The trade war isn’t coming. It’s already here.
Alarming as the daily news may be, this is not the first time nations have clashed over trade. In the 20th and 21st centuries, there have been many moments of conflict over tariffs and dire warnings of imminent trade wars. Understanding that history helps us navigate today’s treacherous trade waters.
While historical precedent is cold comfort for those who are suffering the consequences of ongoing trade turbulence, from lost jobs to more expensive groceries, it shows that this trade war is different from those of the past in ways that are worth thinking about. The most important point is that the new American trade policy has forsaken the rules and norms of trade politics and jettisoned balance, restraint, and cooperation — principles that have made the current trade system work, albeit imperfectly, for 80 years.
Trade Is Politics
Tariffs and trade are not often the topic of international headlines. They usually make for dry reading, but they have always been a major issue in international politics and a chronic source of disagreement between countries.
Trade is divisive domestically and contentious internationally because trade connects the domestic and international spheres. Some producers want access to foreign markets while others want protection against foreign competition. Trade can increase choices available to consumers and lower costs — this improves people’s standards of living. But foreign competition can cost jobs, and thus also lower people’s standards of living. Trade produces winners and losers.
Trade also affects countries’ international influence and authority. Trade can make countries rich, and national wealth is a key basis for international influence. Trade can also prevent economic growth and diversification, thereby marginalizing countries.
Trade politics get even more complicated when trade is instrumentalized to achieve non-trade objectives. The United States has used trade policy to strengthen its allies, as it did with the creation of the European Economic Community in the 1950s, isolate its enemies during the Cold War, and draw former enemies closer, including China in the 1980s.
For all these reasons, political leaders pay a lot of attention to trade. President John F. Kennedy kept a chart in the Oval Office with daily updates about the amount of foreign textiles arriving in the United States. We might not expect textiles, films, cars, lumber, or cheese to be the stuff of high-stakes international politics, but they have been in the past and are again.
We Never Had Free Trade and Not All Tariffs Are Bad
Since the end of World War II, tariffs have been lowered item by item, but tariffs have not disappeared. In 2022, 51 percent of world imports were duty free. Many remaining tariffs are (or were) low or they serve a preferential function, meaning they extend protection to specific economic sectors so that they can develop, become robust, and then, so the logic goes, become internationally competitive. Most industrial and highly developed economies developed behind protective tariff barriers.
The utility of tariffs has not disappeared. As economies evolve, some industries become less competitive and new sectors emerge that require protection to establish themselves. Tariffs are not the only way to protect a domestic economy — they are just the most conspicuous. Non-tariff barriers include quotas, internal levies, value added taxes, quality standards (safety, technical, health), and foreign exchange restrictions. Every country uses non-tariff barriers, including the United States. You can think of this as cheating, but it’s more useful to think of tariffs and non-tariff barriers as tools that make the international trade system work. That system requires stable and growing domestic economies that have access to foreign markets and are in turn accessible to foreign products. It’s a question of balancing access and protection as well as domestic and international economic well-being.
Trade Wars Are Harmful and Trade Negotiations Are Hard-Fought
Trade wars rattle markets, raise prices, increase unemployment, weaken supply chains, prompt nationalist sentiment, and strain foreign relations, including those between longstanding allies. People suffer in a trade war.
This was exactly the logic behind the creation of the current international trade system, which emerged after World War II. The victorious countries in the war set up an organization to lower tariffs and increase world trade: the General Agreement on Tariffs and Trade. That agreement was established because experts, officials, and politicians around the world — including in the United States — believed that the Great Depression of the 1930s had been one of the main causes of World War II. According to Harry Hawkins, one of the leading economic planners in the U.S. State Department in the 1940s, “Nations which are economic enemies are not likely to remain political friends for long.” Its mandate reflected the logic of doux commerce: Increasing the volume of world trade and deepening interdependency among nations would make the world less likely to go to war again.
