Federated Farmers president Don Nicolson said yesterday similar barriers to free trade were tried in 1929 and 1930 in the United States, and had the effect of drawing out the depression.
The Government said it was disappointed with the announcement that the subsidies, suspended two years ago, were back.
While the full details were not yet known, it was understood they would take effect from this week.
Trade Minister Tim Groser and Agriculture Minister David Carter said the move would send a negative signal at a critical time for multilateral trade negotiations and the global economy, when efforts were being made to reject protectionism and convince countries to remove distortions in agricultural markets.
"In recent years, we have seen the Europeans take some very positive steps forward in reforming their Common Agricultural Policy, which we have welcomed, but this announcement represents a major step backward," Mr Groser said.
"The European move means it's now even more urgent that we complete the Doha Development Round in the World Trade Organisation.
"The agreement by WTO members to eliminate export subsidies in agriculture is one of the most important potential gains from the round.
"It is clear that unless we move forward soon, unsubsidised producers like those from New Zealand will continue to bear the cost of the trade-distorting measures of others."
Mr Nicolson said the reintroduction of the subsidies was "a political decision, made under duress".
Asked what could be done about the situation, he said it was "about negotiation".
There was a possibility of appealing to the WTO's legal body, and he expected the backing of countries like Australia.
Federated Farmers Dairy Otago chairman David Wilson said yesterday because New Zealand sold 95% of its produce on the international market, it relied on the prices it received from that market.
Because of the subsidies, European farmers would be able to sell more cheaply to the international market, lowering the return for New Zealand.
Dairy farmers were already selling their products at about 50% of what they were last year.
"It's just making an already difficult situation that much worse."