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The Wall Street Journal is normally friendly to Donald Trump and his policies. But not this time.

In a lead editorial on Friday, the paper lambasted the President for his decision to impose heavy duties on imported steel and aluminum, calling it "Trump's Tariff Folly".

The paper pulled no punches. It said the move "will punish American workers, invite retaliation that will harm U.S. exports, divide his political coalition at home, anger allies abroad, and undermine his tax and regulatory reforms".

The move will also feed inflation by driving up the price of everything made with the metals, from cars to drink cans. For the first time in this century, there is a risk that inflation could spiral to levels we have not seen since the 1980s.

The stock market, which had rallied from the early February correction, went back into a downward slide. The Dow dropped about 500 points on Thursday after the announcement to end the day with a 420-point loss. On Friday, the index continued its downward slide in the morning but then rallied to finish off 70 points on the day.

The tariffs on steel and aluminum come on top of earlier duties on solar panels and washing machines, aimed at protecting U.S. companies. They are all part of the same pattern that saw the Trump administration impose harsh new penalties on Canadian softwood lumber and Bombardier's C series jets.

None of this should be a surprise. Mr. Trump revealed his isolationist ideology even before he announced he was running for President and hyped up the rhetoric during the campaign and in his inauguration speech. It is the essence of his "Make America Great Again" slogan and he's sticking to it.

For reinforcements, he has surrounded himself with protectionist hawks, including Commerce Secretary Wilbur Ross, trade advisor Peter Navarro, and U.S. Trade Representative Robert Lighthizer. The doves, led by chief economic advisor Gary Cohn, appear to have been thoroughly defeated. Rumors are now swirling that Cohn will be the next major White House departure.

The President's Twitter comment on Friday morning that "trade wars are good and easy to win" tells us all we need to know about his state of mind.

All this is disturbingly similar to the 1930 Smoot-Hawley Act, which set off an international trade war by imposing U.S. import tariffs of more than 60 per cent in some cases on almost 900 products. Predictably, other countries retaliated, including Canada, which raised tariffs on about 30 per cent of U.S. imports into this country.

Did it work for the U.S.? Absolutely not, according to economic historians. Yes, imports into the country dropped. But so did output and exports. According to the U.S. State Department, global trade dropped by 66 per cent between 1929 and 1934. The Smoot-Hawley Act was widely blamed for exacerbating the length and depth of the Great Depression.

Back at the beginning of January I predicted that this would be the year that Mr. Trump's isolationist agenda came to the forefront and kicked off a trade war, with widespread economic consequences. It's happened even sooner than I expected. The world is in for a rough ride.

So, what should you do in these circumstances? The initial reaction is to steer clear of aluminum and steel companies that export to the U.S., at least until the terms and exemptions for the proposed tariffs are clarified. Some those stocks have already been battered. Rio Tinto (NYSE: RIO), which has its headquarters in London, owns six aluminum plants in Quebec and B.C. plus an alumina plant in Quebec. It saw its shares drop more than 11 per cent last week. Shares of Stelco Holdings (TSX: STLC) fell more than 6 per cent after Mr. Trump's announcement.

The metals producers are only part of a much larger picture, however. Mr. Trump has threatened further action against any countries that retaliate against his steel and aluminium tariffs, specifically mentioning German cars. Canada should expect similar treatment if the Federal Government imposes retaliatory duties on U.S. exports to this country. This suggests that any company that relies heavily on exports to the U.S. is potentially vulnerable. That covers a lot of ground.

The safest bets in this tumultuous environment are financial companies like the banks and insurers and domestic retailers such as Canadian Tire. But the reality is that if we end up in a major international trade war, the whole stock market will suffer. GICs are starting to look a lot more appealing, even with rates still low.

Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters. For more information and details on how to subscribe, go to