The History of Tariffs and the Economic Impact of Major Trade Wars

Tariffs—taxes imposed by governments on imported goods—have long been tools of economic policy and can impact trade wars.

They have been wielded for revenue generation, industry protection, and geopolitical leverage.

While often used to shield domestic producers, tariffs can escalate into trade wars with profound consequences for global commerce and national economies. This article traces the history of tariffs, reviews significant trade wars, and analyses their economic impacts on the involved nations.

The Origins of Tariffs

Historically, tariffs were among the earliest forms of taxation. In ancient civilizations such as Egypt, Greece, and Rome, levies on goods entering ports were seen as key revenue sources. In the 18th and 19th centuries, as nation-states formed and industrialized, tariffs became tools of economic nationalism.

• Mercantilism (16th–18th centuries): European powers imposed high tariffs to accumulate wealth by maximizing exports and minimizing imports.
• U.S. Tariff Policy: In its early years, the U.S. heavily relied on tariffs, culminating in the Tariff of Abominations (1828), which fueled sectional tensions and contributed to the Civil War.

Major Trade Wars in History

1. The Smoot-Hawley Tariff and the Great Depression (1930)

• Background: Amidst economic downturn, the U.S. passed the Smoot-Hawley Tariff Act, raising tariffs on over 20,000 imported goods to protect American jobs and industries.
• Retaliation: Major trade partners including Canada, France, and Germany retaliated with their own tariffs.
• Economic Impact:
  • Global trade contracted by over 60% between 1929 and 1934.
  • Exports from the U.S. dropped sharply, exacerbating the Great Depression.
  • The backlash helped push the U.S. towards a more liberal trade policy post-WWII.

2. The Chicken War (1960s)

• Background: In response to U.S. tariffs on imported chicken (due to a domestic price collapse), the European Economic Community (EEC) imposed retaliatory tariffs—famously targeting American brandy and light trucks.
• Impact:
  • The U.S. responded with a 25% tariff on light trucks, which remains in place today and helped shape the dominance of U.S. pickups like the Ford F-Series.
  • Trade tension was contained, but it highlighted how narrowly targeted tariffs could lead to prolonged distortions in trade patterns.

3. The U.S.-Japan Trade Tensions (1980s–1990s)

• Background: As Japan’s trade surplus grew, the U.S. accused it of unfair practices, particularly in autos and electronics.
• U.S. Response: Threats of tariffs, “voluntary export restraints,” and quotas.
• Economic Impact:
  • U.S. consumers paid more for Japanese cars.
  • Japan shifted production to U.S. soil (e.g., Toyota and Honda factories), eventually reducing tensions.
  • Long-term, the episode fostered the globalization of production.

4. U.S.-China Trade War (2018–Present)

• Background: The U.S. under President Trump accused China of intellectual property theft, trade imbalances, and unfair subsidies. In response, the U.S. imposed tariffs on over $360 billion worth of Chinese goods.
• China Retaliated: Tariffs on $110 billion worth of U.S. goods, especially agriculture (e.g., soybeans).
• Economic Impact:
  • U.S.:
    • Short-term inflation in tariffed goods.
    • U.S. farmers received billions in subsidies to offset lost Chinese demand.
    • Manufacturing uncertainty increased.
  • China:
    • Slower export growth and a shift in supply chains to Southeast Asia.
    • Boosted internal efforts toward tech self-reliance.
  • Global:
    • Businesses re-evaluated supply chains, accelerating the “China+1” strategy.
    • WTO rules were further undermined.

5. U.S.–South Africa Tariff Tensions (2023–2024)

In recent years, tensions between the United States and South Africa have escalated due to political disagreements and perceived misalignments on foreign policy, notably South Africa’s stance on global conflicts and its relationship with non-Western powers.

In 2023, U.S. lawmakers proposed a review of South Africa’s eligibility under the African Growth and Opportunity Act (AGOA)—a preferential trade agreement that provides duty-free access for certain goods exported to the U.S.

Impact on South Africa:

• Export Risk: AGOA has been a crucial driver of South African exports in key industries such as automotive, agriculture (e.g., citrus and wine), and textiles. Potential suspension or limitation of AGOA benefits would jeopardize billions of rands in export earnings and affect thousands of jobs.
• Investor Confidence: Ongoing uncertainty surrounding trade relations with the U.S. could discourage future investment—particularly in manufacturing and export-oriented sectors.
• Policy Recalibration: The situation has reignited debates within South Africa over trade diversification, with increased calls for strengthening trade ties with the BRICS bloc and African continental partners.
• Job Creation & Skills Development: Industries that rely on U.S. access for growth—such as automotive parts manufacturing in the Eastern Cape—are especially vulnerable. A disruption could affect employment in regions where jobs are already scarce.

Impact on the U.S.:

• Supply Chain Disruption: The U.S. may face higher costs or supply instability in industries sourcing materials or goods from South Africa, such as platinum group metals, agricultural products, and vehicles.
• Geopolitical Influence: A weakened economic relationship could reduce U.S. influence in the Southern African region, potentially opening space for competitors like China and Russia to deepen ties.

Economic and Diplomatic Implications:

From a South African standpoint, the threat of losing tariff-free access to the U.S. market underscores the vulnerability of developing economies in global trade frameworks. While diversification is essential, the immediate priority remains securing AGOA eligibility and maintaining favourable trade relations with major partners. For many South African businesses, this is not just a diplomatic issue—it’s a matter of survival.

Broader Economic Consequences of Tariffs

1. Protection vs. Inefficiency: While tariffs can shield infant or struggling industries, they often lead to higher consumer prices and reduced competitiveness.
2. Retaliation Spiral: Trade wars typically escalate, with each side imposing broader and harsher measures.
3. Global Supply Chains: Modern economies are interlinked. Tariffs disrupt global production networks and delay investment decisions.
4. WTO & Multilateralism: Widespread use of unilateral tariffs weakens international institutions like the WTO and promotes fragmentation.

Tariffs have always served as a double-edged sword—defending domestic interests on one side, and igniting trade tensions on the other.

From Smoot-Hawley to the U.S.-China standoff, history shows that while tariffs may provide short-term gains for select industries, they often come at the cost of broader economic stability and international cooperation.

In a globalized world, trade wars rarely have winners—only different degrees of loss.