But the trade liberalization process was never gentle. Despite repeated assertions that international trade made the world more peaceful, trade negotiations were, and continue to be, combative and selfish. The General Agreement on Tariffs and Trade organized eight rounds of trade negotiations between 1947 and 1994. In every single one, national negotiators asked for much and grudgingly made concessions in return. Negotiations included accusations of bad conduct, walkouts, and deadlocks. The hard-nosed behind-the-scenes politics of trade negotiations were papered over in upbeat statements at the end of rounds.
Don’t be fooled.
Agreement to lower tariffs, and later to remove or minimize other kinds of barriers to trade, involved zero-sum horse trading as each national delegation was determined to bring home a good deal for their people. This did not mean the General Agreement on Tariffs and Trade wasn’t working well. The point of the organization was not to make the process of liberalizing trade peaceful. Rather, haggling over tariff rates and access to foreign markets was the preferred way to compete, infinitely better than going to war.
America Hasn’t Always Championed Freer Trade
To his critics, President Donald Trump’s trade policy is a rejection of the role the United States has played in the creation of the international trade system and in the world generally. American leadership and backing have been crucial to the creation of the international trade system, to launching rounds of trade negotiations in the General Agreement on Tariffs and Trade, as well as concluding ever more complex international trade agreements. It was the United States that pushed for a new round of international trade negotiations in the 1980s (called the Uruguay Round), which had an ambitious agenda that moved far beyond tariffs.
Characterizing the United States as the sole champion of freer international trade is only part of the story. The United States has long been divided over freer international trade and many administrations have introduced protectionist measures. The United States received a waiver from the General Agreement on Tariffs and Trade for agriculture in the 1950s to limit foreign competition. It restricted foreign products that were manufactured more efficiently than domestic producers, such as textiles, televisions, and cars in the 1960s and 1970s.
The United States has also engaged in trade battles with its most important trading partners and closest allies. In the 1960s, the United States and the European Economic Community raised tariffs against one another in a dispute over American poultry exports. People worried the “Chicken War” would become a full-scale trade war. Canada and the United States have been fighting about softwood lumber for 40 years. This dispute is still not resolved.
Trump is not the first president to say that trade and trade agreements have harmed Americans. President Ronald Reagan was a proponent of freer international trade, but he declared that he would “not stand by and watch American businesses fail because of unfair trading practices abroad … because other nations do not play by the rules.” The Biden administration also endorsed protectionism in order to revive American manufacturing. Indeed, it kept many of the tariffs introduced during the first Trump presidency.
American opposition to trade, and the use of trade policy and tactics that combine liberalization and protection, are not exceptional. Other countries, including trading countries, have behaved in similar ways.
Familiarity Shouldn’t Make Us Complacent
Historical context might be reassuring. We’ve been down this road before and participants in tariff disputes and imminent trade wars have compartmentalized these conflicts, resolved them, or moved on. Maybe the pattern will hold up this time, but we shouldn’t count on it. This trade war is different because Trump’s tariffs reject the processes, rules, and norms of the international trade system. For 80 years, restraint prevented the slide into economic recession and full-scale trade war, but now the brakes are off on American trade policy. Balance between domestic and international economic well-being was the goal and cooperation and competition made the trade system work. The American tariffs uphold a zero-sum nationalist rationale and the politics behind tariffs are brutal, bullying, and destructive. No one can be sure what the United States will do next. Trump might reverse himself on tariffs or be forced to remove them if American courts determine that he has exceeded his tariff authority. What we can be sure of is that the credibility and reliability that made the United States a vital pillar of the international trade system is gone.
Francine McKenzie is a historian at the University of Western Ontario. She writes about the history of global trade, peace, and international organizations, including the General Agreement on Tariffs and Trade and the United Nations. She is the author of GATT and Global Order in the Postwar Era (2020).
Image: © Raimond Spekking / CC BY-SA 4.0 (via Wikimedia Commons)
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