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Economist Albert Hirschman鈥檚 National Power and the Structure of Foreign Trade, although released more than 50 years ago, offers a guide for the next four years. In this work, he introduces the concept of national power as 鈥渢he sense of power of coercion which one nation may bring to bear upon other nations, the method of coercion being military or 鈥榩eaceful.鈥欌�� Hirschman also explained the strategy for exercising national power: 鈥淎 country trying to make the most out of its strategic position with respect to its own trade will try precisely to create conditions which make the interruption of trade of much graver concern to its trading partners than itself. Tariff wars and interruptions of trade rarely occur, but the awareness of their possibility is sufficient to test the influence of the stronger country and shape the policy of the weaker.鈥�

US President Donald Trump followed the Hirschman script precisely when he 鈥渄eclared a national emergency and announced tariffs of at least 10% across all countries.鈥� He also set rates higher for countries deemed the 鈥渨orst offenders.鈥� For example, he set a new tariff on Vietnamese exports to the US of 46%. The US is Vietnam鈥檚 largest trading partner, accounting for almost 39% of its exports.

Vietnam immediately moved to negotiate a trade deal with the US. According to , 鈥淧resident Donald Trump said that Vietnamese leader To Lam is willing to eliminate tariffs to avoid punishing new US duties imposed on the Southeast Asian nation鈥檚 imports.鈥�

Expecting pushback to the president鈥檚 tariffs, Trump鈥檚 treasury secretary in his warning to other countries. 鈥淢y advice to every country right now is: Do not retaliate. Sit back, take it in, let鈥檚 see how it goes. Because if you retaliate, there will be escalation. If you don鈥檛 retaliate, this is the high-water mark.鈥�

Were he alive today, Hirschman might be saying, 鈥淚 told you so.鈥� China, meanwhile, seems intent on testing Hirschman鈥檚 hypothesis 鈥� and the strength of US resolve 鈥� with Beijing standing firm, so far, against Trump鈥檚 tariff gamble. China can resist because it has as much or more leverage than the US. It is not as dependent on exports to the US as other countries. Further, it can harm the US through its control of intellectual property such as TikTok. China understands this has become a game of 鈥淢utually Assured Economic Destruction.鈥�

Tariff Time Warp

Trump鈥檚 commerce secretary Howard Lutnick, echoing Hirschman鈥檚 thoughts but clearly ignorant of the economic and political impacts of tariffs, suggests other countries Vietnam鈥檚 example: 鈥淚 expect most countries to start to really examine their trade policy toward the United States of America and to stop picking on us,鈥� he said. 鈥淭he key is, will they take our agricultural products, will they treat us fairly?鈥� Lutnick added that 鈥渁 manufacturing renaissance in the US thanks to the tariffs is going to drive growth, starting in the fourth quarter.鈥�

Lutnick鈥檚 optimism matches that of John Edgerton, a former president of the National Association of Manufacturers, who stated that tariffs would bring 鈥渁 breath of relief to all industry and all business.鈥� He also thought the US would not be harmed by these actions: 鈥淭he National Association of Manufacturers believes that business conditions are fundamentally sound, that the future prosperity of the country is not endangered, and the present tariff law, when fully understood, will result in stabilization of business conditions.鈥�

Edgerton spoke, not in April 2025 but in June 1930, almost 95 years ago. The New York Times article that quoted him then also quoted Senator Reed Smoot, one of the principal authors of the 1930 tariff legislation that helped bring on the Great Depression: 鈥淚 am confident the enactment of the bill will have a splendid effect on business,鈥� Smoot stated. 鈥淚t will end existing uncertainty in the business world due to agitation over the tariff. I am sure the tariff has nothing to do with the general decline in the stock market today.鈥� Smoot added, 鈥淭he farming district of the country will be the first to benefit from the tariff.鈥�

Just as today, many criticized the tariff action taken almost a century ago. Their objections were ignored. Consequently, between 1930 and 1932, the US constant dollar GDP declined by 18.5%. Over the same two years, US farm output dropped from $10.3 billion to $5.5 billion in current dollars. In short, US farmers suffered terribly under the Smoot-Hawley Tariff Act of 1930. The Trump proposals will have a similar deleterious effect.

Defiant Nostalgia

Trump is infatuated with making the US the manufacturing giant it was 50 or 60 years ago. High tariffs are more than 鈥渁 shot across the bow鈥� of US trading partners, constituting, in fact, 鈥渁n economic project of defiant nostalgia: an attempt to reclaim America鈥檚 place as a dominant manufacturing power,鈥� the New York Times.

