President Donald Trump’s trade policies have significantly disrupted global commerce, with sweeping tariffs and increasing tensions between the United States and other nations.
While he may have stepped back from proposed broad tariffs on many countries, his administration has implemented a baseline ten percent tariff on most imports, with particularly high levies on specific goods like steel and a striking 30 percent tariff on imports from China.
The consequences of these tariffs have created an environment of uncertainty and instability on the global stage, reminiscent of past trade conflicts that often had dire ramifications.
The trade issues we now face are not entirely new; history shows that prior to the establishment of the World Trade Organization (WTO) in 1995 and its predecessor, the General Agreement on Tariffs and Trade (GATT) in 1947, countries frequently resorted to trade as a means to exert power over one another.
This led to what economists refer to as ‘hold-up problems,’ where one state or business makes an investment on the assumption of a continuing relationship with another, only to find it leveraged against them later.
For instance, a country might invest in oil infrastructure in another nation, only to find that once the deal was made, the investing state can coerce the partner through shifts in agreement terms.
In the short term, nations can extract short-lived benefits through trade coercion, but in the long-term, such policies tend to be detrimental.
Using economic leverage to gain concessions damages overall investment levels and economic growth, and generates political instability.
Nations that feel economically coerced often resort to military means to rectify perceived injustices, as seen in various historical contexts.
One notable example of such dependence in a trade relationship occurred in the kingdom of Hawaii in the 19th century.
As American traders capitalized on Hawaii’s sugar economy, a Reciprocity Treaty was signed in 1875 which abolished tariffs on Hawaiian sugar entering the United States, initially benefiting the islands significantly.
However, this deal ultimately fostered an unhealthy dependency on the U.S., leading Washington to use its leverage to gain exclusive rights to Pearl Harbor.
The exploitation of this dependency peaked when the U.S. cut tariffs on foreign sugar in the 1890s while subsidizing domestic producers, effectively crippling Hawaii’s sugar economy and fueling local support for U.S. annexation.
This pattern of economic exploitation has been repeated in various countries.
In Mexico, significant U.S. and European investments in infrastructure sparked tensions when Mexico began expropriating those assets without due compensation, similarly to the antagonistic treatment of foreign investments in China during the Qing dynasty.
Historical trade tensions and conflicts reveal a pattern where aggressive trade tactics spawn deeper geopolitical rivalries that often culminate in direct conflict.
The Smoot-Hawley Tariff Act of 1930 serves as a glaring example, leading to a global trade war that only worsened international relationships and contributed to World War II.
More modern historical moments, such as the normalization of trade relations between the U.S. and China in 1979, remind us that hope existed for improved cooperation between nations through trade.
However, despite the initial progress, trade remained uncertain as Congress frequently needed to renew China’s normal trade status, creating instability that hampered greater economic engagement.
Advocates for integrating China into the global economy believed it would encourage political reform and reduce militaristic tensions, leading to its accession to the WTO in 2001.
China’s inclusion was seen as a major success for the WTO, as it helped to stabilize and enhance global trade relations for years to come.
Yet, the landscape shifted dramatically following Trump’s election.
His administration actively dismantled the foundational norms established by the WTO, pushing for a more transactional approach to global trade—an approach that revives the hold-up problems of the past.
During Trump’s presidency, the U.S. increasingly disregarded WTO guidance and shifted to a punitive trade mindset, inciting a defensive posture among trade partners such as the European Union.
New measures by these nations, like the EU’s anti-coercion instrument, emerged as reactions to the unpredictable nature of Trump’s tariffs.
The current geopolitical climate carries echoes of historical trade conflicts, as Trump’s tariffs may lead to alliances fraying, and nations looking to diversify their economic ties to hedge against potential U.S. coercion.
Trump’s strategy, aiming to bring manufacturing jobs back to American soil through tariffs, threatens greater economic uncertainty rather than stability.
Firms are hesitant to invest domestically when they face unpredictable tariff changes that might undermine their profitability.
By attempting to negotiate bilateral agreements, the administration falls into the trap of creating less enforceable trade agreements that lack the stability of a multilateral system.
Tariffs not only impact economic landscapes but also lower the cost of military confrontation by reducing dependency on key imports, such as semiconductor technology from Taiwan.
This shift towards less reliance on economic partnerships could embolden aggressive actions from nations like China, potentially leading to dangerous military escalations.
Similarly, trade policies can create an environment where nations utilize their remaining dependencies to extract political concessions, a tactic historically employed by Russia through energy prices.
The U.S. risks losing its economic credibility under such conditions, which could have catastrophic effects on international order and stability.
Without reliable frameworks for trade, global politics may descend into chaos, akin to the lead-up to World War II marked by failed diplomatic institutions.
As Trump negotiates and potentially softens his trade stance, he risks undermining the cooperative foundations that have idealized the U.S. role in the global economic system.
The history of trade conflicts warns us of the dangers posed by such isolationist behaviors, leading not to American strength but to fragmentation and peril in international relations.
image source from：https://www.foreignaffairs.com/world/when-trade-wars-become-shooting-wars
