Smoot-Hawley 2.0: Watching History Repeat Itself

So we’re really doing this again, huh? Watching politicians swing sledgehammers at our economy while claiming they’re performing delicate surgery.

Been thinking about the Smoot-Hawley Tariff Act lately. If you slept through history class, this was the 1930 masterpiece of economic self-sabotage that helped transform a stock market crash into the full-blown Great Depression. And I’m seeing the EXACT same patterns playing out right now.

Let’s get something straight: Smoot-Hawley wasn’t just a policy mistake. It was economic suicide dressed up as patriotism.

The Original Sin: What Actually Happened

The original Smoot-Hawley Act raised tariffs on over 20,000 imported goods to record levels. The sales pitch was familiar:

• “Protect American jobs!”
• “Bring manufacturing back!”
• “Stand up to foreign competitors!”

What actually happened?

1. Our trading partners immediately retaliated with their own tariffs
2. Global trade collapsed by nearly 70%
3. American exports plummeted
4. Unemployment more than doubled

More than 1,000 economists begged President Hoover not to sign it. They warned exactly what would happen. He signed it anyway because politics trumped economics. Sound familiar?

The Ripple Effects Were Devastating

The damage wasn’t just limited to trade numbers on a spreadsheet:

• Farm prices collapsed (the exact opposite of what was promised to rural America)
• Bank failures accelerated
• Consumer purchasing power tanked
• The depression deepened and lasted YEARS longer than it might have

And no, it didn’t “bring jobs back.” That’s not how this works. That’s never how this works.

Fast Forward: We’re Doing It Again (2025 Edition)

I’ve watched with a mix of fascination and horror as we’ve spent the last several years systematically rebuilding the Smoot-Hawley framework, only with fancier Powerpoints and slicker PR.

Just last month, in February 2025, the President reinstated a 25% tariff on foreign steel and aluminum—doubling down on the first term’s protectionist playbook. Steel companies cheered. Everyone else? Not so much.

The new tariffs might have different targets, but the economic illiteracy remains the same:

• Steel and aluminum tariffs (started in 2018, now doubled down in 2025)
• The China trade war (which cost Americans an estimated $195 billion)
• By late 2019, we had slapped tariffs on roughly $350 billion of Chinese imports
• They hit back with retaliatory tariffs on $100 billion of US exports
• New “national security” tariffs on EVs, solar panels, semiconductors
• Threats of 60% blanket tariffs on Chinese goods
• 100% tariffs on various goods from different countries

And guess what? Our trading partners are following the same script from the 1930s: retaliation. The EU, China, Canada, Mexico - they’re all responding with counter-tariffs that hit American exporters. Canada and Mexico are particularly pissed—and they’re two of our biggest steel suppliers!

The Mythology of Tariff Success

The most frustrating part is watching people fall for the same myths that were debunked nearly a century ago:

Myth #1: “Tariffs protect American jobs.” Reality: They protect SOME jobs while destroying OTHERS. For every steel worker whose job might be temporarily saved, multiple jobs are lost in industries that use steel. Plus consumer prices rise, reducing purchasing power.

Myth #2: “They’ll bring manufacturing back.” Reality: Most manufacturing jobs weren’t lost to trade - they were lost to automation. The jobs that do “come back” are different ones requiring different skills.

Myth #3: “We’re winning the trade war!” Reality: NOBODY wins trade wars. Studies of the 2018-2020 trade war showed it cost Americans billions, created minimal manufacturing jobs, and hurt farmers so badly the government had to bail them out.

The True Price Tag

Some economic studies have now estimated that Smoot-Hawley and the resulting trade war may have been responsible for 15-20% of the severity of the Great Depression. Not the entire cause, but a massive accelerant.

The new wave of protectionism comes with its own price tag:

• Higher prices for consumers (essentially a regressive tax hitting the poor hardest)
• Supply chain disruptions
• Reduced export opportunities
• Investment uncertainty
• Geopolitical tensions

The data on those 2018 steel tariffs? They destroyed approximately 75,000 jobs in steel-dependent sectors. For every steel job “saved,” multiple manufacturing jobs were lost. That’s not a win—that’s a shell game.

The aluminum industry story is even more absurd. We’re putting tariffs on aluminum while our domestic production continues to decline because of high electricity costs. The tariffs aren’t going to magically make electricity cheaper for American smelters. So what happens? Manufacturers pay more, consumers pay more, and we still don’t produce more aluminum. Economic genius!

And the promised benefits? They rarely materialize beyond political talking points.

Why We Keep Making This Mistake

The psychology is pretty clear. Tariffs are politically appealing because:

1. The benefits are concentrated and visible (specific factories, specific workers)
2. The costs are diffuse and hidden (slightly higher prices for everyone)
3. They offer simple villains (foreign countries) instead of complex realities

It’s always easier to blame foreigners than to address the real issues: inadequate worker retraining, insufficient investment in education, lack of a social safety net, and the need for actual industrial policy (not just trade barriers).

What History Actually Teaches Us

If there’s one thing the Smoot-Hawley disaster should have taught us, it’s that economic nationalism is a trap. Trade isn’t a zero-sum game where one country wins and another loses. It’s a system that, while imperfect, has lifted billions out of poverty and created prosperity that would have been unimaginable in the 1930s.

Are there legitimate concerns about trade? Absolutely. But addressing them with blunt instruments like across-the-board tariffs is like trying to perform heart surgery with a chainsaw.

Where We Go From Here

I’m not optimistic. The political incentives all push toward more protectionism, not less. It’s way easier to promise simple solutions than to admit the world is complicated.

Look at the recent developments: we’re literally in Smoot-Hawley 2.0. The February 2025 steel and aluminum tariffs are already straining relations with Canada, Mexico, Japan, and South Korea. Manufacturing companies that use these materials are watching their costs rise and their margins shrink. And this is just the beginning.

The complex effects are already visible. Yes, some steel workers might see higher wages—I don’t begrudge them that—but at what cost to the broader economy? The inflation impact is real. The job losses in manufacturing are real. The diplomatic damage is real.

But if history is any guide, this path leads to economic pain, not prosperity. The bill will come due, just as it did in the 1930s. And once again, the people who will suffer most aren’t the politicians who pushed these policies or the economists who warned against them.

It’ll be regular people just trying to make a living in an economy artificially made worse by the same bad ideas we supposedly learned to avoid a century ago.

History doesn’t repeat itself, but it sure does rhyme. And right now, it’s rhyming with disaster.