Commerce tariffs are again — reshaping markets and elevating essential questions for buyers. In early 2025, the USA enacted broad-based tariffs on practically all buying and selling companions, reversing a long time of liberalization. The end result: renewed volatility, geopolitical rigidity, and a transparent crucial for portfolio resilience. Whereas right now’s headlines really feel new, the dynamics aren’t.
Over the previous 150 years, the USA has seen a number of high-tariff regimes — from the put up–Civil Conflict growth to the Smoot-Hawley fallout. The worldwide economic system has modified, however investor habits and threat pricing stay ruled by acquainted patterns.
On this weblog, we study these classes by way of a data-driven lens, leveraging our proprietary database of 150 years of asset and financial information—probably the most complete long-term dataset on tariffs, financial progress, and funding returns out there to this point ([3], [4], [5]). Our goal is to not counsel that historical past will repeat itself, however to uncover patterns that rhyme — offering context for buyers in search of to navigate right now’s uncertainty. The proof reveals that whereas tariffs can introduce stress into markets, systematic fairness components, notably low-volatility, have traditionally supplied stability and added worth during times of commerce disruption. For buyers dealing with a resurgence in protectionist coverage, these classes are each well timed and actionable.
The Historical past of Tariffs
Displays 1 and a pair of hint the USA by way of a number of tariff regimes since 1875. From protectionism to liberalization and again once more, tariff coverage has mirrored broader political and financial forces. This long-run view gives vital context for right now’s shifts.
Exhibit 1: US Efficient Tariff Price Since 1875
Yale BudgetLab and Northern Belief Asset Administration – Quantitative Methods. The efficient US tariff price is measured as customs responsibility income as a % of products imports. The pattern interval is 1875-2024.
Exhibit 2: Historic Tariff Tendencies
Yale BudgetLab and Northern Belief Asset Administration – Quantitative Methods.
1875-1913: Protectionist Peak
Within the Civil Conflict the USA applied the Morrill Tariff in 1861, elevating common tariff charges on dutiable commodities to roughly 47% to generate income for the Civil Conflict. From the post-Civil Conflict period (which was 1861–1865) to World Conflict I, tariffs remained excessive to guard flourishing industries. Tariffs on dutiable imports averaged between 30% and 50%, reflecting the Republican Social gathering’s dedication to industrial improvement by way of commerce boundaries, amounting to efficient tariffs of round 30%. Notable laws contains the Morrill Tariff (1861), the McKinley Tariff (1890), and the Dingley Tariff (1897), the latter of which marked the peak of protectionism on this period.
1913–Twenties: First Liberalization
The Underwood Tariff Act of 1913, enacted beneath President Woodrow Wilson, marked a turning level by lowering the fundamental tariff charges. As well as, many uncooked supplies and groceries have been added to the freed from tariff listing. This shift was pushed by Democratic efforts to advertise freer commerce and encourage American producers to provide extra environment friendly and develop into extra aggressive with their costs, reducing the common price for shoppers.
Nineteen Thirties: Smoot-Hawley Period
The 1929 inventory market crash triggered a world downturn, prompting nations to guard home industries. In 1930, the USA handed the Smoot-Hawley Tariff Act, elevating duties on over 20,000 imports—pushing common tariff charges to 45%. As an alternative of stabilizing the economic system, the coverage sparked international retaliation, with main buying and selling companions like Canada, the UK, and Germany imposing countermeasures. The end result: a commerce warfare and a 60% drop in world commerce by 1933.
Publish-WWII to Nineteen Seventies: Commerce Liberalization Period
After World Conflict II, U.S. coverage pivoted towards multilateral liberalization by way of the Common Settlement on Tariffs and Commerce (GATT). By means of negotiation rounds, leading to over 100 agreements, together with Geneva, Dillon, Kennedy, and Tokyo, common tariffs on industrial items fell dramatically. By the Nineteen Seventies, US tariffs have been round 10% or decrease, reflecting a world development towards freer commerce.
1990S–2000s: NAFTA and WTO Integration
With the signing of NAFTA (1992) coming into power (1994) and the U.S. becoming a member of the WTO (1995), tariff boundaries declined even additional. By the 2010s, common tariffs on all US imports had dropped to roughly 1.5–2.5%, reflecting the height of US commerce openness.
