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100 years of customs duties: the eventful history of US trade
key takeaways.
US economic history is punctuated by protectionist cycles, from the 1930 Smoot–Hawley Tariff Act to the 2025 tariff shock, used as a tool of national defence, often at the cost of disrupted trade
Free trade, embodied by the GATT in 1947 and the WTO in 1995, long prevailed, but the 1990s’ “golden age” of globalisation has given way to a defensive, competitive protectionism
Under Donald Trump, tariff escalation reached an intensity not seen since the interwar years, marking a break in international trade relations and weakening multilateralism
For open economies like Switzerland, reliant on key trading partners, the task is to diversify export markets and lean on innovation and agility to safeguard prosperity.
For six months now, Donald Trump's trade strategy has come to resemble a global soap opera. Each tariff announcement triggers a chain reaction, shakes the markets and feeds economic uncertainty. In order to understand what is in play today, this turmoil must be placed in a long-term perspective. This is not, in fact, the first time the United States has practised protectionism: its economic history has been marked by cycles where customs barriers have staged powerful comebacks in the name of defending the national interest.
But at no point since the interwar period has this return to protectionism taken as spectacular and systematic a form as that announced in Spring 2025.
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On 2 April 2025, renamed “Liberation Day”, Donald Trump celebrated “one of the most important days in American history”, announcing “reciprocal tariffs” with a baseline tariff of 10% on all imports and tariffs of 34% for China, 20% for the EU and 31% for Switzerland. Some sectors were hit harder than others; for instance automobile imports, taxed at 25%.
At no point since the interwar period has this return to protectionism taken as spectacular and systematic a form as that announced in Spring 2025
Markets plummeted, oil prices dropped, the US dollar and American debt were left to languish. Beijing retaliated with tariffs of 84%, triggering an escalation. After a crazy week, Trump suspended tariffs on dozens of countries for 90 days (temporarily dropping them to 10%), opening up a phase of bilateral negotiations. At the same time, he increased the pressure on China, with tariffs of up to 125%, before accepting a truce and a return to 10%. This truce came to an end with a new shock: Switzerland was hit with an incomprehensible rate of 39%, and on its National Day.
These two events marked a rupture in international trade relations, attacking the free trade system introduced in 1947 when the GATT was signed. Is this the dawning of a new age or the return to Made in USA protectionism? For a clearer picture, let us delve into a century of tariff barriers.
The protectionist temptation is an American reflex of long standing. At the turn of the 1930s, the Great Depression landed a heavy blow on the United States, which desperately sought to protect its economy. The Republican senator Reed Smoot and the Republican representative Willis C. Hawley drafted the Smoot-Hawley Tariff Act which was signed in 1930 by President Herbert Hoover to shield American industry and agriculture in the face of the crisis. As a result of this Act, tariffs on more than 20,000 products soared and led to retaliatory measures by numerous countries, among them Canada, Mexico, France and even Switzerland. An escalation which caused a crisis during the interwar period, leading to a slump in world trade of around 66% between 1929 and 19341. In the process, the Roosevelt administration voted in 1934 for the Reciprocal Trade Agreements Act, as part of its efforts to pull America from the nationalist trap by negotiating more flexible bilateral agreements2.
This episode illustrates how this withdrawal, far from providing a lasting solution, in fact aggravated the global economic crisis and left a lasting trace on the collective American memory and serves even today as a warning whenever the subject of protectionism is raised in the United States.
From the GATT to the WTO: Geneva, the free trade capital
We had to wait until 1947 and the end of the Second World War for the global economic elite to get together in a world still in ruins, with the aim of preventing a return to protectionism. The creation of the General Agreement on Tariffs and Trade (GATT) in Geneva brought together some twenty signatory states committed to reducing tariffs on thousands of products.
Originally conceived as a provisional agreement, it was to be replaced by a true international trade organisation. But political disagreements between the principal players blocked this project, so that the GATT filled the role of trade negotiation framework for almost fifty years until the creation of the World Trade Organization (WTO) in 1995.
In 1947, the average global customs tariff exceeded 20% while in 1994 it fell to below 4% in the developed countries
Several rounds of negotiation3 led to a gradual fall in tariffs, in particular with the Dillon Round (1960-1962) formalising a reduction of USD 4.9 billion in tariffs, the Kennedy Round (1964-1967) which led to an average tariff reduction of 35% and the Tokyo Round (1973‑1979) which began to address non-tariff barriers. The Uruguay Round (1986-1994), the last and most important, led to the creation of the WTO in 19954. These agreements radically transformed world trade. In 1947, the average global customs tariff exceeded 20% while in 1994 it fell to below 4% in the developed countries5.
