When Tariffs Escalate

Trade wars follow a predictable pattern of escalating retaliation. Country A imposes tariffs. Country B hits back. Country A goes further. Both economies suffer, but neither wants to look weak by backing down.

The Smoot-Hawley tariffs of 1930 are the classic warning. America raised tariffs on thousands of imported goods, trading partners retaliated, and world trade collapsed in the years that followed. Most economists believe this deepened the Great Depression.

Modern trade wars are quieter but follow the same destructive logic. The US-China trade war added hundreds of billions in tariffs, disrupted supply chains, and raised costs in both countries without meeting its goals.