2018–2020s: Strategic Protectionism
Starting in 2018, the Trump administration imposed a ten% blanket tariff on imports, together with extra levies concentrating on nations with giant commerce surpluses with the USA, notably China. These measures marked a shift towards selective protectionism and initiated retaliatory tariffs by main buying and selling companions.
2025: Escalation of Broad Tariff Coverage
In 2025, the USA enacted its most vital commerce shift in a century: a ten% blanket tariff on all imports, plus an added levy based mostly on every nation’s bilateral items deficit. Although a 90-day grace interval softened the rollout, ongoing exemptions and reversals have created persistent coverage uncertainty. The influence has been most acute for China, the first goal, with retaliatory tariffs from Beijing following rapidly. The risky and politically charged setting has difficult forecasting and elevated warning amongst international buyers.
The menace now hanging over the worldwide economic system is that President Trump is orchestrating a return to the Nineteen Thirties, when the notorious Smoot-Hawley tariffs set off a sequence response of worldwide retaliation, typically blamed for deepening the Melancholy. This transfer contrasts sharply with the multilateral liberalization development of the earlier a long time. These regimes of US commerce tariffs additionally influence common international tariffs internationally, as different nations both had excessive tariffs (like European nations within the 19th century) or retaliated (for instance through the Smoot-Hawley period). The determine beneath, taken from Bas, 2012 reveals the common stage of world tariffs [2].
Exhibit 3: Unweighted World Common Personal Tariff, 35 International locations, %
Bas, M. (2012). Enter-trade liberalization and agency export choices: Proof from Argentina. Journal of Growth Economics, 97(2), 81-493.
Tariffs are extensively thought to be impediments to commerce openness. By growing the price of cross-border transactions, excessive tariffs have a tendency to limit the movement of products and providers, thereby reducing a rustic’s trade-to-GDP ratio—an ordinary measure of openness [2]. Exhibit 3 illustrates the historic evolution of US commerce openness, outlined because the sum of imports and exports as a proportion of GDP, with key tariff regimes highlighted.
Exhibit 4: Historic Commerce Openness
GlobalMacroDatabase, Yale BudgetLab, Northern Belief Asset Administration – Quantitative Methods. The determine reveals the historic timeseries habits of the 10-year centered shifting common of U.S. Commerce Openness (based mostly on the sum of US Imports and Exports as a proportion of GDP). The bars highlighted durations of excessive tariffs. Tariff charges are calculated as the whole income from import duties divided by the worth of complete imports in the identical yr. The pattern interval is 1875-2024.
The information reveals clear declines in openness during times of elevated protectionism, notably the late nineteenth century and the Smoot-Hawley period of the Nineteen Thirties. Conversely, commerce openness expanded considerably through the put up–World Conflict II liberalization section and thru the multilateral agreements of the Nineteen Nineties and 2000s. This development started to reverse within the late 2010s, as focused tariffs—notably these imposed on China throughout President Trump’s first time period—curtailed international commerce flows. The latest escalation in 2025 threatens to speed up this reversal, underscoring the persistent rigidity between protectionist insurance policies and international financial integration.
What Does the Knowledge Inform Us About Tariffs and Financial Development?
A primary order query for buyers is what’s the influence of tariffs on financial progress? Whereas intuitive arguments typically hyperlink protectionism with weaker financial outcomes, the historic information current a extra nuanced image. Tutorial analysis over the previous a long time has yielded combined outcomes, with some durations displaying optimistic correlations between excessive tariffs and robust progress— particularly earlier than World Conflict II — whereas post-war information level to slower progress in high-tariff regimes.
This phenomenon has been termed the “tariff–progress paradox,” first recognized by Bairoch (1972), who famous that economies within the late nineteenth and early twentieth centuries typically grew quickly regardless of, and even alongside, elevated tariff ranges[1]. On the similar time, economical channels counsel tariffs traditionally raised enter prices and have achieved little to spice up productiveness, thereby doubtlessly hindering financial progress originating from different historic sources like migration, restoration of the nice melancholy, or productiveness will increase coming from main improvements.
To supply additional coloration on the connection between efficient tariffs and financial progress we plot in Exhibit 5 the annual US actual GDP progress charges since 1875, with the earlier excessive tariff durations highlighted in gray.