Workers in the US manufacturing sector dropped from 20 million in 1980 to under 13 million most recently. Manufacturing employment as a percentage of total employment also peaked in the 1940s at almost 40%, whereas today, it is only 8%. The manufacturing job decline, although fully offset by increases in employment in other sectors, led to a decrease in income and decimated the communities that lost those jobs.

The Trump administration that manufacturing jobs will return. Officials from manufacturing firms think differently: 鈥溾�榃hile we certainly agree we should aggressively pursue any policy that helps us make things in America, the idea that you can move every part of the manufacturing process back to the US does not align with reality,鈥� said Kip Eideberg, senior vice president for the Association of Equipment Manufacturers. Eideberg, whose group represents makers of equipment used in construction, agriculture, mining, utilities and forestry, added that with businesses relying on components and labor from around the world, 鈥榶ou can鈥檛 just pick all that up and just move it over the US.鈥欌��

Jay Timmons, the current president of the National Association of Manufacturers, also criticized the tariffs strongly, unlike his predecessor John Edgerton in 1930.

Dire Economic Impacts

The potential economic consequences of Trump鈥檚 tariff program are dire. Projections of a likely recession have increased sharply. JPMorgan, for example, raised the probability of in 2025 from 16% to 60% and expects GDP declines of 1% to 2%. That projection was made before Trump blinked this week, announcing a 90-day pause on reciprocal tariffs 鈥� beyond the new 10% baseline 鈥� for all countries other than China, which had responded robustly to the US with equivalent tariffs.

Markets may have breathed a sigh of relief at this reprieve, but the danger has not passed, with the world鈥檚 two largest economies still seemingly set on course for a damaging trade war and the stay for other countries potentially limited. A disruption of the type instigated by President Trump still has the potential to cause a more significant slowdown than even JP Morgan flagged. GDP fell by 10% per year after Smoot-Hawley passed.

A slowdown in productivity will contribute to an economic decline. Economic historians Alexander Klein and Christopher Meissner studied the impact of tariffs from 1870 and 1909. They that these measures reduced output and explained how: 鈥淭ariffs may have reduced labor productivity in manufacturing by weakening import competition and by inducing entry of smaller, less productive domestic firms.鈥� They also concluded that 鈥渢he era鈥檚 high tariffs are unlikely to have helped the US become a globally competitive manufacturer.鈥�

Economist David Autor points indirectly to the same consequence in the last two decades, too, noting that the manufacturing job losses in specific geographical regions led to fewer workers entering into manufacturing while boosting employment in lower productivity service sectors such as hospitality and health care. Geographic mobility surprisingly declined, likely further cutting productivity.

Lower productivity leads directly to lower GDP. Standard economic modeling and accounting show that the size and productivity of a nation鈥檚 labor force plus a nation鈥檚 capital stock determine its GDP.

The Trump administration obviously hopes the nation鈥檚 capital stock will increase, offsetting the decreased productivity. It cites promises from producers of ultra-high-end electronics, such as the Taiwanese firm Foscam, to expand in the US. However, as The Wall Street Journal : 鈥淒espite these pockets of activity, measures of business investment intentions published by the Federal Reserve suggest that across the economy, corporate spending plans are being scaled back against the backdrop of tariff uncertainty.鈥�

A Tentative Conclusion

Decreasing investment combined with the almost certain drop in consumer spending prompted by continued tariff-fueled uncertainty, price rises and spiraling unemployment could push the US into a recession.

A tentative conclusion is that US GDP will drop by 2% to 4% by the end of the year. Global GDP will also decline, probably by 1% to 2%. The absence of a Federal Reserve response to the sharp decline in equity shares after the Apr. 2 "Liberation Day" announcement may exacerbate the decrease.

Douglas Irwin, a leading US historian, may have the current situation best: 鈥淢r Trump has done a lot of damage 鈥� to America and the world. The president was right in at least one of his Rose Garden statements. With tariffs, he said, 鈥榳e can be so much wealthier than any country, it鈥檚 not even believable.鈥� He got that last bit right.鈥�

Philip Verleger is an economist who has written about energy markets for over 40 years. A graduate of MIT, he has served two presidents, taught at Yale and helped develop energy commodity markets since 1980. Kim Pederson is the editorial director of PKVerleger. The views expressed in this article are those of the author.