High tariffs can shrink a nation's trade by sixty percent
Finance
Global trade operates on a delicate tipping point where a small increase in import costs can trigger a massive, lopsided collapse in the flow of goods.
Economists use the gravity equation to predict trade, suggesting that a mere one percent increase in tariffs can trigger a ten percent drop in total trade volume. This volatility was famously displayed during the 1930s when the Smoot-Hawley Act contributed to a staggering 67 percent collapse in global trade. When costs rise, nations don't just pay more; they stop specialized production entirely, shattering the delicate links of international commerce.