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US President Donald Trump holds up a chart as he announces reciprocal tariffs on a slew of nations on April 2, 2025, from the White House Rose Garden. (AFP/Yonhap)

If we look closely at the history of trade, we see that it is far from beautiful.

Today, free trade is as commonplace as the air we breathe, but most of modern history was dominated by protectionist tariff barriers, predation and colonization. Protectionism has historically sparked frequent trade wars, touching off conflicts between nations that have sometimes escalated into military clashes.

The arrival of an all-time demagogue like current US President Donald Trump is now turning the clock back to an uglier era. His actions have laid waste to the foundations of the global trade order — policies of multilateralism and nondiscrimination that had prevailed for 80 years. Their place is being taken by the logic of power.
 
Trump’s 40 years of tariff fixation rooted in 18th-century mercantilism

Trump’s trade policies are rooted in mercantilist principles. Mercantilism, which spread through Western Europe in the 16th to 18th centuries, is a system that involves seeking monopolistic profits by seizing exclusive control over trade in particular regions and goods. Trade itself is viewed as a zero-sum game where nations battle to snatch rights away, lest the same thing happen to them.

Under the gold and silver standards, trade deficits led to the visible loss of state wealth overseas — a situation that countries reacted sensitively to. This explains why the history of the Western world has been marred by plunder and warfare.

On April 2, Trump high-handedly declared his plan to slap exorbitant tariffs on countries around the world. His 50-odd-minute speech, which could only be described as crude, started with his declaring that it was “Liberation Day” and was rife with mercantilist logic.
 
“For decades, our country has been looted, pillaged, raped and plundered by nations near and far, both friend and foe alike,” he claimed. “Foreign leaders have stolen our jobs, foreign cheaters have ransacked our factories.” 

“Our country and its taxpayers have been ripped off for more than 50 years, but it is not going to happen anymore,” he declared.
 
Trump is willfully ignoring the fact that the free trade order established after World War II transformed trade relationships into a positive-sum game where all parties benefit. Over the past 50 years, the US has seen its real per capita GDP increase by over 140%, making it one of the greatest beneficiaries of this new order, which also explains how the US is retaining the position of the world’s wealthiest nation as its per capita GDP in 2024 stands at US$85,810. The claim that the US has only ever been “ripped off” could not be any further from the truth.
 
Trump continued his speech, stating, “In many cases, the friend is worse than the foe in terms of trade. Such horrendous imbalances have devastated our industrial base and put our national security at risk.” 

This declaration has justified the irregularly high “reciprocal” tariffs on allies such as South Korea and Japan and the hundreds of billions of dollars that the US has bullied its allies into pledging as investments. The US is determined to take back the money that was “stolen” from it, so it is only fitting that we say that it now pursues a policy of mercantilism.

Trump’s faulty understanding goes back nearly 40 years. In 1987, at the age of 41, he paid US$94,000 of his own money to take out full-page advertisements in The New York Times and other newspapers.

“Make Japan, Saudi Arabia, and others pay for the protection we extend as allies. Let’s help our farmers, our sick, our homeless by taking from some of the greatest profit machines ever created,” Trump wrote in the personally signed advertisement, calling for “these wealthy nations, not America” to be taxed through tariffs.

This advertisement shows that Trump’s obsessive belief that countries that have a trade surplus with the US should be punished with tariffs hasn’t changed at all for 38 years. It also suggests that Trump is unlikely to give up that predilection even if the US Supreme Court rules that his reciprocal tariffs represent an unlawful application of the International Emergency Economic Powers Act. He will just find some other excuse to get his way.
 
The 19th-century protectionism by the great powers led to war

The Industrial Revolution of the 19th century represented a major turning point in the history of Western trade. It was a watershed moment that opened up a huge gap between the Northern and Southern hemispheres amid the ascendancy of capitalism in the West.

Innovations in methods of transportation and industrial and military technology brought about not only economic disparity but also military and political imbalances. The great powers’ expanding control over Asia, Africa, and Central and South America picked up steam under the banners of economic nationalism and territorial expansionism.

It was against this backdrop that imperialism — the phenomenon of political, economic and military rule of colonies — became so dominant between the late 19th century and the mid-20th century. The percentage of countries reduced to client states of the great powers rose from 37% in 1800 to 67% in 1878 and then 84% in 1914.

The system of international trade is heavily influenced by the attitude adopted by the hegemonic power. There was a time in the mid-19th century when the British Empire (so vast it was known as “the empire on which the sun never sets”) championed free trade.

