Tariffs Are Back — But Haven’t We Learned This Lesson Before?

Tariffs Are Back — But Haven’t We Learned This Lesson Before?

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On Wednesday, the U.S. government announced a sweeping series of new tariffs that could reshape how we shop, work, and even how our food is grown. But what does this policy shift really mean for everyday Americans? And why do economists keep comparing it to one of the worst economic mistakes of the 20th century?

Let’s unpack the data, history, and consequences—all in plain English.

As we explore these issues, it’s essential to remember that history has shown that the most successful investors are not those who attempt to predict short-term movements, but rather those who remain invested through uncertainty. Panic is the enemy of long-term wealth.

What This Chart Tells Us

This chart, titled Exhibit 1: Effect of Tariff Announcements to Date, illustrates the U.S.’s plans to increase tariffs across a broad range of trading partners as of April 2, 2025.

Key insights:

• The U.S. imports $3.27 trillion worth of goods annually.
• The average tariff rate in 2024 was 2.5%.
• After the announced changes, the average effective tariff rate would jump to 18.8%.

Countries Hit Hardest:

• China: from 10.9% to 47.5% (+36.6 percentage points)
• Vietnam: from 4.1% to 46.7%
• Bangladesh: from 15.4% to 36.9%
• Indonesia: from 5.1% to 28.5%
• India: from 0.7% to 27.9%

These increases stem from multiple overlapping policies, including a 20% tariff on all Chinese goods, 25% tariffs on steel, aluminum, autos, and auto parts, as well as new reciprocal tariffs that match the rates charged by other countries on U.S. goods.

Source: White House, U.S. Department of Commerce, U.S. International Trade Commission, Goldman Sachs Global Investment Research

U.S. Farmers: First in Line for Retaliation

When the U.S. raises tariffs, other countries typically retaliate—and they often target American agriculture.

Why? Because U.S. farmers depend heavily on international trade. According to the USDA, about 20% of all U.S. agricultural output is exported. In 2022, the U.S. exported a record $213 billion in agricultural goods, led by soybeans, corn, beef, pork, and dairy (USDA ERS, Reuters).

When countries like China, Mexico, or Canada retaliate with tariffs on these goods, U.S. farmers lose access to vital markets, leading to falling prices and reduced income. During the 2018–2019 trade war, soybean exports to China collapsed, and American farmers received $28 billion in federal aid just to stay afloat.

Looking at the chart, we see that China and Mexico—two of the top buyers of U.S. farm goods—are facing total tariff increases of 47.5% and 7.3%, respectively. If they respond in kind, American farmers could once again find themselves on the defensive.

And for investors in agriculture or U.S. equities broadly, remember: the stock market prices in fear quickly, but it often rebounds even faster. Staying invested through volatility has historically led to better outcomes than pulling out and trying to time re-entry.

 

Auto Industry: Brace for Price Hikes

The U.S. auto industry is deeply dependent on foreign parts. A single car contains 30,000 components, and many of them come from places like Mexico, Canada, Germany, and Japan—all of which appear in the tariff increase chart.

Relocating even 10% of the supply chain would take at least three years, according to analysts (Detroit Free Press). Costs could rise by 25% or more due to higher U.S. labor and regulatory burdens (LinkedIn). New car prices could jump by $5,000 to $15,000, even for “American-made” vehicles, due to tariffs on parts (MarketWatch).

While the news may be unsettling, investors should take the long view again. The auto industry has weathered wars, recessions, supply chain shocks, and innovation cycles. Equity markets have rewarded those who stayed the course.

 

Flashback: The Smoot-Hawley Mistake

Market Timing: Why Patience Pays

Periods of policy and economic uncertainty often tempt investors to jump in and out of markets. However, trying to time the market can have a devastating effect on returns.

J.P. Morgan Asset Management found that from 2003 to 2022, the S&P 500 delivered an annualized return of 9.8%. But if you missed the 10 best trading days in that 20-year period, your return dropped to just 5.6%. Miss the best 20 days? You’re down to 2.6% (J.P. Morgan Guide to Retirement 2023).

And here’s the kicker: those best trading days often occur within days of the worst ones. If you sell after a downturn, you’re likely to miss the sharpest rebounds.

That’s why the most effective strategy, historically, has been to stay invested, stay diversified, and avoid emotional decisions.

Final Thoughts: Is This a Smart Trade or a Risky Gamble?

The new wave of tariffs may feel like a power move—but history and data suggest it’s a risky game. Farmers, car buyers, small business owners, and everyday consumers could all ultimately bear the cost.

As we look back at Smoot-Hawley and ahead to a future of 18.8% average tariffs, we’re left to ask: Are we protecting American jobs—or just making everything more expensive for everyone else?

Throughout it all, investors should remember that volatility is normal. Markets rise and fall. But those who stay invested, ride out the storms and resist the urge to panic are consistently the ones who come out ahead.

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