Trump's tariffs echo the catastrophic 1930 Smoot-Hawley Tariff Act and risk a global recession or depression, could destabilize political systems, and potentially ignite military conflict.
By Fareed Khan
Since Donald Trump’s re-election as president of the United States, a storm of economic and geopolitical turmoil has engulfed the world, driven by his antagonistic tariff policies targeting America’s closest allies and trading partners. On March 4, 2025, Trump imposed 25% tariffs on imports from Canada and Mexico and 10% on Chinese goods under the International Emergency Economic Powers Act (IEEPA). On July 10, 2025, he escalated tensions by threatening a 35% tariff on Canadian imports beginning in August, with 30% on Mexico, and blanket tariffs of 15% to 20% on most other trading partners.
These policies, echoing the catastrophic Smoot-Hawley Tariff Act, risk plunging the global economy into a deep recession or depression, destabilizing political systems, and potentially igniting military conflict between the US and some of its trade partners and allies. If this were to happen Canada—a nation rich in oil, critical minerals, and freshwater which the US covets—could potentially be the frontline in such a conflict. The resulting consequences will harm hundreds of millions globally, but American consumers will bear the steepest costs through higher prices, job losses, and eroded global influence.
The historical parallels of Trump’s tariff policies to the Smoot-Hawley legislation are stark. Enacted in 1930, the act raised duties on hundreds of imports, prompting retaliatory tariffs that crippled global trade and was a major factor in transforming a recession into The Great Depression. By June 2025, Trump’s tariffs raised the average US rate to 15.8%, the highest in over a century, threatening a similar outcome.
The International Monetary Fund (IMF), Organization for Economic Co-operation and Development (OECD) and World Bank have slashed 2025 global growth forecasts, warning of a US-triggered recession. Given that modern global economies are far more interconnected than in the 1930s, these risks will be greatly amplified. Disruptions in one market, particularly one as large as the US, will cascade worldwide, threatening the livelihoods of hundreds of millions. We also have to remember that the Great Depression fuelled nationalist and fascist movements, paving the way for World War II, and today’s escalating trade tensions could similarly destabilize global peace.
Economists warn that Trump’s tariffs will hit American consumers hardest. The Tax Foundation estimates that tariffs imposed as of April 2025 will cost US households $1,200 annually as businesses pass on the higher costs of imported good. The automotive industry, reliant on Canadian and Mexican parts, also faces production cost increases of $3,000 per vehicle, while grocery prices will rise due to Mexico supplying over 60% of US vegetable imports and nearly half of its fruit imports.
Trump’s claim that tariffs boost domestic manufacturing and will grow the economy are dubious claims and have been refuted by the vast majority of economists. His first-term tariffs led to job losses in agriculture outweighing manufacturing gains. Retaliatory tariffs from Canada, Mexico, and China—targeting US exports like agricultural products, alcoholic beverages, and other items—have cost American farmers, wine makers and distillers billions, with China’s 15% tariffs further eroding market access. These measures create an inflationary spiral, reducing purchasing power and pushing the US and global economies toward recession. With the US accounting for 26.1% of global GDP the impact of Trump’s tariffs will have a world-wide impact. The economic fallout is already evident. The US economy contracted in the first quarter of 2025, and Canada’s exports to the US, which account for approximately 14% of its GDP, have declined substantially, with the Bank of Canada warning of a “substantially weaker” economy.
The president’s tariff policies had a devastating impact on the stock market with a crash in April 2025 that erased trillions of dollars in value after Trump announced a 10% universal tariff and “reciprocal” tariffs on 57 countries. Inflation is also projected to surge as businesses deplete pre-tariff stockpiles, with significant price increases expected on imported products by late summer 2025. American families, already strained by inflation, are facing higher costs for essentials like food and fuel, while export-dependent sectors shed jobs. Canada’s retaliatory measures, including Ontario’s threatened 25% electricity export surcharge, are sure to exacerbate cross-border tensions. Furthermore, people in the US Midwest, reliant on Canada for 60% of their crude imports, could see gas prices rise by as much as 50 cents per gallon, should Trump decide to apply tariffs to crude oil, or if Canada applies export tariffs as a punitive measure.
Beyond economics, Trump’s trade war risks geopolitical catastrophe, with Canada as a potential flash point. His July 10, 2025, threat of a 35% tariff on Canadian goods, coupled with provocative calls to annex Canada as the “51st state,” has inflamed tensions. Posts on X reveal growing US nationalist sentiment, with some MAGA supporters eyeing Canada’s one-tenth of global oil reserves, its critical mineral resources, and fresh water as strategic assets for US energy security and its technology sectors. Canada’s resources make it a prime target, as the US seeks to secure oil for energy, minerals for electric vehicles, and fresh water amid growing domestic water shortages.
The link between trade wars and military conflict is well-established. French economist Frédéric Bastiat’s maxim, “when goods do not cross frontiers, armies will,” resonates today. The Smoot-Hawley tariffs exacerbated tensions that then fuelled global militarization in the 1930s. Trump’s rhetoric, casting allies like Canada as possible enemies while extending an olive branch to Russia—a nation with a history of undermining Western security—creates a dangerous diplomatic inversion.
