Trade Wars and Economic Flashbacks: Are We Headed Toward Another Recession?
As new tariffs disrupt the global economic order, markets tumble and questions mount. Can we expect a rebound — or are we seeing the start of a deeper crisis?
By R.L. Crossan
A Familiar Shock: Tariffs Return, Markets React
On April 3, 2025, President Donald Trump announced sweeping new tariffs, including a minimum 10% levy on virtually all imports and higher rates on select countries. Within 24 hours, U.S. stock markets responded sharply: the Dow Jones dropped over 2,200 points (-5.5%), the S&P 500 fell 6%, and the Nasdaq Composite lost 5.8%, entering bear market territory [1].
These declines echoed through international markets as major trading partners like China and Canada responded with retaliatory tariffs of their own. China imposed a 34% levy on U.S. imports, sending a strong signal that this round of trade confrontation would not go unanswered [2].
Tariffs in Historical Perspective: A Misleading Comparison?
President Trump, defending the tariffs, remarked: “We were at our richest from 1870 to 1913. That’s when we were a tariff country... and then they went to an income-tax concept. It’s fine, but it would have been much better” [3].
While the period from 1870 to 1913 did see impressive GDP growth — nearly 5% annually with per capita GDP doubling — the comparison to today’s economy is misleading. The late 19th century was a time of industrialization, westward expansion, and relatively little global competition. The U.S. economy was smaller, more isolated, and largely self-contained.
Today’s economy is integrated, digital, global, and deeply dependent on complex international supply chains. Tariffs now disrupt not only trade but also production, technology, and investment patterns.
How We Got Here: Then vs. Now
1870–1913:
High tariff era, before the federal income tax.
U.S. protected growing industries but faced little international industrial competition.
Economy boomed — but inequality soared, and many workers lived in poverty.
Revenue came mainly from import duties.
Post-1913:
Ratification of the 16th Amendment introduced income taxes.
Tariff rates declined and became less central to revenue.
The economy grew even more robustly through the 20th century, particularly post-WWII.
Today (2025):
GDP growth in Q4 2024 was 2.4%, with per capita GDP estimated at $65,875 [4].
Inflation is around 2.8% (Feb 2025), modest compared to post-COVID highs [5].
The stock market is deeply reactive to trade tensions, supply chain vulnerabilities, and political instability.
What Happened in 1929 — And Why It Still Matters
To understand fears of a looming recession, it’s helpful to revisit the stock market crash of 1929. Known as the Great Crash, it began on October 24 (Black Thursday), worsened on Black Monday and Black Tuesday, and preceded the Great Depression [6].
What caused it?
Excessive speculation
Loose credit and margin buying
Poor banking oversight
Global debt from WWI and high tariffs (Smoot-Hawley Tariff Act)
Today’s market isn’t identical — credit structures are stronger and financial regulation is more robust — but the political environment and trade disruptions resemble the same sort of global uncertainty and fragility.
A Warning from the IMF and Economists
Following this week’s tariff announcement and market drop, the International Monetary Fund warned that a protracted trade war could stunt global growth. Economists now fear stagflation — slow growth combined with rising prices — similar to the 1970s [7].
The United States is still grappling with lingering inflation and cautious investor sentiment after the post-pandemic economic recovery. Tariffs, if prolonged, risk:
Driving up costs for U.S. consumers
Causing companies to cut back on investment
Triggering retaliatory trade barriers that hurt U.S. exports
Is This the Beginning of a Recession?
While it’s too soon to confirm a recession, the ingredients are lining up:
Trade wars
Market volatility
Global retaliation
Policy uncertainty
Historically, sustained tariff increases have led to negative economic consequences. The Smoot-Hawley Tariff Act of 1930 intensified the Great Depression by choking global trade. Today’s interconnected economy could suffer similarly if diplomatic and economic negotiations fail.
Conclusion: Tariffs in a Modern World
Tariffs are not inherently evil or good — they are tools. But using 19th-century logic in a 21st-century economy risks doing more harm than good. The global economic system is faster, more interconnected, and more vulnerable to disruption than ever before.
If the goal is to protect U.S. jobs and industries, then careful, targeted trade policy — not sweeping tariffs — may be more effective. What history tells us is clear: protectionism comes with a price, and that price is often paid by the very workers it claims to help.
As policymakers and citizens alike assess the road ahead, one thing is certain: we must learn from history — not repeat it blindly.
References
[1] Associated Press – Markets plunge after Trump tariff announcement: https://apnews.com/article/25df44f3429c8ac0fff50d26c1ead114
[2] AP News – China announces retaliatory tariffs on U.S. imports: https://apnews.com/article/7be43f6ba3e8586bb9b89fbb99e3b477
[3] PBS – Trump cites 1870–1913 tariff era in defense of current trade policy: https://www.pbs.org/newshour/politics/trump-has-touted-gilded-age-tariffs-an-era-which-saw-industrial-growth-together-with-poverty
[4] Trading Economics – U.S. GDP per capita: https://tradingeconomics.com/united-states/gdp-per-capita
[5] NerdWallet – Current U.S. inflation rate: https://www.nerdwallet.com/article/investing/inflation
[6] Federal Reserve History – The Stock Market Crash of 1929: https://www.federalreservehistory.org/essays/stock-market-crash-of-1929
[7] The Guardian – IMF warns of global economic risk from Trump trade war: https://www.theguardian.com/us-news/2025/apr/04/first-thing-markets-plunge-as-imf-says-trump-trade-war-poses-significant-risk-to-global-economy