Trade wars: Lessons from the past that need to be learned - short-term gains, long-term losses
Today, as the United States under President Donald Trump considers introducing new tariff barriers, it is worth reflecting on the potential consequences of such actions. History teaches us that trade wars not only fail to bring the expected benefits but often lead to a deterioration of the economic situation in the countries that initiate them. In light of the current trade tensions, it is worth recalling the lessons from history. The Great Depression of 1929–1933, the most severe economic crisis in the history of capitalism, was exacerbated by protectionist policies, including the imposition of tariffs intended to protect domestic markets, which in reality had the opposite effect.
Tariffs – a weapon that strikes at one's own country
Tariffs are often presented as a way to protect the domestic economy. They are supposed to support local producers, protect jobs, and increase budget revenues. In theory, this seems reasonable – since foreign goods become more expensive, consumers are more likely to reach for domestic products. The problem is that this policy rarely works as expected.
When a state imposes tariffs, it creates artificial barriers to competition. Local producers, instead of competing with foreign companies and striving for innovation, may allow themselves to stagnate. The lack of real pressure to improve quality or reduce costs leads to slower development and worse products. Additionally, tariffs raise prices – both for companies that have to pay more for imported raw materials and for consumers who suddenly spend significantly more for the same goods.
This has its consequences. When people pay more for basic products, they have less left for other expenses. Consumption decreases, which hits the entire market – not only trade but also the service and investment sectors. Companies begin to lose customers, which means the need to cut costs, i.e., lay off employees. Unemployment rises, the economy slows down, and the state, instead of strengthening, falls into crisis.
And worst of all – all this happens even before the other side has a chance to respond.
Retaliation – how trade wars destroy economies
No country will allow itself to be the losing side in a trade conflict. When one country imposes tariffs, the other usually responds in kind, imposing tariffs on the aggressor's exported goods. This is how a trade war begins, which brings no winners – only losses on both sides.
An example is the trade war between the USA and China. When the United States raised tariffs on Chinese products, Beijing responded with restrictions on American exports, especially agricultural products. The result? American farmers lost key markets, their incomes fell, and many of them fell into financial trouble. On the other hand, Chinese consumers had to pay more for goods that were previously cheaper and easily accessible.
The effect of a trade war is not only more expensive products and losses for companies. It also destabilizes the economy, creates uncertainty for investors, and slows down growth. When countries start blocking their markets, international trade loses momentum, and the global economy begins to choke.
Tariffs were supposed to protect the economy, but in reality, they lead to rising prices, unemployment, and fewer opportunities for development. And when escalation turns into a full-blown trade war, the only certain outcome is that everyone loses. Perhaps instead of building more barriers, it would be better to focus on how to increase competitiveness and innovation? Because history shows one thing – protectionism rarely leads to success.
Finally, it is worth asking ourselves: Is the introduction of tariffs by the United States really just an element of a negotiation strategy, something like a political scare tactic, or is there a real desire to close borders to global trade? Does the Trump administration hope that such a game will instill fear and force other countries to make concessions, or is it a step that is intended to bring some economic benefits in the long run? After all, as history shows, even if the goal is noble – that is, protecting domestic markets or jobs – the consequences of such actions can be unpredictable, and the effects felt both in the country that implements them and around the world.
In reality, by asking ourselves whether it is worth "stirring up a storm" in the name of protecting the economy, we may conclude that a policy based on fear and market pressures is a strategy fraught with risk. Because isn't it true that in the long run, those authorities that operate on the basis of promises of protection may be the ones that fall into the trap themselves – just as happened during the Great Depression? So, is it really worth this game? Time will tell, but it is worth asking ourselves this question before we get caught up in the spiral of a trade war, the costs of which may be much higher than initially appears.
Today, as the United States under President Donald Trump considers introducing new tariff barriers, it is worth reflecting on the potential consequences of such actions. History teaches us that trade wars not only fail to bring the expected benefits but often lead to a deterioration of the economic situation in the countries that initiate them. In light of the current trade tensions, it is worth recalling the lessons from history. The Great Depression of 1929–1933, the most severe economic crisis in the history of capitalism, was exacerbated by protectionist policies, including the imposition of tariffs intended to protect domestic markets, which in reality had the opposite effect.
Tariffs – a weapon that strikes at one's own country
Tariffs are often presented as a way to protect the domestic economy. They are supposed to support local producers, protect jobs, and increase budget revenues. In theory, this seems reasonable – since foreign goods become more expensive, consumers are more likely to reach for domestic products. The problem is that this policy rarely works as expected.