His suspension of trade talks with Canada on June 27, 2025, over its digital services tax, and threats to dissolve agreements related to NORAD and Great Lakes management, signal a dismantling of decades of cooperation. This erosion of trust and Trump’s frequent criticisms of Canada could embolden US nationalist factions in his MAGA movement, particularly if economic hardship intensifies as a result of his tariff policies. This raises the spectre of military posturing by the US to secure Canadian resources. Such a conflict would disrupt North American stability and have global repercussions.
The economic damage extends to global supply chains, particularly in North America’s integrated automotive and sector. Canada supplies critical components for US vehicle production, and tariffs could disrupt just-in-time manufacturing, leading to factory slowdowns and job losses. Mexico’s shift toward domestic corn and fuel production to counter tariffs also threatens US agricultural exports, deepening rural America’s economic woes. Small businesses, already struggling with inflation, face higher input costs, forcing layoffs or closures, while consumers grapple with reduced purchasing power. Emerging markets, dependent on trade with the US face secondary effects as global trade networks falter, potentially triggering currency devaluations and social unrest in vulnerable economies.
Canada’s strategic vulnerabilities heighten the stakes. Its oil reserves, critical minerals, and fresh water are increasingly sought-after as global resource scarcity intensifies. The US, facing domestic water shortages and pressure to secure minerals for green technology, may view Canadian resources as a national security priority, fuelling increased nationalist fervour. Canada’s relatively small military and economic size compared to the US make it vulnerable to coercion, yet its retaliatory measures, like restricting oil and electricity exports, could destabilize US regions like New York, Michigan and the Mid-West states, which rely on Canadian energy. This tit-for-tat escalation risks turning economic disputes into broader conflicts, with Canada as the front-line due to its proximity and resource wealth.
The global economic consequences extend beyond North America. Developing nations, reliant on exports to the US and Canada, face declining demand as tariffs disrupt trade flows, potentially leading to economic stagnation in regions like Southeast Asia and Latin America. The World Bank warns that a prolonged trade war could push 50 million people into poverty by 2026, as global supply chains unravel and commodity prices spike. In the US, the ripple effects will be felt in urban and rural communities alike, with rising costs for goods like electronics and clothing, which depend on imported components, eroding middle-class savings and exacerbating inequality. These pressures could fuel domestic unrest, as economic hardship amplifies political polarization.
The geopolitical ripple effects are equally dire. Trump’s threatened tariff on the EU, delayed to August 1, 2025, has strained NATO alliances, with EU leaders approving retaliatory tariffs. China’s response—imposing up to 84% tariffs on US goods—further isolates America from the nations that have helped create the post-World War Two trade network.
This fragmentation undermines efforts to counter China’s growing global influence, as Canada, Mexico and other allies may seek alternative trade partners, even potentially aligning more closely with Beijing as a counterbalance to the US. In addition, Trump’s pivot toward Russia, evidenced by his reluctance to forcefully criticize Moscow for its actions in Ukraine, and fully support that country in its war with Russia, risks destabilizing the post-World War II order that has maintained relative peace through economic interdependence. Furthermore, America’s $748.9 billion trade deficit, along with how it has alienated and angered allies and trade partners, will make this isolation economically perilous.
Long-term diplomatic solutions also face significant hurdles. The fractured political landscape in the US, with Congress divided along partisan lines, limits the prospects for repealing Trump’s tariff authority, despite legal challenges to his policies. Canada’s efforts to build coalitions through the G7 and other international forums are hampered by Trump’s withdrawal from multilateral frameworks, leaving allies scrambling to maintain global trade norms. Rebuilding trust will require years, and possibly decades, of sustained diplomatic engagement, as nations like Canada pivot to diversify trade with Africa, Asia, Europe, and Latin America, reducing reliance on the US market.
Whether this trajectory can be averted is up in the air? The US Congress holds the authority to curb Trump’s tariff powers, especially after federal courts ruled his actions unconstitutional. However, political polarization and Trump’s influence over the Republican Party make bipartisan action challenging, and only courageous leadership would restore free trade principles.
Canada, led by newly elected prime minister Mark Carney, sought to rally allies at the G7 Summit in Alberta in June, but Trump’s early summit departure and his unpredictability have stymied progress. What Canada and other nations targeted by Trump need to remember is Immanuel Kant’s assertion that “the spirit of commerce . . . sooner or later takes hold of every nation, and is incompatible with war,” a sentiment that remains relevant today.
Moving forward global leaders must prioritize diplomacy and free trade to avert economic and geopolitical catastrophe. Canada’s resource wealth and economic potential positions it to forge new alliances, but this risks further alienating the US, potentially escalating tensions.
The world stands at an inflection point in history. Without decisive action by the leaders of Canada, Mexico and other nations in Trump’s cross hairs, Trump’s tariffs could spark a global economic catastrophe and even armed conflict. This will affect people around the world but Americans will face the harshest consequences—higher costs, unemployment, and diminished global influence.
It’s up to political leaders to do what’s needed to ensure that the world doesn’t fall down the black hole of global depression and possible armed conflict, and keep it from regressing economically and politically, as one man’s actions disrupt and destabilize the world.
© 2025 The View From Here. © 2025 Fareed Khan. All Rights Reserved.
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