
This dramatic change resulted from one of the most harmful decisions in modern economic history: SMOOT-HAWLEY TARIFF ACT, promulgated in June 1930.
The law, promoted by the senator Reed Smoot and by the congressman Willis C. Hawleyit was intended to protect US farmers following the 1929 scholarship.
However, the initial bill was quickly extended Under pressure from industrial lobbies, covering more than 20,000 products, including manufactured products, with rates that reached an average of 40% and, in some cases, exceeded 100%.
Far from helping the economy, as explained by the IE University (Spain) business and world trade expert, Deniz torcNo, this measure contributed to the collapse of international trade.
Countries such as Canada, France, Italy, Germany and the United Kingdom have responded with their own punitive customs rights to US products. These retaliation rates created a chain reaction: international cooperation weakened, US exports fell 61% between 1929 and 1933 and world trade contracted by over 60%.
This situation further aggravated the great depressionespecially affecting the economies dependent on foreign trade and exacerbating the geopolitical tensions of the 1930s.
Global consequences and the forgotten lesson
A Inflation arrow climba massive destruction of jobs and the Decline of Quality of Life They became painful testimonies of the failure of protectionism.
The contraction of world trade not only paralyzed key industries, but destabilized whole economies that depended on exports to support growth.
As coins devalued themselvesos Budget deficits have fired And in a chain reaction, the Financial Systems collapsed.
The 1930s watched not only an economic crisis, but also a transformation of the international system fueled, in part, by commercial decisions and wrong policies.
A historical lesson that, as the contemporary case of Trump tariffs demonstrates, continues to be ignored by leaders which give priority to short -term populist measures to the detriment of global economic stability.
Why do tariffs never fulfill your promise?
After decades of progress in liberalization of commerce, driven by multilateral organizations such as the World Trade Organization, the United Nations and the OECD, It seemed that the lessons had been learned. However, the second presidential term of Trump revived disturbing parallels with Smoot-Hawley.
Historical and contemporary data clearly show that customs rights rarely function as an effective instrument of economic protection. In an interdependent global system, supply chains cross various borders before reaching the end consumer. Increased customs rights results in higher production costs, harming both consumers and companies- even in the countries that apply them.
In addition to the United States, other countries also resorted to protectionism with adverse results. THE Argentinafor example, implemented a policy of replacing imports with high tariffs and commercial restrictions for decades. Although initially promoted industrial development, long -term led to a loss of competitivenessto a high inflation e to dstate ependence to support inefficient sectors.
O Brazil He had a similar experience: in the 1980s and 1990s, his military barriers temporarily protected certain industries, but also reduced product quality and asphyxiated technological innovation.
A Indiauntil the economic reforms of 1991, had one of the most protectionist tariffs in the world, which, consequently, limited its insertion in global trade and delayed its economic growth.
Deniz Torcu lists the three main negative effects of protectionism:
- Increased prices for consumers.
- Loss of competitiveness of companies and job destruction.
- Reduction of world economic growth due to the uncertainty and decline of international trade.
Towards a cooperative and resistant economy
Economic history, from the smoot-hawley law to the recent trade war promoted by Trump, clearly demonstrates that the protectionism Not only is it ineffectiveas well as counterproductive.
In a world where value chains are global and innovation depends on transnational cooperation, the Closing of economic borders weakens collective resilience.
Protectionism may seem like an immediate solution to economic crises or internal pressures, but its long -term consequences are almost always more costly than its apparent benefits. Instead of reinforcing national industries, isola-as; instead of protecting jobs, destroy future opportunities.
That cup of coffee in 1932 became the symbol of a closed economy. By 2025, it may be the batteries of electric cars, medicines or basic food products, once again, the high cost of negative interference in world trade.
“Bet on international cooperationna diversification of markets and in investing in sustainable competitiveness It’s now, more than ever, the only Intelligent way to advance“Concludes Professor Deniz Torcu.
