The Echoes of History: Understanding the Impact of U.S. Tariffs on North America

The iconic 1986 film Ferris Bueller’s Day Off has become an unlikely point of reference in discussions about the North American economy. A scene from the movie, featuring a monotone high school teacher droning on about the Hawley-Smoot Tariff Act of 1930, has resurfaced on social media. The clip serves as a stark reminder of the lessons of history as Canadians and Americans grapple with the economic implications of U.S. President Donald Trump’s tariffs on Canada and Mexico. The teacher’s rhetorical questions about the effects of the tariffs—“Did it work? Anyone? Anyone?”—are met with silence, mirroring the indifference of the students. His conclusion? “It did not work, and the United States sank deeper into the Great Depression.” Today, economists and policymakers are asking similar questions about the potential consequences of Trump’s tariffs.

The Hawley-Smoot Tariff Act: A Historical Precedent

The Hawley-Smoot Tariff Act of 1930, signed into law by President Herbert Hoover, was one of the most significant trade policies of the 20th century. The law drastically raised tariffs on imported goods in an effort to protect American industries and generate revenue for the federal government. However, the policy backfired. A thousand economists at the time warned Hoover that the tariffs would worsen the economic crisis, and their predictions proved accurate. The law led to retaliatory measures from U.S. trading partners, deepening the global economic downturn. Canada and other nations imposed their own tariffs on American products, leading to a sharp decline in international trade. The Smoot-Hawley tariffs are widely regarded as one of the key factors that prolonged the Great Depression.

The political fallout from the tariffs was just as significant. The Republican Party, which had championed the law, suffered heavily in the 1932 elections. Voters rejected the policy, and Democrats gained control of both houses of Congress. The architects of the tariffs, Senator Reed Smoot and Representative Willis Hawley, were also ousted from office. The episode serves as a cautionary tale about the dangers of protectionist trade policies.

The Current Crisis: Trump’s Tariffs and Their Implications

Fast-forward to the present, and history seems to be repeating itself. Trump’s tariffs on Canada and Mexico, announced in March 2025, have sent shockwaves through the North American economy. Economists warn that these tariffs are the largest trade shock to both the U.S. and Canada since the Smoot-Hawley era. The average tariff rate has quadrupled, rising from 1.5% to nearly 12%, according to a report by the Royal Bank of Canada. This dramatic increase has raised concerns about the potential for a recession, particularly given the deeply integrated supply chains between the two nations.

The U.S. accounts for 77% of Canada’s exports, and Canada is the largest market for U.S. goods. This interdependence means that disruptions to trade will have far-reaching consequences. Economists predict that the manufacturing sector in Canada, particularly in Ontario and Quebec, will bear the brunt of the impact. However, no sector will be spared, as the ripple effects of the tariffs spread throughout the economy. Tu Nguyen, an economist at RSM Canada, warns that if the tariffs remain in place and lead to further retaliation, a recession could occur within six months.

The Consequences of Retaliation and Isolation

One of the key lessons of the Great Depression is that economic isolationism exacerbates economic downturns. Moshe Lander, an economist at Concordia University, notes that countries affected by the Depression made the mistake of turning inward and erecting trade barriers. “Isolating is the worst thing you can do,” he says. Today, there are fears that Trump’s tariffs will lead to a similar cycle of retaliation and economic contraction.

Canada has already experienced the impact of U.S. tariffs in 2018, but the current measures are far more severe. The Royal Bank of Canada warns that the tariffs represent the largest trade shock since the 1930s. The effects will not be limited to Canada; American consumers will also feel the pain as inflation rises. The RBC report predicts that U.S. inflation could exceed 3% by the end of 2025. BMO chief economist Doug Porter forecasts that if the tariffs remain in place for a year, Canada’s real GDP growth could drop to 0.5%, and the unemployment rate could surge to 8%.

Preparing for the Future: Strategies for Businesses and Policymakers

While the near-term outlook is grim, economists argue that there are steps businesses and policymakers can take to mitigate the damage. Michael Dobner, an economist at PwC Canada, advises companies to prepare for supply chain disruptions by realigning their supply chains and seeking new markets. Tu Nguyen emphasizes that while rerouting supply chains and finding new customers will take time, these adjustments are inevitable in the long term.

For policymakers, the challenge is to avoid repeating the mistakes of the past. The Smoot-Hawley tariffs taught us that protectionist policies only deepen economic crises. Instead of isolating themselves, countries should work together to promote trade and economic integration. While Canada’s actions alone may not be enough to influence the Trump administration, retaliatory measures from multiple U.S. trading partners could pressure the administration to reconsider its tariffs.

Conclusion: Learning from History to Avoid Repeating It

The Ferris Bueller clip has become a viral reminder of the dangers of tariffs and protectionism. The Hawley-Smoot Tariff Act of 1930 is a cautionary tale about the consequences of turning inward during economic crises. As the North American economy faces the largest trade shock in nearly a century, the lessons of history are more relevant than ever.

Economists warn that Trump’s tariffs could lead to a recession, disrupt supply chains, and harm consumers on both sides of the border. However, history also offers a way forward. By avoiding the mistakes of the past and promoting international cooperation, policymakers and businesses can work together to mitigate the impact of the tariffs and ensure a more resilient economic future.