TARIFF WARS ARE QUINTESSENTIAL 'AMERICA'

Two centuries of U.S. tariffs have often been conjoined with war

by Bill Paton, Xishuangbanna, 7 April 2025

Trade Wars Were Started by the U.S.A. Both Before and During the Great Depression

Tariffs are especially integral to U.S. history, dating to the first months of the young country's newly-established Congress. Tariffs on imports were a near constant, both for revenue and for protection, often causing conflict and often linked to wars. Despite this long history, Trump's new Global Tariff War is unprecedented for the scale of the tariffs and of the trade affected. One can only hope the same will not be true of the scale of any military conflict to follow.

Early tariffs and trade wars

Tariffs are ancient, recorded as early as the 3rd millennium BCE in Anatolia, and in ancient China which sometimes levied duty on imported horses, woolen goods and exotic foods. Ancient Greece relied on tariffs in part to fund its armies and navies, as did Egypt and Mesopotamia. Indeed, European trade wars usually led to full scale war; ancient Rome charged 25% duty on incoming grain, thereby covering 1/3 of its military budget.

In the 1500s, Britain seized the lead in combining trade and kinetic warfare, conducting the Anglo-Spanish Wars (1568–1807), and the Anglo-Dutch Wars (1652–1784), both fought over control of trade routes, shipping and colonial markets. Britain attacked China in the Opium Wars (1839–1860), to cover its trade deficit by forcing the Chinese to buy its opium. Trade negotiations were conducted by cannon. China was forced to legalize opium and cede Hong Kong, weakening the Qing Dynasty and reshaping world trade.

Tariffs—a key instrument of U.S. economic policy since its founding

For more than two centuries, tariffs and trade wars have been repeatedly started by the U.S.A.(1) The Tariff Act of 1789, was one of the first pieces of legislation passed by the newly-formed U.S. Congress, to raise revenue following the War of Independence in 1783. After the War of 1812, U.S. manufacturing expanded in the north, and the Tariff of 1816 was passed to protect domestic industry from imports. The South relied on exporting agricultural goods and feared retaliatory tariffs against them. Subsequent tariffs were extremely high, such as the Tariff of 1828 or the "Tariff of Abominations" as it was derided in the South—increasingly alienated.

A Compromise Tariff lowered tariffs slowly but soon the Union government was at it again, imposing the much higher Morrill Tariffs of 1861 to finance the war it saw coming with the South, the U.S. Civil War (1861-1865). It applied more and more tariffs to fund the war as it dragged on.

After the war, U.S. industry boomed. Titans such as Rockefeller, Carnegie and Vanderbilt grew rich behind tariff walls specifically constructed for them against imports of oil, steel and railroad infrastructure, respectively. The South was again opposed, paying more for manufactured goods and once more facing retaliatory tariffs against their plantations' exports.

McKinley Crashes the U.S. Economy With Tariffs

President Trump greatly lauds the McKinley Tariff of 1890, named after the head of the House Ways and Means Committee at the time, who went on to become President. When McKinley's bill raised duties to almost 50%, mainly for protectionism, the resulting steep increase in domestic goods' prices cost the Republicans the election of 1892, bringing the Senate, House and Presidency all under Democratic control. A major recession then followed, beginning in 1893, followed by four or five years of galloping double-digit unemployment.

It is unclear why President Trump considers this a great example. We do know he likes the McKinley era for its complete lack of income taxes, generating a revenue surplus almost entirely from tariffs. At one point back then, still higher tariffs were justified by the Republican Party as a way to reduce the U.S. federal budget surplus, arguing that the resulting big reduction in imports would outweigh the increase in duty. Revenue, however, rose. The tariffonomics of the day were dead wrong.

Next was the Dingley Tariff of 1897, introduced to fund the coming Spanish-American War, raising duties even higher than McKinley's. There was already a clear pattern of tariffs conjoined with military warfare, both to to fund it, to prepare for it and to provoke it.

A decade or so later the Payne-Aldrich Tariff of 1909 was passed under President Taft, bowing to public sentiment that tariffs were too high, and then further easing them under the Underwood Tariff of 1913. Successful re-introduction of a national income tax in 1913 went on to replace tariffs as the main source of federal revenue, as well as to fund U.S. participation in WW I.

