History’s clearest economic lesson is one some people stubbornly refuse to learn: Unilateral tariffs and trade wars produce no winners — only casualties. From the 1930 Smoot-Hawley tariffs of the United States that deepened the Great Depression to today’s escalating protectionism, the pattern remains tragically consistent.
Unilateral tariffs ignite a vicious cycle of retaliation, strangling growth, warping markets, and unraveling the intricate web of global commerce. The stakes today are even higher: in an era of climate crises and AI upheaval, protectionism isn’t just economically reckless — it’s existential folly.
The Smoot-Hawley Tariff Act — a misguided attempt to shield American industries — slapped duties on over 20,000 import items. The result? Retaliation from 25 nations, global trade collapsing by 66 percent, and a recession spiraling into depression. Fast-forward to 2024, and history echoes ominously. The US-China tech rivalry, Europe’s carbon border taxes, and a global surge in import restrictions (over 3,000 protectionist measures implemented in 2023 alone, per Global Trade Alert) reveal a world dangerously sleepwalking into the same catastrophe. Modern trade wars sabotage prosperity through three ruinous mechanisms:
Supply chain carnage. Global production networks — meticulously built over decades — are being shredded overnight. The Organisation for Economic Co-operation and Development warns that current tariff escalations could slash $1.4 trillion from world GDP by 2025. When the US-imposed steel tariffs in 2018, Ford’s material costs ballooned by $1 billion annually, forcing layoffs and price hikes. Today’s chip wars are even more destructive: Taiwan-based TSMC, which produces 90 percent of advanced semiconductors, now faces export curbs that could paralyze industries from Detroit to Dortmund.
Inflation on steroids. Tariffs are inflation masquerading as policy. The Washington-based Peterson Institute for International Economics calculates that former US president Joe Biden’s 2022 solar panel tariffs raised US installation costs by 30 percent, delaying green energy adoption. Trump’s current levy on Chinese goods would cost median US households several thousand dollars yearly — a crushing blow to many families already grappling with housing and healthcare crises. This isn’t patriotism; it’s economic self-immolation.
Rule of law replaced by rule of force. The World Trade Organization reports a 15-fold increase in trade disputes since 2020, as nations abandon rules for raw power politics. When India bans rice exports to curb domestic prices, hunger spikes in Nigeria. This “every nation for itself” mentality leaves us helpless against transnational threats — from pandemic preparedness to AI ethics. Protectionism’s fatal flaw? It treats symptoms but not the causes. American manufacturing didn’t decline because of “unfair trade” but from chronic underinvestment. US worker training spending lags South Korea’s by 73 percent, while China now outpaces the West three-to-one in green tech research and development. No amount of tariffs can compensate for rotting infrastructure or stagnant innovation, which weaken economies. The solution lies not in economic isolation but in coupling open markets with domestic vigor. Consider South Korea’s response to China’s amazing shipbuilding dominance: Instead of imposing tariffs, it wisely invested $9 billion in AI-driven shipyards and workforce academies. By 2023, Hyundai Heavy Industries had secured 45 percent of global LNG vessel orders. Germany’s “Autoland 2030” plan similarly merges trade with transformation — subsidizing EV factories while expanding European Union trade pacts with Africa for critical minerals. As the 1930s nightmare clearly taught us, trade wars metastasize into real wars when economic bonds fracture. Today’s interdependence is our greatest safeguard against conflict. To retreat into protectionism is to surrender our capacity to combat climate collapse, regulate AI, and cure tomorrow’s pandemics.
The choice is stark: compete through innovation and increase cooperation, or perish in a zero-sum dystopia. As WTO Director-General Ngozi Okonjo-Iweala warns, “We are playing with matches in a room full of dynamite.” It’s time to douse the flames before everything explodes.
At the coming June’s G7 summit, leaders must move beyond tariff threats and commit to a new trade consensus: harmonized green subsidies, a moratorium on export bans for critical goods, and a WTO emergency fund to compensate developing nations for climate-related trade shocks. Prosperity and stability in this century demand not less globalization but smarter globalization, before protectionism’s vicious cycle becomes our collective death spiral.
The author is an economics and politics analyst, award-winning columnist of Philippine Star and Abante newspapers, book author and moderator of the Pandesal Forum.
The views do not necessarily reflect those of China Daily.
