Free Traders Can’t Name a Single Trade

War
If you google “the trade war of,” you won’t find any historical examples. There was no
Austro-Korean Trade War of 1638, Panamanian-Brazilian Trade War of 1953 or any
others. History is devoid of them. Trade wars are an invented concept, a bogeyman
invented to push free trade.

Failed 2012 presidential candidate Mitt Romney has been claiming that
Donald Trump’s (and by logical implication, Bernie Sanders’) proposed
rejection of free trade would start a trade war and tip America into recession.

Economists Paul Krugman and Howard Richman have both neatly

summarized why this simply isn’t how the economics works, even if a trade
war does happen, so I won’t repeat their points here.

But I have a simpler one: Trade wars are mythical. They simply do not
happen.

If you google “the trade war of,” you won’t find any historical examples. There
was no Austro-Korean Trade War of 1638, Panamanian-Brazilian Trade War
of 1953 or any others. History is devoid of them.

Please don’t respond with that old canard about the Smoot-Hawley tariff of
1930 starting a trade war and causing the Great Depression. It doesn’t stand
up, as actual economic historians from Milton Friedman on the right to Paul
Krugman on the left have documented. See here, and here, and here.

The Depression’s cause was monetary. The Fed allowed the money supply to
balloon during the late 1920s, piling up in the stock market as a bubble. It then
panicked, miscalculated, and let it collapse by a third by 1933, depriving the
economy of the liquidity it needed to breathe. A wave of bank failures in 1930
spread the collapse around the country. Trade had nothing to do with it.

As for the charge that Smoot caused the Depression to spread worldwide: it
was too small a change to have plausibly so large an effect. For a start, it only
applied to about one-third of America’s trade: about 1.3 percent of GDP. Our
average tariff on dutiable goods went from 44.6 to 53.2 percent—not a large
jump. Tariffs were higher in almost every year from 1821 to 1914. Our tariff
went up in 1861, 1864, 1890, and 1922 without producing global depressions,
and the recessions of 1873 and 1893 managed to spread worldwide absent
tariff increases.

Neither does the myth of a spiral of retaliation by foreign nations stand up.
According to the official State Department report on this question in 1931:

With the exception of discriminations in France, the extent of discrimination against

American commerce is very slight...By far the largest number of countries do not
discriminate against the commerce of the United States in any way.

Trade wars are an invented concept, a bogeyman invented to push free trade.

The giveaway, of course, is that free traders claim both that a) trade wars are
a terrible threat we must constantly worry about, and b) it’s obvious no nation
can ever gain anything from having one. Think about that for minute.

Now my challenge to free traders (and to my readers) is this: write to me and

name a trade war. I promise to publish any results I get.

Note: Trade wars started for non-economic reasons in wartime, with the
deliberate intention of screwing up the other side’s economy, don’t count. We
were quite right not to be selling Germany steel in 1942.

Update 02/12/17: Keeping the promise above, several readers have written to
me about a number of “trade wars” they claim history records. While most of
these events did indeed take place, I find it hard to classify them as full-blown
“wars,” as opposed to minor “skirmishes.” Commercial conflicts between
nations happen all the time, and over plenty of subject other than trade.
Currencies, for example (related to trade, of course), have been contentious
both under the pre-1971 Bretton Woods regime of fixed exchange rates and
the post-1971 regime of floating (but manipulated!) rates. So I really can’t get
excited about the following incidents: he Politics email.
“Immediately after the Civil War, the United States abrogated its reciprocity
treaty with Canada, following which Canadian economic nationalists sought to
pay their southern neighbor back “in their own coin” - that is, through tariff
retaliation. By 1879, Canadian Conservatives consolidated around their
National Policy of protectionism. Some American companies - Singer
Manufacturing, American Tobacco, Westinghouse and International Harvester
- decided to move their production to Canada rather than pay the high import
taxes. By the late 1880s, 65 U.S. manufacturing plants had relocated to
Canada. In this case, far from halting outsourcing, protectionism caused it.
Trade tensions reached a breaking point in 1890. Republicans, controlling the
executive and the legislative branches, passed the highly protectionist
McKinley Tariff. Tariff retaliation was, according to Sir Alexander Galt - the
first Canadian high commissioner in London - “the only argument applicable in
the present case.” Canadian agricultural exports fell by half from 1889 to
1892. And when the Republicans passed the even more protectionist Dingley
Tariff in 1897, Canada decided that the best response was a double dose of
tariff retaliation and closer trade ties with the British Empire rather than the
United States.”

This isn’t really a war at all. The U.S, which was (despite what the author
above says) already protectionist even before the Civil War, decided to raise
its tariffs, and naturally one of our trading partners followed suit. So what?
This is exactly what one would expect, and given that protectionism is a valid
economic strategy and was almost certainly appropriate for nations at
America’s and Canada’s level of development at the time, it was beneficial to
both nations. Canada would not be a First World country today if it had just
bought American manufactured goods and allowed it to be turned into a giant
breakbasket and iron mine for American consumers.

Next example:

“Soon after Italy’s unification, the young nation turned to infant industrial
protectionism, whereupon it terminated its trade agreement with France in
1886. It raised tariffs as high as 60 percent to protect its industries from
French competition. Italy’s turn to protectionism made the French intractable.
They refused to negotiate and instead threatened the Italians with punitive
tariffs if Italy did not lower its own. Tariff retaliation followed tariff retaliation. In
France, this resulted in the passage of the highly protectionist Méline Tariff of
1892, which famously signaled the death knell of the country’s flirtation with
free trade.”

Not to bore the reader with the details of French economic history, but
interpreting the well-known Meline tariff as principally an act of retaliation
against Italy is highly contentious, to say the least. It is far more plausible that
this tariff was instead understandable imitation of post-1871 Germany’s visible
success with tariff-based industrialization. The peak of free trade as an idea in
Europe, along with the rest of economic liberalism (in the old sense of the
word), was around the middle of the 19th century, but it decayed thereafter as
nations pursued the classic infant-industry strategy that endures to this day in
places like China.

So in sum, supposed “trade war” tariffs were not acts of war (whatever
understandable jingo rhetoric may have been used in domestic politics at the
time) so much as rational acts of economic policy that would have made
sense regardless.