Back then , iron tools would be wrought iron. It does rust, but the slag inclusions in it make it less susceptible to rust than the mild steel used today. But tools with cutting edges, like chisels and axes, would be part high-carbon steel, and that could rust more readily. That's what they would think of, when they said something was steel. Stainless steel would not exist yet. It was known that tannic acid would tend to slow down rust, and wrapping things with oil cloth (cloth with cured linseed oil in it) or waxed cloth would also help, but for tools the usual way to prevent it was grease and regular attention; taking them out of the toolbox, scrubbing any new rust spots with some emery or pumice, applying some more grease...in short, just not putting them away and forgetting about them.