What History Has to Say About the ‘Winners’ in Trade Wars
Smoot-Hawley “was such a disaster that it’s held sway over American trade policy for over 80 years,” said Joshua Meltzer, a senior fellow at the Brookings Institution who also teaches international trade law at Johns Hopkins University. “No one wants to repeat it.”
He called Mr. Trump’s comments on trade wars “a dramatic departure” from economic orthodoxy.
On the question of who wins, “the easy answer is to say that no one wins a trade war,” said Marc-William Palen, a professor of history at the University of Exeter in Britain and the author of “The ‘Conspiracy’ of Free Trade,” which examines trade rivalry between the United States and the British Empire in the 19th century. “But the more I reflect on it, it seems the winners are those nations that don’t take part.”
Professor Palen cited the late-19th-century trade wars between Canada and the United States, which caused a precipitous drop in Canadian exports to America and led Canada to seek export markets in Britain. “The British Empire was the winner,” he said.
Another “big winner” from a trade war it was not involved in, Professor Palen said, was Soviet Russia, which was largely shunned by Western trading partners after the 1917 revolution and the rise of communism, and was desperate for hard currency. The Smoot-Hawley tariffs, Professor Palen said, caused countries like Italy to abandon American imports and resume trading with the Soviets, forging trade links that persist today.
A textbook case of one country’s “winning” a trade war occurred during the late 19th century when a newly unified Italy imposed steep tariffs on imports from France in order to spur domestic industrialization. France, which was much richer and stronger, retaliated with tariffs against Italy, and Italian exports to France collapsed. Even after Italy abandoned its tariffs, France continued to punish Italy for years with high tariffs.