Do you feel the impact of tariffs? He is not alone. On April 2, 2025, President Donald Trump announced new radical tariffs: a 10% tax on almost all US imports, along with other specific ones to punish the countries to which he accuses of exploiting US markets. Just a week later, on April 9, his administration abruptly suspended much of the plan for 90 days, which left markets and allies in a situation of uncertainty.
The proposed tariffs were presented as a way of reactivating the American manufacturing industry, recovering jobs and counteracting what Trump considers unfair commercial practices. However, they immediately shook financial markets and generated alarm between economists and global partners in the United States. Critics of the entire political spectrum revived a family warning: “impoverish the neighbor.”
History shows that these types of policies are rarely successful. In the current interconnected world, it is more likely that they will cause quick, precise and painful reprisals.
What is the strategy of “impoverishing the neighbor”?
The phrase comes from economic history and refers to protectionist measures (tariffs, import restrictions or monetary manipulation) designed to boost the economy of a country at the expense of its commercial partners. Think about how to clean your garden by throwing garbage on your neighbor’s property: it seems ordered until they respond.
This approach contrasts markedly with the principles established by Adam Smith. In “the richness of nations”, he argued that trade is not a zero sum game. Specialization and open markets observed, generate mutual benefit: a growing tide that drives everyone. Trump tariffs ignore this logic.
And the story supports Smith. In the 1930s, the United States adopted a strategy similar to that Trump is experiencing through the Smoot-Hawley tariff law, increasing tariffs to protect national jobs. The result was a wave of global reprisals that suffocated international trade and aggravated the great depression.
An example: Lesoto
As an example, consider the 50% tariff that the United States imposed on imports from Lesoto, a small African nation without coastline. The measure entered into force at midnight on April 3, but, as reported, it was subject to a 90 -day break from noon on April 4.
The tariff was calculated taking the United States trade deficit with Lesoto (234.5 million US dollars in 2024), dividing it between the total value of Lesoto’s exports to the United States (237.3 million US dollars) and dividing that result by two.
The 50% tariff would have an insignificant effect on the US economy; After all, of the 3.3 billion US dollars that imported the United States in 2024, only a small fraction came from Lesoto. But for Lesoto, a nation that depends largely on textile exports and preferential access to the US market, the consequences would be serious. Apply the same tariff logic to all partners, large or small, ignores fundamental economic realities: scale differences, commercial capacity and vulnerability. It represents the mentality of impoverishing the neighbor: Download internal frustrations on the weakest economies to obtain a short -term political image.
Lesoto is just an example. Even countries that matter more than US of what they export, such as Australia and the United Kingdom, did not fight. This “marker” mentality – take commercial deficits such as losses and surpluses as profits – runs the risk of reducing the complexity of global trade to an eye game per eye.
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The return of a family strategy -and risky-
This type of thought has consequences. During Trump’s first mandate, China responded to American tariffs drastically cutting American soybeans and pork imports. As a result, these exports collapsed from 14,000 million dollars in 2017 to only 3,000 million dollars in 2018, hardly affecting politically sensitive states such as Iowa. The European Union responded to American tariff Republican former Mits McConnell and Paul Ryan. Canada and the European Union have shown their willingness to use similar tactics on this occasion.
This is not new. In 2002, President George W. Bush imposed tariffs up to 30 % of imported steel, which led the European Union to threaten with retaliation tariffs against products such as Citrus of Florida and Carolina textiles made of key states. Given the internal political pressure and a failure of the World Trade Organization against the measure, Bush changed position in 21 months.
A decade earlier, the Clinton administration faced a long commercial dispute with the EU, known as the “banana war”, in which European regulators structured import norms that harmed Latin American banana exporters backed by the US in favor of the old European colonies.
During the Obama era, EU increased visa rates, which disproportionate to the Indian Technological Services sector. India responded by delaying approvals for US pharmacists and large investments in the retail sector.
Not all forms of commercial retaliation monopolize holders. Many are subtle, slow and bureaucratic, but not less harmful. Customs officials can delay paperwork or impose arbitrary inspection or labeling requirements. The approval of American pharmaceutical products, technological or chemicals can be hindered by vague procedure reasons. Public hiring standards can be rewritten discreetly to exclude US companies.
While these tactics rarely attract public attention, their accumulated cost is real: breach of delivery terms, loss of contracts and increased operating costs. Over time, US companies can transfer their operations abroad, not because of labor costs or internal regulation, but to escape the slow process of bureaucratic sanctions that suffer in other countries.
What tariffs imply in a connected economy
Those who defend tariffs often argue that protect national industries and create employment. In theory, they could do it. But in practice, recent history shows that they are more likely to provide reprisals, increase prices and interrupt supply chains.
Modern manufacturing is deeply interconnected. A product may involve the assembly of components from a dozen countries, which move from one side of the borders to another. Tariffs harm foreign suppliers and US manufacturers, workers and consumers.
More strategically harmful, erodes the influence of the USs the allies tire of commercial fluctuations, and their rivals, such as China and Russia, intervene to forge deeper alliances. Countries can reduce their exposure to the US dollar, liquidate treasure bonds or align with regional blocks such as the BRICS group (led by Brazil, Russia, India, China and South Africa), not by ideology, but by necessity.
In summary, eu weakens its own strategic position. The long -term cost is not only economic, but also geopolitical.
Instead of resorting to tactics of the neighbor’s impoverishment, EU could ensure his future investing in what really promotes long -term strength: the intelligent development of the workforce, revolutionary innovation and strategic alliances with the allies. This approach would address commercial imbalances through skilled diplomacy instead of brute force, while strengthening internal resilience by training US workers and companies to prosper, instead of blaming others.
History clearly demonstrates it: abandoning obsession with bilateral commercial deficits and focusing on the creation of value pays off. The United States can obtain components from all over the world and improve them through a design, innovation and unique manufacturing excellence. That is the engine of true economic power.
*Bedassa Tadesse is an economy professor at University Minnesota Duluth
Text originally published in The Conversation
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