Thanks to an overwhelming competitive advantage in industrial production, Britain sold manufactured goods overseas while importing agricultural goods. That represented the first shift from the bilateral trade of the period of mercantilism to a system of multilateral trade, as trading agreements began to adopt “most-favored-nation status” — assuring that a trading partner would not be treated worse than any other country — a key component in the spread of free trade.

To be sure, free trade of this sort was only applied among the Western powers. Inequality prevailed in the trading arrangements forced on countries across Asia, Africa and Central and South America.

The most infamous episode of this sort was the Opium War, fought between the British Empire and Qing-era China in 1839. The immediate cause of the war was British smuggling of opium into China in an attempt to redress a severe trade imbalance with China as silver flowed out of Britain to buy Chinese tea.

The war ended with the Treaty of Nanjing (1842), which compelled China to open up five ports, including Shanghai, and recognize extraterritoriality (British legal jurisdiction over foreign residents) there. In addition, China had to cede Hong Kong to Britain and give up customs sovereignty.

That treaty served as the template of what became known as “unequal treaties” between Europe and Asia. It also marked the beginning of what the Chinese call “the century of humiliation.”

The reason that Chinese President Xi Jinping has repeatedly reminded the Chinese public of this incident while stressing what he calls “the great rejuvenation of the Chinese nation” (or the “Chinese Dream” for short) is that it strikes a nerve.

Xi’s desk reportedly displays a poem by Lin Zexu, a Qing bureaucrat who resisted the British authorities by confiscating and burning shipments of opium. The poem contains the memorable line, “Were it to benefit my country, I would lay down my life.”

Xi made sure that historical sites connected with Lin were restored during the 17 years he spent in Lin’s birthplace of Fujian Province earlier in his career. These hint at the origin of Xi’s determination not to submit to Trump’s pressure over tariffs.

A full 180 years after the humiliation of the Opium War, China has emerged as a force to be reckoned with in the reorganization of the world order.

Discomfort with Germany’s rapid industrialization and construction of a powerful navy drove Britain to revert to trade protectionism in the late 1870s. Britain’s response was driven by the challenge Germany posed to its own hegemony.

When great powers engage in protectionist trade, they still need foreign countries’ resources, markets and investment to sustain their economic growth and maintain their armies. That’s why protectionist trade leads to territorial expansionism.

The European powers’ scramble for colonial possessions during this period reached its peak when latecomers like Germany, Russia, Japan and the US entered the game. Their imperialistic expansion culminated in a disastrous war between the great powers.

With no more colonies left to seize, the powers faced off on the continent of Europe and became embroiled in World War I in 1914. When the Great Depression struck in the early 1930s, those same countries erected protectionist barriers that stoked conflict, paving the way for World War II.
 
US protectionist pivot is reminiscent of British actions 150 years ago

Drawing a lesson from that tragic history, the US took steps to build an international economic system oriented on free trade after World War II. The result was 80 years of postwar prosperity.

But Trump has been trying to dismantle that system. The US is no longer likely to prevail in its hegemonic rivalry with China under the free trade and multilateralism that are key components of the World Trade Organization regime, and any efforts to reverse the collapse of American manufacturing are likely to prove futile. As such, the US is turning to protectionism and bilateral negotiating tactics.

Trump’s protectionism can be compared to Britain’s reversion to protectionism in response to the German threat a century and a half ago. Just as then, Trump’s protectionism, grounded in economic nationalism, takes on mercantilist characteristics, including high tariffs, threats of sanctions, capital extortion (as in Korea and Japan) and gunboat diplomacy (as in Venezuela). The problem is that protectionism is fundamentally prone to provoking economic instability, trade wars and, in the worst-case scenario, outright war.

That point was made by Albert Otto Hirschman, the famed economist who fled from Nazi Germany to the US, in a passage in his 1945 book “National Power and the Structure of Foreign Trade.”

“Restriction and discrimination [i.e., trade wars] undoubtedly sharpen national antagonisms. They provide also excellent opportunities for nationalist leaders to arouse popular resentment,” Hirschman wrote, adding that these leaders will realize “that international economic relations provide them with an excellent instrument to achieve their ends, just as a promise of a quick and crushing victory by means of aerial superiority undoubtedly contributed in a most important way to the outbreak of the present war” (as appears in “A Splendid Exchange: How Trade Shaped the World” by William Bernstein).

If we fail to learn the lesson of last century’s historical tragedy, the world may well find itself slipping into chaos once more.

By Park Hyun, editorial writer

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