Steve Hanke Warns of 'Tariff Tsunami' That Could Plunge US Economy into Dark Times
Veteran economist Steve Hanke has issued a stark warning about former President Donald Trump's new tariff plan, likening the proposals to an "economic wrecking ball" and comparing them to the policy disaster from the early years of the Great Depression.
On the social media platform X, Hanke – known for his expertise in currency reform and international economic policy – posted a series of comments strongly criticizing the comprehensive tariff plan that Trump proposed during his latest election campaign. He did not hesitate to call it "the stupidest thing I have ever seen in my life."
"According to estimates by my former colleague David Stockman and I, Trump's proposed tariffs will increase input costs for American businesses by up to $500 billion," Hanke declared in a video that quickly went viral.
A Warning from History: Smoot-Hawley Again?
Hanke notes that the current situation is a repeat of the factors that led to the Great Depression of the 1930s. He cites the 1930 Smoot-Hawley Act — a tariff policy that exacerbated the global economic collapse of the time — as a dangerous precedent that has been ignored.
“At that time, the money supply was shrinking. The government imposed tariffs, and what happened? The market crashed. From March 1930 to June 1932, the Dow lost 83% of its value,” Hanke analyzes.
He argues that the current monetary environment has many similarities, with signs of liquidity contraction and a return to inflation, while the Trump administration is likely to repeat the failed policies of the past.
"We've seen the movie"
Hanke said Trump's advisers are making a serious mistake by underestimating the impact of global tariffs. Trump's treatment of the issue as a "small, temporary" problem, he said, shows a huge gap between policy perception and economic reality.
"Trump is acting like this is just a temporary blip for a few days. But if we don't adjust, we're going to be in for an economic nightmare. And there's no doubt that the United States is making itself the target of retaliation from major trading partners."
A warning to voters and policymakers
Hanke's speech is drawing attention from academics and financial circles, as Trump's tariffs have become a contentious issue in the election campaign. Experts warn that imposing excessive tariffs could lead to a wave of trade retaliation, raise consumer prices and choke off economic growth.
“This is not a smart protectionist strategy. This is a replay of a historic failure,” Hanke concluded.