Donald Trump is finding out that trade wars are not easy to win after all. He was elected at least in part because of his promise to bring down inflation from the levels it reached under Joe Biden, but his long-held beliefs in tariffs will lead if implemented to rising prices. Moreover, what are his goals with his tariff wars? Is it to raise revenue? Or to force America’s trading partners to lower their own tariff barriers (“reciprocity”)? Or is it to protect American industries? He claims that these tariffs will bring back the industrial jobs that have been lost over the last forty years, to China and elsewhere. At different times he has claimed all of these are possible; however, the reality is that he can’t achieve all three goals at the same time. He has evoked the memory of President McKinley’s tariff policy, but McKinley’s tariffs were carefully targetted to protect specific American industries as they were developing. The only consistent theme is his sense of resentment of the countries that are running a trade surplus with the U.S. His tariff plans announced on 2nd April 2025 targetted those countries in direct proportion to the size of their trade surplus.
This all has strong echoes of a period in British history when tariffs also played a key rôle. In 1903 Joseph Chamberlain launched a campaign for tariff reform, specifically a system of “imperial preference” that would place a tariff barrier around the British empire. This was at a crucial time in the global economy; Britain had dominated world trade in the 19th century, promoting free trade and even fighting a war with China to force it to open up to opium imports from India. At the turn of the 20th century that dominance had started to slip, and Britain faced both economic and political competition, particularly from Germany. Just like Trump, Chamberlain really never clarified what the goals of his tariffs were, but his campaign argued that if food became more expensive as a consequence, then this was necessary to fend off the threat from Germany.
Chamberlain’s programme split the Conservative Party, which suffered a crushing defeat in the 1906 general election. Nevertheless, Chamberlain acquired an important supporter in Max Aitken (Lord Beaverbrook), the owner of the Daily Express, who dedicated the paper to what he called the “Empire Crusade” (the Daily Express has the figure of a Crusader on its masthead to this day). Imperial preference didn’t get implemented until 1932, when Chamberlain’s son Neville was Britain’s Chancellor of the Exchequer (finance minister). By that time, all the big global economies were retreating behind tariff barriers, and the era of British-promoted free trade was dead. Britain’s tariffs only came down after American pressure following the Second World War, as America became the dominant trading power.
History is repeating itself. A great imperial power is once again retreating from free trade as its manufacturing dominance falters. The goals of its tariffs are unclear and confused, and they seem unlikely to be able to restore American manufacturing dominance. The most worrying lesson of this history is the turmoil and war that the world had to go through before a new equilibrium was found.