History serves as a powerful reminder of the dangers of protectionism and the ongoing necessity for open markets. Few historical episodes illustrate this more clearly than the Smoot-Hawley Tariff Act of 1930, a United States policy aimed at protecting domestic industries during the Great Depression. Instead of alleviating economic hardship, the act sparked a global trade war by imposing unprecedented tariffs on hundreds of imported goods, which prompted retaliatory action from key trading partners.
The consequences were devastating. International trade collapsed, US exports to retaliating nations plummeted, and the global economy sank deeper into the Great Depression. Smoot-Hawley serves as a lasting cautionary tale of how short-term protectionist policies can exacerbate economic instability, delay recovery, and undermine international cooperation. Economists continue to view it as a striking example of the long-term damage inflicted by policies that prioritize domestic concerns over global collaboration, and the lessons it teaches remain profoundly relevant today.
In the modern era, the echoes of Smoot-Hawley are evident in contemporary trade policies, such as the tariffs imposed by the Trump administration and the recently announced additional tariffs that took many observers by surprise.
The decision to impose a 10 percent minimum tariff on most US imports, along with higher levies on key allies and competitors, has escalated a global trade war. China, the European Union, and others have condemned the tariffs, which are expected to slow global growth, raise the risk of recession, and increase costs for US consumers, with China announcing countermeasures. Meanwhile, the Trump administration has eliminated the duty-free de minimis treatment for low-value imports from China and plans to impose additional tariffs on semiconductors, pharmaceuticals, and critical minerals.
Although these measures are presented as a way to tackle trade imbalances and protect national security, instead they disrupt global supply chains, increase costs for businesses and consumers, and lead to retaliatory tariffs from trading partners.
Instead of resolving trade disparities, such policies create new complexities that weaken international cooperation and foster an atmosphere of mistrust and fragmentation. In a world characterized by interconnected economies, protectionist measures represent a regression, jeopardizing progress, stability, and future growth.
Amid rising trade barriers and geopolitical tensions, the partnership between Hong Kong and Hainan province presents a compelling vision for open trade and cooperation. The signing of a memorandum of cooperation (MoC) between Hainan province and Hong Kong on March 26 marked a pivotal step toward enhancing collaboration in trade and investment, financial services, cross-border data exchange, tourism, and talent mobility. At a time when the global economy faces unprecedented challenges and protectionism continues to loom large, this partnership underscores the enduring value of constructive dialogue and shared progress.
The MoC reflects a shared vision for leveraging the unique strengths of Hong Kong and Hainan to promote mutual growth and deepen collaboration. With its expertise in professional services and international trade, Hong Kong’s role as a global financial hub complements Hainan’s transformation into a free trade port and gateway for global commerce. The agreement also enhances market access for professionals from Hong Kong, creating new opportunities for its vibrant services sector while supporting Hainan’s economic ambitions.
This collaboration is part of a broader strategy to promote openness, innovation, and regional integration. It aligns with China’s wider commitment to fostering economic cooperation, as highlighted by the Boao Forum for Asia, which recently brought together global leaders, business executives, and scholars. This year’s theme, “Asia in the Changing World: Towards a Shared Future”, reflects the significance of collaboration in addressing common challenges and advancing shared prosperity across borders.
Innovation and technology are essential to the Hong Kong-Hainan partnership. The MoC includes provisions for talent exchange and collaborative efforts in high-impact sectors like artificial intelligence, renewable energy, and digital transformation. These initiatives are crucial for tackling urgent global challenges such as climate change, technological disruption, and sustainable development.
Hong Kong’s strengths in intellectual property protection, its common law framework, and its trilingual business environment make it an ideal hub for tech-driven enterprises. At the same time, Hainan’s free trade policies and industrial zones offer fertile ground for testing innovative projects and nurturing business growth. This creates a dynamic ecosystem that encourages technological breakthroughs and positions them as leaders in global innovation.
Demonstrating its ongoing commitment to innovation, the Boao Forum has announced the International Science, Technology, and Innovation Forum in Hong Kong this June. Under the theme “Transitioning Towards the Future: Powered by Science and Technology Innovation”, the event will gather global experts to explore how innovation can promote sustainable growth and tackle critical global challenges. This initiative reflects the broader objectives of the Hong Kong-Hainan partnership and their shared dedication to fostering progress through collaboration and progressive policies.
The partnership between Hong Kong and Hainan offers a timely counterpoint to the protectionist policies emanating from the US. It highlights that open trade, innovation, and cooperation are desirable and essential for navigating the complexities of today’s world. While tariffs and trade wars may yield short-term benefits for select industries, they ultimately harm consumers, stifle innovation, and undermine long-term economic stability. By combining their unique strengths, Hong Kong and Hainan can drive growth within the region and set a precedent for others to follow, showcasing the rewards of collaboration and openness.
The lessons of Smoot-Hawley and the modern trade disruptions it inspired remain clear — protectionism leads to fragmentation, stagnation, and conflict. In contrast, the partnership between Hong Kong and Hainan demonstrates the immense potential of openness, collaboration, and shared innovation. As the global economy faces challenges ranging from supply chain disruptions to climate change, this commitment to fostering free trade and regional integration provides hope and opportunity.
The 24th edition of the Boao Forum for Asia continued to offer a platform for visionary dialogue and actionable insights. It emphasized that shared prosperity relies on collaboration rather than protectionist policies. Amid global uncertainty, it served as a potent reminder that openness, innovation, and mutual respect are vital for creating a brighter, more interconnected future for international trade.
The author is an international partner and member of the Global Advisory Board, Millenium Associates AG.
The views do not necessarily reflect those of China Daily.