Exhibit 5: US Tariffs Vs. Financial Development
GlobalMacroDatabase, Yale BudgetLab and Northern Belief Asset Administration – Quantitative Methods. The efficient US tariff price is measured as customs responsibility income as a proportion of products imports. The bars highlighted durations of excessive tariffs. US financial progress is measured by the ten years (centered) common progress price in actual GDP.
We will see that US financial progress was marginally increased throughout excessive tariff regimes. Throughout the Protectionist Peak’ interval, the economic system skilled a excessive however progressively declining progress price of three.9% on common, adopted by a major drop through the Nice Melancholy. Subsequently, progress recovered and averaged above 5% through the ‘Smoot-Hawley’ period.
After that, tariffs declined, however financial progress fell to ranges beneath these seen through the protectionist peak — dropping from 3.2% within the put up–World Conflict II interval to 2.2% because the begin of the twenty first century. Furthermore, proof suggests a prisoner’s dilemma for particular person nations. If a single nation imposes tariffs in a focused and well-designed method, it could reap some advantages. Nevertheless, if others retaliate, the end result sometimes worsens for all.
Leaders contemplating a shift towards commerce openness face a strategic recreation, not an remoted resolution. Defection by main economies — elevating tariffs unilaterally — typically leads others to comply with go well with. Ultimately, solely cooperation serves one of the best pursuits of the “prisoners.” Therefore, the worldwide context and worldwide responses matter considerably, with a traditional ‘prisoner’s final result’ possible if everybody begins retaliating. Good luck, politics.
Does this imply we are able to count on tariffs to keep away from harming — and even benefitting — financial progress going ahead? We take a purely data-driven historic perspective, however we emphasize that right now’s economies differ in vital methods from these of the nineteenth and early twentieth centuries. Most notably, the worldwide economic system is now way more interconnected, with intricate worldwide provide chains, more and more advanced and tech-driven merchandise, and a US economic system that depends extra closely on the export of providers than items.
If the objective of protectionism is to enhance commerce balances, historical past gives some precedent, however on the similar time, international commerce has develop into a a lot bigger share of world GDP. This implies that the chance price of retreating behind protectionist partitions could also be significantly larger right now than it was prior to now.
Tariffs and Funding Returns
Subsequent, we flip to the influence of tariffs on funding returns. Our distinctive and in depth historic dataset allows us to look at this query by way of a purely data-driven lens, specializing in actual returns throughout each asset courses and fairness components. We analyze key conventional asset courses out there over an extended pattern — equities, bonds, and gold — in addition to traditional fairness fashion components together with measurement, worth, momentum, low threat, and high quality. These components signify core constructing blocks in buyers’ alternative units. We conduct three fundamental analyses: (i) a pattern break up based mostly on earlier tariff episodes recognized in Exhibit 2; (ii) a pattern break up based mostly on the extent of US efficient tariffs; and (iii) a pattern break up based mostly on commerce openness. Exhibit 6 reveals the outcomes when zooming into the main tariff regimes recognized above.
Exhibit 6: Actual Funding Returns Throughout Tariff Regimes
Baltussen et al. (2023), Yale BudgetLab and Northern Belief Asset Administration – Quantitative Methods. Knowledge from January 1875 till December 2024, * apart from High quality which begins in 1940, High quality is overlooked for durations with restricted observations. Returns are inflation-adjusted, in annual phrases, in USD and averaged throughout tariff regimes.
The outcomes present that equities carried out properly throughout earlier high-tariff durations, with annual actual returns averaging 5.3% through the Protectionist Peak and 5.1% through the Smoot-Hawley period –each broadly according to the long-term common over the previous 150 years. Bond returns have been extra modest, at 2.7% and 1.1% respectively, whereas gold posted unfavorable returns through the 1875–1913 interval. Fairness issue portfolios persistently outperformed the broad market, including roughly 2.0% in each high-tariff regimes.
Notably, low-volatility stood out through the 1875–1913 interval, whereas the scale issue delivered notably sturdy outcomes through the 1930–1945 Smoot-Hawley period.
Subsequent, we take into account a pattern break up based mostly explicitly on the extent of US efficient tariffs, utilizing a cutoff of 15%, as proven in Exhibit 7. The outcomes align carefully with the interval classifications offered in Exhibit 6. Actual fairness returns are, on common, optimistic and broadly according to long-term averages. Actual bond returns are additionally optimistic throughout high-tariff episodes however are usually nearer to zero when tariffs are comparatively low.
