The Toll of Tariffs: How Economic Nationalism Courts Conflict and Saps Growth

In moments of uncertainty, nations seek certainty. And few places offer a more seductive illusion of control than at the border. Tariffs—those ancient tools of statecraft—return to the center of political theater with renewed vigor. In the halls of Congress, in the echo chambers of populist media, and in the calculated messaging of aspiring strongmen, we are told that trade is a game rigged against us. The solution, we are assured, lies not in the tangled complexities of global cooperation, but in the simplicity of barriers: higher tariffs, stricter quotas, tighter controls.

But this story, so emotionally satisfying and politically expedient, belies an older and darker truth: that economic nationalism—when allowed to metastasize—has historically been both the architect of economic stagnation and the harbinger of war.

The case against free trade, once the provenance of fringe ideologues, now enjoys bipartisan traction. Labor unions decry offshoring, manufacturers resent foreign competition, and intellectuals from both the left and right increasingly question the moral basis of global capitalism. There is, to be fair, merit in some of these critiques. The dislocations of trade have real costs, and the market's invisible hand often carries a cudgel for those caught in its path.

But to see the costs without acknowledging the benefits is to commit a kind of economic myopia. Tariffs, after all, are taxes. They are taxes levied not on some distant foreign adversary, but on domestic consumers and firms. A 10% tariff on imported steel raises costs not just for the steel buyer, but for every downstream industry that depends on it—from automobiles to construction. The economic literature is unusually unified on this point: tariffs reduce efficiency, increase prices, and often fail to generate the promised resurgence in domestic employment.

And yet, politicians persist. Why?

Because tariffs are visible. Their benefits are tangible and immediate to the favored industries. Their costs, by contrast, are diffuse and delayed—borne in quiet by households and businesses without lobbyists. This asymmetry of perception grants tariffs a kind of political immunity.

But what begins as economic theater often ends in geopolitical tragedy.

It is worth remembering that modern free trade is not merely an economic policy; it is a peace project. Following the cataclysm of two world wars, Western leaders did not turn to protectionism to secure their nations—they turned to integration. Institutions like the General Agreement on Tariffs and Trade (GATT), and later the World Trade Organization (WTO), were constructed on the premise that nations which trade with one another are less likely to shoot at one another.

This was not naïve idealism, but hard-nosed realism. Interdependence alters the calculus of conflict. In a deeply globalized world, the costs of war are no longer just blood and treasure—they are GDP contractions, broken supply chains, and cratering capital flows. Mutual trade creates mutual interest.

Tariffs, when used recklessly and punitively, do more than disrupt supply chains—they unwind these bonds of mutuality. When economic nationalism takes root, political nationalism soon follows. This is not theoretical conjecture, but historical pattern. The infamous Smoot-Hawley Tariff Act of 1930, which raised U.S. tariffs on over 20,000 goods, helped ignite a global trade war. Retaliation was swift. Allies became adversaries. Global trade collapsed by more than 60%, and the economic carnage helped incubate the fascist ideologies that would soon plunge the world into another war.

To be clear: tariffs do not cause wars in the same way that a match causes fire. But they dry the tinder. They create zero-sum thinking, nurture resentment, and erode the habits of cooperation.

In today’s global discourse, there is a growing temptation to frame trade not in terms of mutual benefit, but of strategic dominance. China does it, we’re told—why shouldn’t we?

This, too, is understandable. The rise of China as a techno-authoritarian behemoth poses legitimate challenges to the liberal economic order. Supply chains entwined with autocracies pose risks not just of disruption, but of moral compromise. And in a world where semiconductor chips are the new oil, it is easy to imagine trade as a battleground of national security rather than economic cooperation.

But herein lies the danger: when every economic relationship becomes a security question, diplomacy frays. And when trust vanishes, so does growth.

The empirical data here is sobering. The 2018–2019 U.S.-China trade war led to retaliatory tariffs across sectors, stymied investment, and cost American farmers billions in lost exports. A 2020 Federal Reserve study estimated that the full costs of the trade war—both in lost income and output—were nearly indistinguishable from those of a small recession. And yet, the geopolitical gains were negligible.

There is a broader point to be made: when nations decouple in the name of resilience, they often find fragility instead. Autarky is not strength—it is brittleness wrapped in rhetoric and trade, for all its imperfections, binds nations into systems where violence is no longer the most efficient solution to conflict.

This is not to say that trade is a panacea. But it is a stabilizer. A lubricant of peace. A restraint on demagogues. And, crucially, a teacher: reminding us that no nation—however exceptional—can thrive alone.

As we look to the future, we would do well to resist the seductive call of walls and tariffs. Economic entanglement is not naïveté—it is strategy. It is the recognition that prosperity and peace are not opposites, but allies. And that the true measure of sovereignty lies not in how high a nation can raise its walls, but in how confidently it can walk among others, unafraid.