Nearly a century after Smoot-Hawley deepened the Great Depression, US President Donald Trump’s second term risks fracturing global commerce again—this time with the whole world paying the price.
When Trump first slapped tariffs on steel and soybeans during his first term, he didn’t just ignite a trade war, he shattered the idea that America would forever defend free trade. Now, back in the White House for a second term, he has doubled down.
His revived “America First” doctrine has thrown global commerce into turmoil once more, rewriting rules painstakingly built since World War II. The fallout is already being felt.
Breaking the Rules
For centuries, empires clashed over markets and resources—from the East India Company to the Opium Wars to today’s Belt and Road Initiative. After 1945, the West tried to tame this rivalry through institutions like the United Nations (UN), the International Monetary Fund (IMF), and the World Trade Organization (WTO).
The idea was that trade wars would give way to negotiated rules. In practice, those rules often preserved Western dominance, but the saving grace was that they held.
The WTO depends on consensus—any member can block a deal. India, for instance, has long protected its food security and generics this way. But America, the world’s biggest economy and importer, has rarely liked playing by rules it didn’t write alone.
Under Trump, that old unease turned to open defiance: the US paralysed the WTO’s dispute settlement system by blocking new judges, leaving the world’s trade referee without a whistle. By 2019, the WTO’s appellate body was deadlocked, a blow to decades of global trade governance.
Trump’s first trade war wasn’t just about tariffs—it was a signal to “Rust Belt” voters who felt abandoned by globalisation. He tore up NAFTA (North American Free Trade Agreement) and forced Canada and Mexico into the USMCA (United States-Mexico-Canada Agreement). He threatened to pull America out of the WTO entirely.
“National security” tariffs on European, Japanese, and South Korean steel and aluminum strained NATO ties, just as he pressed allies to spend more on defence.
Who Pays the Price?
Beyond tariffs, Trump’s real legacy was decoupling. Huawei bans, semiconductor controls, and TikTok crackdowns were the first salvos of the US-China tech war. COVID-19 accelerated the trend: companies scrambled to “reshore” factories to the US or “friend-shore” them to Mexico and Vietnam. The price of certainty was fragmentation and higher costs.
The National Bureau of Economic Research estimates US consumers now shoulder an extra $40 billion a year because of Trump-era tariffs, hitting small importers and households hardest.
Meanwhile, American farmers bore the brunt of Chinese retaliation—soybeans and pork exports took a $27 billion hit by 2020. Federal subsidies softened the blow, but the promised revival of factory jobs lagged far behind the rhetoric: by 2019, only 20,000 manufacturing jobs had been added, dwarfed by decades of losses to automation and global competition. Steel and aluminum mills saw short-lived gains but rising input costs stung downstream manufacturers.
America’s unpredictability rattled allies and empowered rivals. By quitting the Trans-Pacific Partnership, Trump ceded space in Asia that China’s RCEP (Regional Comprehensive Economic Partnership) and CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) quickly filled.
Today, Beijing markets itself—ironically—as the new guardian of open trade, even as it tightens its own grip through Belt and Road routes both physical and digital.
India’s Protectionist Trap
India got an early taste of Trump’s approach when he revoked its duty-free status for $5.6 billion in exports in 2018.
India struck back with tariffs on almonds, apples, and Harley-Davidsons—retaliatory moves that echo its bigger struggle. Prime Minister Narendra Modi’s Atmanirbhar Bharat ('Self-Reliant India'), launched in 2020, tries to shield local industry and create jobs, but it also recalls India’s old “License Raj” when high tariffs and stifling regulation kept growth stagnant until the 1990s economic reforms cracked it open.
Trump’s renewed semiconductor export curbs in 2025 now threaten India’s $400 billion IT sector and its fragile chip-making ambitions.
A soon-to-be-inked “mini deal” with Washington may clear up some disputes over farm and dairy access but the larger question lingers: how does India balance open trade with self-reliance in a world increasingly retreating behind tariff walls?
A Fractured Future
The deeper danger is what comes next. Former US President Joe Biden kept most Trump-era tariffs in place, proving that the politics of protectionism transcends party lines. But Trump’s return has revived and expanded them—new 25 percent tariffs on Chinese goods, 10 percent on other “offenders,” justified by everything from migration to fentanyl to unfair tech flows. Meanwhile, Europe’s Carbon Border Adjustment Mechanism, due in 2026, will add climate-driven tariffs to the mix.
The WTO’s rules remain, but with no umpire, does anyone play fair?
Every tariff raises prices, distorts supply chains, and chills innovation. But the real test is whether the global trading system stays open or fractures into rival blocs—a modern rerun of Smoot-Hawley’s downward spiral. Trump fired the first warning shot in his first term. His second could lock in a fractured global order for a generation.
The Same Mistake Twice or a Reckoning?
Samuel Johnson had warned, “Hell is paved with good intentions.” Smoot-Hawley’s proponents meant to save American jobs and triggered a depression instead. Does Trump’s tariff regime echo that logic, repackaged in MAGA language?
Yet, as Alfred, Lord Tennyson wrote,
“The old order changeth, yielding place to new,
And God fulfils himself in many ways,
Lest one good custom should corrupt the world.”
Is Trump’s “new order” truly new—a long-overdue reckoning and recalibration for free trade’s broken promises—or just America’s costliest trade mistake, remade for the 21st century, with the whole world paying the bill? Only time and history’s harsh memory will decide.
(Krishnan Srinivasan is a former foreign secretary of India; Manoj Mohanka follows geopolitics closely and serves on corporate boards. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)