Tariffs Help Crash the Global Economy, Leading to World War II

The Fordney-McCumber Tariff of 1922-1929 raised U.S. tariffs against Europe to 38% to protect U.S. industries post-WWI, triggering retaliatory tariffs. Trade tensions and economic instability escalated, leading to the start of the Great Depression in 1929.

The Smoot-Hawley Tariff Act of 1930–1934 then placed tariffs on 20,000 goods, to shield farmers during the Depression. It was the first time the U.S.A. declared a tariff war against the whole world and it was a colossal error. Retaliatory tariffs from 23 countries reduced global trade by a whopping 67%, hugely worsening the Great Depression. In 1931, Britain abandoned its policy of free trade (mostly within its own empire), erecting tariffs. The collapse of global trade by 2/3 was an important precursor to World War II.

The Free Trade Era (1945-2018)

At the end of WW II, the world economy was decimated and the U.S. began an era of unprecedented dominance. No longer needing to protect its industries, it sought instead to open global markets to its exports. It first formed the General Agreement on Tariffs and Trade (GATT), and then its successor, the World Trade Organization (WTO), seeking reductions in tariff and non-tariff barriers. The World Bank and IMF towed the line, forcing developing countries in need of credit to open their markets to the West. When President Clinton championed China joining the WTO, in 2001, the resulting, further surge in global trade growth helped raise China's GDP from 6.9% of Global Product in 2001 to 19.3% in 2024. This followed a previous, spectacular leap in China's share of Global Product from less than 2% in 1978, when its population was 23% of the world's, to 6.9% in 2001.

It was not all smooth sailing. The "Chicken War" (1962–1964), imposed EC tariffs on U.S. poultry. The U.S. retaliated with tariffs on European trucks and brandy. The “Pasta War" (1985–1987), followed, with U.S./E.U. tariffs over citrus and pasta. The, EU then launched the "Banana Wars" (1993–2009), favoring Caribbean banana imports under the EU/Africa-Caribbean-Pacific (ACP) trade initiative, intended to help developing countries' export more. The U.S. objected strongly, as U.S. companies owned many banana plantations in Latin America, leading to 8 WTO disputes.

Famously, when the U.S. felt threatened by Japan's rise, it accused Japan of unfair practices in the automotive and electronic sectors and started the U.S.A./Japan Trade War (1980s and ’90s). In 1985, the U.S. forced Japan to sign the Plaza Accord which raised the value of its Yen. Combined with a series of 'voluntary' export restraints, and further tariffs and bilateral agreements with the U.S., this is blamed for the stalling of the Japanese economy or its 'Lost Decade' . President Trump is now after a similar deal with all its major trade partners, referred to as the 'Mar-a-Lago Accord' .

GATT and the WTO led to an era of extraordinary globalization. Between 1945 and 1994, world trade grew from US$ 56 billion to $4.61 trillion. Under the WTO, it then swelled much further to US$ 33 trillion in 2024, a revolution. Some poor countries, particularly in Asia, became rich, while others rose to Middle Income status. Many African countries developed new exports, such as fresh flowers or string beans exported by air. Economic disparities among nations fell, though internal disparities often rose. There was much relocation of labour-intensive manufacturing to developing countries, particularly from the U.S.A. to Asia, and especially China.

The Global Trade War (2018/2025 - )

President Trump's 2018 arrival in the White House marked the end of the U.S. free trade era, and the beginning of the U.S.-China Trade War, now the Global Trade War, the biggest since Smoot-Hawley (1930–1934). Suddenly, the global free trade regime which the U.S.A. had started, staunchly promoted—even enforced through the IMF and World Bank— was now 'unfair'. Chinese companies' success in such markets as telephony or social media were 'security threats'. Their 20-year investment in developing solar panels, electric vehicles and lithium batteries, was 'cheating' and 'over-production'.