America in the noughties, or the end of Happy Globalisation
During the second half of the 20th century the consensus around free trade in the United States can primarily be seen as the fruit of the country's economic predominance in the face of a Europe undergoing reconstruction after the Second World War, on the one hand, and the determination to pursue a trade integration of the western economies in the face of communism, on the other.
Since the 1990s, long perceived as the golden age of Happy Globalisation and of free trade, the United States has initiated a slow but deep destabilisation of this model, notably following the signing of the NAFTA agreement, the rise of Chinese imports and subsequently the financial crisis of 2008. This led to what some have called a competitive liberalisation6 with a growing awareness of the harmful effects of globalisation on certain segments of the US economy such as offshoring, the destabilisation of the manufacturing industry and the increase in trade deficits7.
Under the Clinton, Bush and Obama presidencies, this manifested as an increased recourse to defensive trade instruments, notably in 2002 with the willingness of the Bush administration to impose tariffs of 8% to 30% on imported steel in order to “save” the US steel industry. In reality, these taxes lasted barely 21 months instead of the 3 years initially envisaged, since the WTO judged them to be illegal and the economic results were disappointing8.
Donald Trump adopted a resolutely protectionist trade policy in 2016, which he justified by the desire to reduce the US trade deficit and protect the industries deemed to be strategic
It was in this context that Donald Trump adopted a resolutely protectionist trade policy in 2016, which he justified by the desire to reduce the US trade deficit and protect the industries deemed to be strategic. Citing the Trade Expansion Act of 1962, his administration levied tariffs of 25% on steel and 10% on aluminium imports, imposing them on allies (European Union, Canada, Mexico) and rivals alike9.
At the same time, based on the Trade Act of 1974, Washington engaged in a trade war with China, gradually imposing tariffs on more than USD 360 billion of Chinese goods and invoking unfair trade practices and intellectual property theft10. These measures led to immediate retaliatory measures, affecting US agricultural exports in particular. While Trump presented this strategy as a means of repatriating production and boosting industrial employment, it also caused diplomatic tension, a rise in costs for numerous American businesses and growing uncertainty in international markets. Although the Joe Biden administration did not mark a net rupture with the protectionism introduced by Donald Trump, he did sign an agreement with the European Union in 2021, putting an end to the conflict surrounding steel and aluminium, replacing the tariffs with import quotas. Biden adopted cooperative protectionism, geared toward defending strategic sectors, relocating production and creating trade alliances to secure supply chains.
Biden adopted cooperative protectionism, geared toward defending strategic sectors, relocating production and creating trade alliances to secure supply chains
So what is Switzerland's position in all of this?
Modern Switzerland has built its prosperity on a strategy of openness and free trade, focusing on innovation, specialisation in key industries and the quality of its workforce. With one of the world’s most competitive economies driven most notably by the pharmaceuticals industry, watchmaking, precision machinery and finance, it benefits fully from multilateralism and a major network of free trade agreements with 70 trading partners across EFTA, and through bilateral agreements. In addition to these advantages, the Alpine Republic is characterised by agility and an ability to adapt, which allow it to respond swiftly to international economic developments and to reposition its businesses when faced with fresh challenges.
On the flipside, this openness to the outside world makes Switzerland heavily dependent on its principal export markets, that is the United States, the European Union and China. It also has limited room for manoeuvre when the great powers take unilateral decisions since it does not possess the requisite political weight or market size to alter the trajectory of its partners on its own. This was cruelly demonstrated by recent events: the failure of the negotiations between the Federal Council and the US administration led to customs tariffs of 39% being imposed on a wide range of products, thereby causing difficulty for several key sectors and highlighting Switzerland's lack of coercive leverage.
For exporting nations such as Switzerland the challenge now is to adapt their model by diversifying their markets, consolidating their alliances and focusing on their innovative capabilities and the agility of their economy
American protectionism thus runs like a red thread through the country's history, resurfacing during each period of doubt or economic fragility. From the Smoot-Hawley Act of 1930 to the trade war that was launched against China in 2018 and the tariff shock of 2025, the United States has regularly brandished the weapon of customs tariffs to defend its strategic interests. The efficacy of these policies remains contested, however. Far from granting lasting protection to employment or industry they have often exacerbated tensions, slowed down trade and made international cooperation more fragile. The current cycle marks a fresh rupture, revealing the weakening of multilateralism and the dawn of an era of fragmented trade where blocs and power relations take precedence over common rules. For exporting nations such as Switzerland the challenge now is to adapt their model by diversifying their markets, consolidating their alliances and focusing on their innovative capabilities and the agility of their economy. At this price they will be able to safeguard their prosperity and make their weight felt in a world where protectionism, rather than being an exception, is confirmed as a constant in US history.
This is a marketing communication issued by Bank Lombard Odier & Co Ltd (hereinafter “Lombard Odier”).
It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication.
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