In distinction, gold returns are sometimes flat throughout high-tariff durations however extra optimistic when tariffs are decrease. Fairness components, nonetheless, present a constant value-add over the market portfolio, delivering sturdy returns in each excessive and low tariff environments. Low-volatility methods carried out properly throughout high-tariff episodes, whereas measurement, worth, and different components additionally held up robustly.
Exhibit 7: Funding Returns Throughout Tariff Regimes
Baltussen et al. (2023), Yale BudgetLab and Northern Belief Asset Administration – Quantitative Methods. The efficient US tariff price is measured as customs responsibility income as a % of products imports. Efficient US tariff charges are year-end values, replicated throughout July-to-June, centered round December. Components are simulated. Knowledge from January 1875 till December 2024, apart from High quality which begins in 1940, given earlier information shouldn’t be out there for this issue. The Multi-Issue collection contains all components out there at every time limit. The shaded half for high quality represents the market return over the identical interval. Components are constructed by overlaying long-short portfolios in the marketplace portfolio. Returns are in annual phrases, in USD. Numbers in parentheses point out the common variety of years per situation.
These outcomes replicate the assorted channels by way of which tariffs can affect issue efficiency. Elevated tariffs typically improve enter prices, compress revenue margins, and heighten macroeconomic uncertainty, situations beneath which buyers are likely to favor extra resilient, lower-risk corporations. This helps low-volatility and high quality issue outperformance. On the similar time, tariffs can weigh extra closely on cyclical and globally built-in companies, which are sometimes concentrated in worth and small-cap segments. Nevertheless, when these components are priced at deep reductions, they will nonetheless ship sturdy returns, notably if coverage shocks reverse or are already priced in, explaining their resilience even in high-tariff regimes.
We subsequent take a look at how funding returns differ with commerce openness, measured as exports plus imports relative to GDP. This third pattern break up is proven in Exhibit 8.
Exhibit 8: Funding Returns Throughout Altering US Commerce Openness
Baltussen et al. (2023), Yale BudgetLab and Northern Belief Asset Administration – Quantitative Methods. US Commerce Openness ranges are year-end values, replicated throughout July-to-June, centered round December. Components are simulated. Knowledge from January 1875 till December 2024, apart from High quality which begins in 1940, given earlier information shouldn’t be out there for this issue. The Multi-Issue collection contains all components out there at every time limit. The shaded half for high quality represents the market return over the identical interval. Components are constructed by overlaying long-short portfolios in the marketplace portfolio. Returns are in annual phrases, in USD. Numbers in parentheses point out the common variety of years per situation.
Per the earlier two analyses, fairness returns stay comparatively steady throughout completely different commerce openness regimes. Bond returns have a tendency to carry up properly when commerce openness declines, whereas gold returns are, on common, unfavorable in those self same durations. Against this, fairness components persistently add worth over the market portfolio in each excessive and low openness situations, with low-volatility methods specifically delivering sturdy efficiency.
Whereas financial outcomes have different, fairness markets — and particularly fairness components — have proven resilience throughout historic tariff regimes. Low-volatility, measurement, and worth methods have persistently added worth, even during times of heightened protectionism. As commerce tensions rise once more, these long-term patterns supply helpful steerage for constructing sturdy, risk-aware portfolios.
REFERENCES
[1] Bairoch, P. (1972). Free commerce and European financial improvement within the nineteenth century. European Financial Assessment, 3(3), 211-245.
[2] Bas, M. (2012). Enter-trade liberalization and agency export choices: Proof from Argentina. Journal of Growth Economics, 97(2), 81-493.
[3] Baltussen, G., Swinkels, L., van Vliet, B., & van Vliet, P. (2023). Investing in Deflation, Inflation, and Stagflation Regimes. Monetary Analysts Journal, 1-28.
[4] Baltussen, G., van Vliet, B., & Van Vliet, P. (2023). The cross-section of inventory returns earlier than CRSP, Working Paper.
[5] Baltussen, G., van Vliet, B., & Vidojevic, M. (2024). Navigating inflation – an evaluation of fairness issue efficiency over 150 years. Northern Belief Company.
