Beggar thy neighbor, harm thyself: Tariffs like Trump’s come with pitfalls

The phrase "beggar thy neighbor" refers to economic policies that a country adopts to improve its own situation at the expense of others. Tariffs, particularly those aggressively applied in the name of nationalism or economic protection, have long fallen into this category. However, the broader lesson of history is clear: such policies often backfire. The protectionist tariffs implemented during Donald Trump’s presidency, while designed to promote American manufacturing and reduce trade deficits, serve as a modern example of how these measures can ultimately harm not just trading partners, but the very economy they aim to protect.

The Economic Theory Behind Tariffs

Tariffs are essentially taxes on imported goods. The intention is to make foreign products more expensive, encouraging consumers to buy domestic alternatives. In theory, this should boost local industries and employment. However, the reality is often more complex. Tariffs can lead to higher prices for consumers, retaliatory actions from trading partners, and disruptions to global supply chains—all of which can create more harm than benefit.

The "beggar thy neighbor" policy emerged during the 1930s Great Depression, when nations across the globe enacted high tariffs to protect domestic industries. The infamous U.S. Smoot-Hawley Tariff Act of 1930, for example, raised tariffs on over 20,000 imported goods. Rather than stimulating the economy, it contributed to a collapse in international trade and a deeper global depression. This historical backdrop offers a cautionary tale that remains relevant today.

Trump’s Tariff Strategy

During his presidency, Donald Trump introduced a series of tariffs targeting countries like China, Canada, Mexico, and the European Union. The most prominent of these were aimed at Chinese goods, intended to punish what the Trump administration called “unfair trade practices” and to reduce the U.S.-China trade deficit. Steel and aluminum imports were hit with 25% and 10% tariffs respectively, citing national security concerns. Trump’s broader rhetoric was to "bring jobs back to America" and reduce dependency on foreign manufacturing.

In the short term, there were some visible benefits. Certain U.S. steel companies saw a spike in profits, and a handful of manufacturing jobs were retained or created. Trump supporters heralded this as proof of success. However, these gains came with hidden costs.

Economic Fallout and Retaliation

Retaliatory tariffs quickly followed. China, for example, responded by placing duties on American agricultural products, targeting politically sensitive sectors such as soybeans and pork. This hit U.S. farmers hard, forcing the federal government to distribute billions in subsidies to keep them afloat. At the same time, many American businesses that relied on imported parts or raw materials saw their costs increase, eating into profits and sometimes leading to layoffs.

Moreover, consumers bore the brunt of these policies. Studies by the National Bureau of Economic Research and others found that the tariffs functioned more like a tax on American consumers and businesses. Prices for goods such as washing machines and electronics increased. Supply chains, finely tuned over decades of globalization, were disrupted, leading to inefficiencies and delays.

Long-Term Consequences

One of the most damaging long-term consequences of Trump’s tariffs is the erosion of global trust in the United States as a trade partner. Businesses, both domestic and international, prefer stable and predictable trade environments. The sudden imposition of tariffs by executive order undermined the credibility of the U.S. in trade negotiations and prompted many companies to reassess their reliance on American markets and suppliers.

Additionally, the trade war with China accelerated a decoupling of the two largest economies in the world. While reducing reliance on China may align with national security concerns, it also creates significant economic costs and introduces new uncertainties. Rather than bringing back jobs en masse, companies often moved production to other low-cost countries like Vietnam or Mexico instead of returning to the U.S.—an outcome that failed to meet the central promise of the tariff policy.

The Globalization Dilemma

The world economy is deeply interconnected. Attempting to untangle that with blunt instruments like tariffs risks harming the very workers and industries one aims to protect. While globalization has undoubtedly created winners and losers, the solution isn’t to retreat into isolationism. Rather, policies should focus on retraining displaced workers, investing in innovation, and establishing fair but forward-looking trade agreements.

Trade wars are inherently risky because they rely on the assumption that one side will blink first. But as history and Trump’s experience show, escalation is far more common than resolution. Just as the Smoot-Hawley Tariff deepened the Great Depression, modern tariffs can stifle economic growth, foster uncertainty, and damage diplomatic relationships.

Alternatives to Tariffs

If the goal is to promote fair trade and economic resilience, there are more effective tools than tariffs. Targeted industrial policy—such as investing in high-tech industries, clean energy, and workforce development—can better position a country for future competitiveness. Trade agreements that include labor and environmental standards can help level the playing field without resorting to economic warfare.

Additionally, multilateralism—working with allies rather than against them—provides greater leverage in addressing trade issues with countries like China. By going it alone, the Trump administration weakened traditional alliances that could have applied coordinated pressure to achieve better outcomes.

Lessons from History

History is full of examples that demonstrate the limits of protectionism. After World War II, countries learned that economic interdependence was a better path to peace and prosperity. Institutions like the World Trade Organization were established to provide rules and forums for resolving disputes. The post-war consensus emphasized trade liberalization, and for decades, it worked: global poverty fell, innovation spread, and living standards rose.

Yet in recent years, that consensus has frayed. The backlash against globalization is real and understandable. But the answer is not to revive the failed policies of the past. As Trump’s tariff experiment shows, beggaring one’s neighbor can end up beggaring oneself as well.

Conclusion

Tariffs may offer short-term political wins, but history shows they come with long-term costs. Donald Trump’s use of tariffs revived a deeply flawed approach to trade that hurt American consumers, farmers, and businesses more than it helped. While addressing the downsides of globalization is essential, the tools must be smart, collaborative, and future-focused. Otherwise, we risk repeating the mistakes of the past—and learning once again that in trying to harm our neighbors, we often end up harming ourselves.