U.S. President Donald Trump gestures as he speaks with reporters before boarding the new Air Force One, a plane gifted by the Qatari government, at Joint Base Andrews, Maryland, U.S., July 1, 2026. / REUTERS Evan Vucci
On Monday, President Donald Trump announced that the U.S. would impose a 50 percent tariff against Canada in a move that Nobel Prize-winning economist Paul Krugman notes is not only “almost surely illegal,” but is the same “terrible mistake” that pushed the U.S. into the Great Depression.
“Yesterday,” writes Krugman, “the Trump administration invoked an obscure and never-before-used provision of Smoot-Hawley — Section 338 — to impose 50 percent tariffs on a wide range of Canadian goods.” Trump’s asserted reasoning for the tariffs involves accusations that Canada is discriminating against U.S. products, but as Krugman notes, the timing is suspicious, as just days earlier, the president had lashed out at Canada because smoke from its wildfires had drifted south of the border.
‘Whatever the real motivation for these new tariffs, they are almost surely illegal,” asserts Krugman. “They are definitely a violation of the U.S.-Mexico-Canada trade agreement, a revision of NAFTA negotiated and signed by Trump himself during his first term. Indeed, the White House fact sheet explicitly states that the new tariffs will be imposed ‘regardless of whether a good originates under the U.S.-Mexico-Canada Agreement (USMCA).’ So these latest actions confirm what most people around the world, from the European Commission to Iran’s Islamic Revolutionary Guard, have already figured out: a deal with Donald Trump lasts only until he feels like breaking it.”
Krugman argues that “this really is a temper tantrum, in the sense that there’s no strategy here. The new tariffs will hurt American consumers, and nobody expects them to extract any concessions from Canadians who are only getting more outraged at the United States.”
And Krugman isn’t guessing, but basing his assessment on historical evidence. As he writes, “The Trade Act of 1930, generally known as the Smoot-Hawley tariff, lost its standing as the worst trade policy action in US history when Donald Trump imposed his ‘Liberation Day’ tariffs in April 2025. But Smoot-Hawley was widely recognized as a terrible mistake soon after its passage, as it provoked widespread retaliation and contributed to the downward spiral of world trade that accompanied and reinforced the Great Depression.”
In fact, the Smoot-Hawley “stupidity” was so widely recognized as harmful that it “led to the 1934 Reciprocal Trade Agreements Act, under which the US began negotiating trade deals — we’ll reduce our tariffs if you reduce yours — that helped pave the way for the great recovery of world trade and the global economy as a whole in the decades that followed World War II.” But while everyone else understood the failures of Smoot-Hawley, Trump and his allies have resurrected the long-defunct approach.
What’s more, argues Krugman, it degrades the U.S. relationship with vital partners. As he writes, “Canada should be, and used to be, America’s greatest friend in the world. We share essential political and moral values with our northern neighbor. For the most part we even share a common language, eh? And Canadians viewed us very favorably until Trump began his tariffs and threats. Now we’re viewed less favorably than China.”
Based on all this, Krugman’s conclusion is grim: “I don’t see a golden age. I see an America that has become an ineffectual bully, sicker, poorer, and riven by political extremism, with no friends anywhere in the world.”