Findings from the 1930s show what can happen when countries go it alone when it comes to trade and exchange-rate policy. In 1930, the US introduced protectionist tariffs. Its trading partners responded with extensive retaliatory measures, and trade flows collapsed, contributing to the severity of the Great Depression. Countries did not stop there, however, choosing also to weaponize their currencies, and triggering a currency war and wholesale abandonment of the international financial system, according to a recent Kiel Policy Brief.
