Trade policy has been a contested issue for governments as long as separate governments have existed.
These days, many economists believe that reducing international trade barriers like tariffs or export restrictions benefits everyone.
However, governments sometimes still need to make political trade-offs between expanding trade and protecting their industries.
When such conflicts arise, trade barriers imposed by one country may provoke retaliatory measures from another, leading to a tit-for-tat escalation known as a trade war.
During the Cold War and the years that followed, the United States was often seen as an advocate of free trade, playing a leading role in setting up the World Trade Organization (WTO) in 1995.
But the U.S. has also engaged in a few trade wars throughout its history.
1930: Smoot-Hawley Tariff Act
The U.S. economy made significant progress in the early 20th century.
But when the Great Depression began in 1929, a Republican-dominated Congress tried to protect struggling American farmers from foreign competition by imposing tariffs on imported goods.
Economists and business leaders opposed the move, pointing out that the U.S. was running a trade surplus, with exports exceeding imports.
Nevertheless, President Herbert Hoover signed the act into law in 1930, imposing tariffs of more than 50% on nearly 2,000 categories of imported goods — some of the highest tariffs in U.S. history.
The law’s passing sparked strong reactions from America’s major trading partners, with 10 countries taking rapid retaliatory measures.
France imposed high tariffs on American-made cars, Canada raised tariffs on various American products while lowering tariffs on British goods. There were even calls for a boycott of American goods in Italy and Switzerland.
The combined impact of the Great Depression and the retaliatory trade measures saw U.S. exports fall by 66% in the following years.
President Franklin D. Roosevelt eventually repealed the tariff in 1934, replacing it with bilateral trade agreements negotiated directly with each country.
The Smoot-Hawley Tariff Act has since become a classic example of a harmful, “beggar-thy-neighbor” trade policy.
1980s: U.S.-Japan semiconductor trade conflict
After World War II, the U.S. encouraged Japan to adopt an industrial and economic policy that would counter the expansion of communism in Asia. At the same time, Tokyo received defense guarantees from Washington.
This strategy was a little too successful. Supported by protectionist economic policies and a favorable dollar exchange rate, Japan became a powerhouse in high-end manufacturing exports like automobiles and electronics.
By the mid-1980s, the U.S. trade deficit with Japan exceeded US$40 billion, accounting for nearly one-third of its total trade deficit, raising concerns about Japan’s economic dominance.
The U.S. tried to resolve the trade deficit through diplomatic means. Since Japan relied on the U.S. for its defense, it agreed to voluntary quotas on its automobile and steel exports, while the U.S. imposed tariffs on Japanese semiconductor products.
Meanwhile, the Plaza Accord, a joint agreement signed in 1985 between the U.S., France, West Germany, Japan and the United Kingdom at the Plaza Hotel in New York City, aimed to enhance U.S. export competitiveness by depreciating the dollar against currencies of other signing countries.
Despite these measures, the U.S. trade deficit with Japan remained high throughout the 1980s. Ultimately, trade policy did not resolve the issue; broader economic factors did: the bursting of Japan’s asset bubble in the 1990s led to over a decade of economic stagnation in Japan.
1993-2009: Banana Wars
U.S.-linked Latin American companies dominated the majority of the world’s banana trade since the 20th century, but the European Union disrupted this dominance by setting aside special import quotas for bananas produced in their former Caribbean colonies, giving those countries preferential access to the EU market.
In 1993, five Latin American countries and the U.S. filed a complaint with the World Trade Organization over the quotas.
Four years later, the WTO ruled in favor of the complainants.
While the EU subsequently modified its rules, its response was seen as superficial, and as failing to address the core issue. In response, the U.S. imposed trade sanctions on European products worth nearly US$200 million.
The dispute lasted nearly a decade and was only resolved in 2009, when the EU agreed to lower tariffs on Latin American banana imports. Caribbean countries continued to enjoy duty-free access to the EU market and received a one-off compensation deal from the EU to offset the costs of increased competition.
2002-2003: Bush steel tariffs
The U.S. once accounted for more than half of global steel production, but its market share has gradually fallen since the 1980s to less than 10% by the early 21st century.
Under pressure from the steel industry lobby, the George W. Bush administration imposed “protective” tariffs of up to 30% on imported steel in 2002.
The move triggered strong opposition from U.S. trading partners, including South Korea, Russia, and the EU, which quickly drafted retaliatory tariff plans targeting U.S. chicken, textiles, and aviation industries.
These tariffs also raised costs for industries in the U.S. that relied on steel as a raw material, resulting in the loss of nearly 200,000 jobs in the steel-consuming sector — more than the total employment in the steel industry.
In 2003, the World Trade Organization ruled against the tariffs, and they were repealed shortly after.
2018-Present: U.S.-China trade war
Since China joined the WTO in 2001 and integrated into the global market, it has rapidly become a manufacturing and export powerhouse, with a growing trade surplus with the U.S.
This situation has sparked concerns among U.S. politicians, including President Donald Trump.
Trump has accused China of exploiting America’s open trade policies, stealing intellectual property, and causing job losses in U.S. manufacturing sectors.
After taking office in 2017, Trump slapped an extensive series of tariffs on Chinese goods, including consumer electronics, medical devices, and machinery parts.
In retaliation, China imposed tariffs on U.S. automobiles and agriculture — particularly the soybean industry.
By the end of Trump’s first term, tensions had eased as China agreed to relax ownership restrictions on foreign enterprises, and the Trump administration suspended plans for further tariffs.
However, the Biden administration that succeeded Trump did not repeal the initial tariffs imposed by Trump; instead, it introduced new trade restrictions, including export controls and investment bans.
Today: Tariffs under Trump 2.0
The U.S.-China trade war has continued into Trump’s second term.
On Feb. 1, 2025, shortly after taking office, Trump signed an executive order announcing a 10% tariff on Chinese goods and a 25% tariff on America’s close allies and biggest trading partners, Mexico and Canada.
Imposing tariffs on allies is not unprecedented, as seen in past trade disputes with Japan and the EU. However, this round of tariff wars is not just about trade.
After consulting with leaders from Canada and Mexico, Trump announced on Feb. 3 that he would delay the tariffs for 30 days in exchange for commitments from both countries on border security and drug control — two issues central to the Trump administration’s agenda.
On Feb. 27, Trump announced that the proposed 25% tariffs on imports from Mexico and Canada would begin on March 4, with an additional 10% tariff on Chinese imports on top of the previously enacted 10% tariff.
The reason for the move was the ongoing influx of deadly drugs from these countries into the U.S., he said.
As the global consensus on free trade gradually crumbles, trade policy is increasingly being used as a lever to achieve broader political objectives.
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