Will the Trump tariffs work? A word of caution

Economist Thomas Sowell is reported to have said that “social engineering is the art of replacing what works with what sounds good.”

That about sums up the debate in America about tariffs. It sounds good to side with America against foreigners. It feels good, too. But that’s not what trade wars actually do. They actually force the government to side with some Americans over other Americans.

Because when politicians and pundits talk about trade wars, they forget that there is actually a combatant on the other side. If we tax the consumer goods they sell to us, they tax the pork we sell to them. Some Americans win—others lose. Historically, trade wars have helped American manufacturing and hurt American farmers. Even our small-scale trade war of 2019 caused such rapid contraction in agricultural exports that the Trump administration offered emergency aid to U.S. farmers.

We learned this lesson through long, bitter experience. While protectionist populists deride the pro-trade consensus as reflective of the “uniparty,” principled conservatives recognize that the reason both parties believed in it is because the hard lessons of history taught us that trade wars make things much worse.

The “tariff of abominations” of 1828 severely harmed Southern states and vastly increased political tension. Anticipation of Smoot-Hawley tariffs triggered the market crash of 1929. The late Jude Wanniski, formerly of The Wall Street Journal editorial page, recounted in his book, The Way the World Works, how the market crashes coincided with headlines showing the trade war becoming more and more likely, much as they have been doing this year. The eventual passage of Smoot-Hawley proved investors’ fears correct by plunging the United States into a deep economic contraction.

But all this has been forgotten. Looking back at the Tariff of Abominations (1828), the Smoot-Hawley disaster (1930) and President Trump’s “Liberation Day” (2025), it seems as though it takes about a century to forget the depressions, geopolitical tensions, civil and international wars, and market collapses that accompany the ambitions of politicians who think they have a mandate to override by pure force the commercial relations of billions of people.

But when we forget, Providence is willing to step up and remind us once again of the iron laws of economics—no expert or central planner knows more than the rest of us combined. Conservatives used to know that. In truth, genuine conservatives still do.

Pundits and thought leaders may be slow to see what’s happening before their eyes, but those of us with skin in the game are shouting it from the rooftops. Stock markets are down for the year falling with each new tariff tweet in the same way they fell through October 1929 with each new headline heralding the coming trade war. Growth-sensitive commodities such as oil and copper and aluminum are plunging in price just as they have done every time we’ve had a global recession. Money is flowing towards inflation hedges and recession hedges. Gold, the classic disaster hedge, is well over $3,300 an ounce. The dollar has been falling against global currencies, including the ever wobbly euro. Surveys of consumers and of business managers are dropping rapidly into contractionary territory.

Political futures markets, which have done quite well in predicting recent political upsets, are now predicting a recession. In other words, every source of information that aggregates the distributed knowledge of all the rest of us as we put our businesses and pensions on the line is flashing “Caution, danger ahead.”

Now, maybe this really isn’t a trade war. Maybe it’s more like (trade) war games, some complex multidimensional plan to get rid of trade taxes and bring in a golden age of international commerce. If so, someone had better tell that to White House trade advisor Peter Navarro and his amen corner among the pundit class, because they all sound a lot like Misters Smoot and Hawley.

One more important thing needs to be said. Americans today have the highest standard of living in human history. We need to stop and give thanks for it, because much of the political rhetoric backing up liberation day makes it sound like we’re living in the Dust Bowl 1930s. We are not. Our diseases are largely the diseases of excess, boredom, and idleness; not of material privation. We are not a people in desperate circumstances who need to do something, anything, because we just can’t go on like this anymore. The other 95% of people living today, and the 100 generations of recorded history before, would trade places with us in a moment. A little recognition of that, and a little gratitude would give us a lot of protection against the lie that confronts every generation of Americans, that economic liberty just won’t work anymore.