Why Every Recession Starts with This One Government Move
Let’s cut straight to it: recessions don’t just “happen.” They’re not freak acts of economic nature. In many cases, they’re the result of a slow burn—policy decisions, global tensions, market jitters—and sometimes, one very specific government move lights the match.
That move? Raising tariffs.
It might sound dramatic to say “every recession starts with this,” but dig into history, and you’ll see a pattern that’s hard to ignore. Tariff hikes have often walked hand-in-hand with some of the world’s most painful economic downturns. Coincidence? Maybe. But probably not.
So, what’s really going on here? Why are tariff hikes such a dangerous game? And could they be the silent trigger that kicks off the next big crash? Let’s dive in.
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First, What Are Tariffs and Why Do Governments Love Them?
At their core, tariffs are taxes on imports. Governments impose them to make foreign goods more expensive, in hopes that consumers will buy more domestic products. The idea is to protect local industries, boost national manufacturing, and even “punish” foreign competitors for unfair trade practices.
Sounds patriotic, right?
But there’s a catch. Actually, there are several.
Tariffs increase costs for businesses that rely on imported materials. They can lead to higher prices for consumers. And more often than not, they spark retaliation from other countries. Trade wars ignite, supply chains suffer, and economic uncertainty explodes.
It’s a political crowd-pleaser that can create serious economic hangovers.
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A History Lesson: Smoot-Hawley and the Great Depression
No discussion about tariffs and recessions would be complete without bringing up the Smoot-Hawley Tariff Act of 1930.
America was already sliding into a recession. To “fix” it, the government raised tariffs on over 20,000 imported goods, aiming to protect U.S. farmers and manufacturers. But instead of a rebound, the opposite happened.
Other countries hit back with their own tariffs. Global trade collapsed by more than 60%. American exports plummeted. Businesses couldn’t sell abroad, jobs vanished, and the Great Depression spiraled out of control.
This wasn’t just a bad decision—it was a textbook example of how a well-intentioned tariff hike can throw gasoline on an already-burning economic fire.
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Fast Forward: The 2018–2019 Trade War
Think we learned our lesson? Not quite.
In 2018, the U.S. launched a wave of tariff hikes, mainly targeting Chinese goods. The goal was to address unfair trade practices and reduce dependency on foreign manufacturing. What followed was an intense trade war. China retaliated. Tariffs flew back and forth. Prices rose, global supply chains froze up, and uncertainty rippled across markets.
The U.S. economy didn’t fall into a full-blown recession, but manufacturing slowed, investment declined, and confidence dropped. Many experts believe if the global economy hadn’t been propped up by tech and consumer spending, we might’ve seen a real downturn.
Then came COVID-19—and while the pandemic took the spotlight, many forget that the economy was already limping into 2020 with self-inflicted tariff wounds.
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So Why Are Tariff Hikes So Economically Dangerous?
Here’s what makes tariffs particularly risky as a government move:
1. They Disrupt Supply Chains.
Companies that depend on imported goods—especially raw materials—face higher costs. That affects everything from manufacturing to construction.
2. They Hurt Consumers.
Higher import costs = higher prices at the store. That means less spending power, which is terrible during economic slowdowns.
3. They Trigger Retaliation.
When one country imposes tariffs, others usually follow. That can escalate quickly into a trade war, which slows down global trade—bad news in our interconnected world.
4. They Create Uncertainty.
Businesses hate not knowing what’s next. Will tariffs rise again? Will trade partners retaliate harder? That uncertainty often leads to delayed investments and hiring freezes.
5. They Can Backfire Politically.
The very workers tariffs are meant to help—like farmers or factory workers—often suffer the most when foreign buyers disappear or raw material costs jump.
