This article originally appeared in The Hub.
By Trevor Tombe, April 4, 2025
Yesterday—“Liberation Day”—the president of the United States announced sweeping new tariffs targeting countries around the world. This included taxes levied on American imports from countries all over the world, including 20 percent on goods from the EU, 24 percent from Japan, 10 percent from the UK, and a “baseline tariff” of ten percent levied on American imports from anywhere and 25 percent on vehicle imports. Although items traded under the Canada-U.S.-Mexico Trade Agreement may be exempt.
From the U.S. perspective, these tariffs are meant to address what some south of the border see as unfair tax and trade policies in other countries.
From the Canadian perspective, these tariffs are viewed differently (to say the least) and the timing of them is striking. The federal election is underway, and a new wave of U.S. tariffs—even if, for now, it does not directly affect most Canada-U.S. trade—adds a dramatic twist to the campaign.
Liberal leader Mark Carney vowed to “fight U.S. tariffs,” while Conservative leader Pierre Poilievre says retaliation “has to hit hard.”
The election outcome might very well come down to which party and party leader is seen as best able to stand up to the United States.
While today’s situation feels unprecedented, it’s not entirely unique. A remarkably similar moment unfolded nearly a century ago.
And that experience offers lessons for us today. One that suggests ever escalating levels of retaliation may be a consequence of electoral politics. But a costly one that could hurt Canada’s economy further. Instead, the lesson from the past may be that we should focus on domestic policy improvements to strengthen our economy whatever comes from abroad.
The 1930 trade war
Let’s dial the clock back to 1930. That year, President Herbert Hoover signed into law the now-infamous Smoot-Hawley tariffs, which dramatically increased taxes on imports into the United States.
Though often associated with the Great Depression, these measures weren’t a reaction to it. Hoover had campaigned in 1928 on raising tariffs—not as a crisis response, but as a way to generate revenue. At the time, tariffs were still a major tool of government finance and viewed by some, including Hoover, as preferable to income taxes.
As in Canada, there were also regional political dynamics around tariffs at play. The primarily agricultural southern states (like the western provinces in Canada) opposed tariffs while the industrial north (like the central provinces in Canada) supported them.
But whatever the motivation for the sharp rise in U.S. tariffs, other countries retaliated and trade volumes declined sharply as a result.
In Canada’s case, Prime Minister Mackenzie King responded with targeted tariff hikes on a relatively small number (only 16!) of items—though he avoided calling them retaliatory. He labelled them “countervailing duties,” arguing they were simply matching increases introduced elsewhere.
“Canada will not engage in a tariff war with any country,” the Budget speech read, continuing to say that the government “would much rather extend lower tariff favours to those who extend them to us than to impose prohibitive tariffs in return for like treatment.”
At the same time, King reduced tariffs on imports from Commonwealth countries. In fact, roughly 17 times more items saw tariff reductions than increases. The idea was then, as we’re increasingly hearing now, to shift and diversify Canada’s trade relationships.
Canada’s 1930 federal election
King also believed this strategy would be a winner and catch his political opponent, Conservative leader R.B. Bennett, off guard.
But Bennett took a different tack. He seized on what he saw as a weak response from the government, and campaigned for stronger retaliatory measures against the U.S.
“Imagine a country sunk so low that the prime minister says he will not do his duty by his country because, if he did, he might provoke someone,” Bennet said.
Of course, elections are never about just one issue. There was plenty more going on in 1930 than just trade policy. But some research suggests that this dynamic—Bennett positioning himself as tougher on the U.S.—may have helped him pull ahead and ultimately win, especially due to gains in Québec.
This victory also mattered for how the trade war unfolded. After his victory, Bennett ramped up retaliatory tariffs against the United States while also pursuing new trade agreements, including with Australia and New Zealand.
Unfortunately, this ultimately harmed Canada’s economy further, with trade volumes falling dramatically with the United States (the most important trading partner then, as now) and the shift to fellow Commonwealth countries coming up short. And there was no upside, as retaliation did not reverse the protectionist stance of U.S. trade policy, which ought to be the goal.
Lessons for today
Fast-forward to today, and we may be seeing a similar dynamic unfold. Some candidates are already trying to outdo one another on who would be toughest in standing up to President Trump.
But just like in the 1930s, tit-for-tat trade measures can end up hurting Canada’s economy more than they help. Retaliation may satisfy emotional needs, but economically, it can do more harm than good. We’re simply too small for any tariff measures that we enact to meaningfully move the needle on economic activity in the United States.
Rather than getting caught up in one-upmanship, Canada could focus on what will actually make our economy stronger.
Thankfully, many of the major campaign pledges so far have emphasized investment and growth. Both leading parties have announced major commitments to fast-track resource development, eliminate interprovincial trade barriers, and pursue tax reforms that encourage investment. These are constructive, forward-looking steps.
That’s what makes this campaign different—so far—from what we saw a century ago. But the risk remains. In the final weeks—especially after this latest round of U.S. global tariffs, and rising trade policy uncertainty—we could see a shift toward a less productive path, where the focus turns to who can hit back hardest at the U.S.
That would be unfortunate. If there’s one lesson from the 1930s, it’s that doubling down on protectionism will only deepen Canada’s economic pain. Let’s hope we choose a different path this time.