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Atrade war is aneconomic conflict often resulting from extremeprotectionism, in whichstates raise or implementtariffs or othertrade barriers against each other as part of theircommercial policies, in response to similar measures imposed by the opposing party.[1] If tariffs are the exclusive mechanism, then such conflicts are known ascustoms wars,toll wars, ortariff wars; as a reprisal, the latter state may also increase the tariffs. Trade war arises only if the competitive protection between states is of the same type and it is not valid in case of dumping exports.[2] Increased protection causes both nations' output compositions to move towards theirautarky position.[3] Minor trade disagreements are often calledtrade disputes when the warmetaphor ishyperbolic.
Trade wars could be escalated to full conflict between states as evidenced in theMassacre of the Bandanese after alleged violations of a new treaty. TheFirst Anglo-Dutch War was triggered by disputes over trade; the war began with English attacks on Dutch merchant shipping but expanded to vast fleet actions. TheSecond Anglo-Dutch War was for control over the seas and trade routes, where England tried to end the Dutch domination of world trade during a period of intense European commercial rivalry. TheFourth Anglo-Dutch War started over British and Dutch disagreements on the legality and conduct of Dutch trade with Britain's enemies in that war. TheShimonoseki Campaign after unrest over the shogunate's open-door policy to foreign trade. TheFirst Opium War which started after theQing government blockaded its ports, confiscated opium contraband and confinedBritish traders, resulted in the dispatch of theBritish Navy to China and engage the Chinese Navy in theBattle of Kowloon. The First Opium War eventually led to the British colony ofHong Kong, and theSecond Opium War, which arose from another trade war with the same underlying causes, expanded theBritish possessions on the island.
One example of a modern tariff war occurred in the 1920s and 1930s between theWeimar Republic (Germany) andPoland, in theGerman–Polish customs war of 1925 to 1934.[citation needed] In the Weimar Republic,Gustav Stresemann (Minister of Foreign Affairs from 1923 to 1929) wanted to force Poland to give up territory by creating an economic crisis; to achieve this, the Germans increased tolls on coal and steel products developed there.[citation needed]
As a reprisal, the Poles increased toll rates for many German products. This led to the rapid development of the port ofGdynia, which was the only way Poland could export its goods to Western Europe without having to transport them through Germany.
U.S. PresidentWarren G. Harding signed theFordney–McCumber Tariff bill (named afterJoseph Fordney, chair of theHouse Ways and Means Committee, andPorter McCumber, chair of theSenate Finance Committee) in September 1922.[4] In the end, the tariff law raised the average Americanad valorem tariff rate to 38 percent.
Trading partners complained immediately. Those injured byWorld War I said that, without access for their exports to the American market, they would not be able to make payments to America on war-timeloans. But others saw that this tariff increase would have broader deleterious effects. Democratic RepresentativeCordell Hull said, "Our foreign markets depend both on the efficiency of our production and the tariffs of countries in which we would sell. Our own [high] tariffs are an important factor in each. They injure the former and invite the latter."
Five years after the passage of the tariff, the U.S.'s trading partners had raised their own tariffs by a significant degree.France raised its tariffs onautomobiles from 45% to 100%,Spain raised tariffs on American goods by 40%, and Germany andItaly raised tariffs on wheat.[5] This customs war is sometimes cited as one of the causes of theGreat Depression.[6]
Other writers even blame the historically high Hawley-Smoot Tariff of 1930 for causing the Depression itself. But [...] the Fordney-McCumber rates, as one historian puts it, were 'already ... high enough to cause a depression if a tariff can have such a result.' [...] Both the Fordney-McCumber and the Hawley-Smoot tariffs are better regarded as symptoms, not causes, of economic distress in 1921 and 1929, respectively.
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