When a state imposes tariffs, it creates artificial barriers to competition. Local producers, instead of competing with foreign companies and striving for innovation, may allow themselves to stagnate. The lack of real pressure to improve quality or reduce costs leads to slower development and worse products. Additionally, tariffs raise prices – both for companies that have to pay more for imported raw materials and for consumers who suddenly spend significantly more for the same goods.
This has its consequences. When people pay more for basic products, they have less left for other expenses. Consumption decreases, which hits the entire market – not only trade but also the service and investment sectors. Companies begin to lose customers, which means the need to cut costs, i.e., lay off employees. Unemployment rises, the economy slows down, and the state, instead of strengthening, falls into crisis.
And worst of all – all this happens even before the other side has a chance to respond.
Retaliation – how trade wars destroy economies
No country will allow itself to be the losing side in a trade conflict. When one country imposes tariffs, the other usually responds in kind, imposing tariffs on the aggressor's exported goods. This is how a trade war begins, which brings no winners – only losses on both sides.
An example is the trade war between the USA and China. When the United States raised tariffs on Chinese products, Beijing responded with restrictions on American exports, especially agricultural products. The result? American farmers lost key markets, their incomes fell, and many of them fell into financial trouble. On the other hand, Chinese consumers had to pay more for goods that were previously cheaper and easily accessible.
The effect of a trade war is not only more expensive products and losses for companies. It also destabilizes the economy, creates uncertainty for investors, and slows down growth. When countries start blocking their markets, international trade loses momentum, and the global economy begins to choke.
Tariffs were supposed to protect the economy, but in reality, they lead to rising prices, unemployment, and fewer opportunities for development. And when escalation turns into a full-blown trade war, the only certain outcome is that everyone loses. Perhaps instead of building more barriers, it would be better to focus on how to increase competitiveness and innovation? Because history shows one thing – protectionism rarely leads to success.
Finally, it is worth asking ourselves: Is the introduction of tariffs by the United States really just an element of a negotiation strategy, something like a political scare tactic, or is there a real desire to close borders to global trade? Does the Trump administration hope that such a game will instill fear and force other countries to make concessions, or is it a step that is intended to bring some economic benefits in the long run? After all, as history shows, even if the goal is noble – that is, protecting domestic markets or jobs – the consequences of such actions can be unpredictable, and the effects felt both in the country that implements them and around the world.
In reality, by asking ourselves whether it is worth "stirring up a storm" in the name of protecting the economy, we may conclude that a policy based on fear and market pressures is a strategy fraught with risk. Because isn't it true that in the long run, those authorities that operate on the basis of promises of protection may be the ones that fall into the trap themselves – just as happened during the Great Depression? So, is it really worth this game? Time will tell, but it is worth asking ourselves this question before we get caught up in the spiral of a trade war, the costs of which may be much higher than initially appears.
2 users upvote it!
1 answer
The USA has always had a more or less protectionist profile in managing its economy (in contrast to, for example, GB with a liberal model).
The US economy is complete enough that it can isolate itself with a customs wall.
The EU, however, can no longer do so, as it lacks its own potential in terms of energy resources, which is currently starkly evident in energy costs for both individual and corporate consumers.
The small positive trade balance between the EU and the USA (with a clear deficit on the EU side in terms of service exchange) is rather the result of price competition from the EU, as numerous competitive advantages previously held by developed countries of the community have unfortunately depreciated to the point that the EU currently competes with the USA solely on price (the resolutions that became the foundation of the Green Deal, which was supposed to restore and strengthen the competitiveness of the community countries, unfortunately have not had the desired effect and have only led to a depletion of the community's own production potential so far.
The USA has always had a more or less protectionist profile in managing its economy (in contrast to, for example, GB with a liberal model).
The US economy is complete enough that it can isolate itself with a customs wall.
The EU, however, can no longer do so, as it lacks its own potential in terms of energy resources, which is currently starkly evident in energy costs for both individual and corporate consumers.
The small positive trade balance between the EU and the USA (with a clear deficit on the EU side in terms of service exchange) is rather the result of price competition from the EU, as numerous competitive advantages previously held by developed countries of the community have unfortunately depreciated to the point that the EU currently competes with the USA solely on price (the resolutions that became the foundation of the Green Deal, which was supposed to restore and strengthen the competitiveness of the community countries, unfortunately have not had the desired effect and have only led to a depletion of the community's own production potential so far.
Machine translated