In the era of the 'Super-Whopper', lying is fundamental to the new tariff campaign, particularly about the cause of the U.S. deficit ("countries ripping off the USA"). Then there are whoppers about the amount of other countries' tariffs. Trump's public tables claim that China's tariffs and other barriers against U.S. imports amount to 67% and so he is 'only' 'reciprocating' with 34% or half (this was his current narrative as of 5 April 2025). His figures were arrived at by a rather bizarre formula that does not consider tariffs or tariff barriers at all.

Map 1

Map 1 shows that global tariff rates are (or perhaps 'were'), much, much lower than that. China's tariff rates, according to the WTO, were in fact just 3% overall compared to 2.5% in the U.S.A. The Effectively Applied Tariff Weighted Average (customs duty) for the world was 4.04%. Never mind that Trump only talks about goods, which accounted for just 2% of world trade growth last year. In services, the U.S.A. has a large surplus trade balance with the world, of nearly $300 billion, and world trade in services grew by 9% last year. In fact, Trump insists that U.S. companies operating abroad should not be taxed and that he will double the taxes on their own companies operating in the U.S. if they are.

Economists widely agree that shotgun tariffs will not accomplish anything positive, and almost universally scorn Trump's assertion that the U.S. trade deficit is other countries' fault:

" Consider this. If you are an employee [... and ...] you spend exactly what you earn, you are in current account balance. Suppose that you go on a shopping binge, spending more than your earnings by running up credit-card debt. You will now be running a current account deficit. Are the shops ripping you off, or is your profligacy driving you into debt?" Jeffrey Sachs

Even seen through the lens of U.S. tariff history, the new Global Trade War is extreme: Firstly, wacky thinking behind the tariffs is poisonous, blocking sensible negotiations. Secondly, these tariffs were imposed by the U.S. President acting individually, without an act of Congress; thus they are not open to reasonable discussion and are volatile. Thirdly, the scale of world trade affected is unprecedented, US$33 trillion: Because that is both exports of $33trn and imports of $33trn, global trade in 2023 accounted for 64% of global GDP ($104 trn).This War could not be any bigger. The relative increase in tariffs is also huge, for instance to 46% on Vietnamese exports to the U.S.A., and so is the U.S. tariffs' coverage—virtually the entire world.

The Global Tariff War has been launched at a time when trade wars and military wars continue to be ominously conjoined; look at the sabotage of the NordStream pipeline under President Biden during the first year of the Ukraine War, depriving Russia of gas sales revenue and redirecting it to the U.S.A. Heavy trade sanctions were also imposed on Russia by the U.S.A. at the start of that war. Most alarming is the combination of Trump's original U.S./China Trade War (2018-present), and the mounting military tensions between the two great powers. Tariffs reduce reliance on other nations—enemies in particular—thus are an important step in preparing to go to war with them. Consider too, the recent dissolution of U.S./European solidarity within NATO.

The U.S.A. has not been unique among nations in using tariffs against other countries' imports. But tariffs have been especially important in U.S. history and development, first as a source of revenue, then as protection. Then, from 1945 to 2018, the U.S. pushed and pushed to lower tariff and non-tariff barriers, in order to export more U.S. goods and services. African farmers, for instance, suffered as they could not compete with international grain prices and lacked sufficient protection.

Now, suddenly, the U.S. has attacked the entire world in an unprecedented reversal and act of economic warfare, utterly rejecting and undermining the WTO it itself built. We can expect that many nations, not just China and Canada, will spunkily apply reciprocal tariffs, further raising the stakes. We can also expect that Trump will then, in some cases, apply 'reciprocal reciprocal tariffs', further escalating an already very dangerous situation.

The lessons of history above would indicate that this Global Trade War will at the least reduce global trade and Global Product, if not crash the world economy. It will of course hurt the poor and poor nations the most, and it will not help the U.S. economy where it will likely cause a recession. We can only hope that the U.S.A's history of its tariffs contributing to starting major new wars will not also be repeated.

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 1) MASTERS, Alexander (February 2025), Tariff and Trade Wars: An Historical Analysis of Protectionism, Kindle Direct Publishing.

I have relied on this excellent new book for much of the history of U.S. tafiffs from 1789 to 1934.

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