Trump’s Tariff War Resembles the Confederacy’s Failed Trade Policies
August 9th 2019
By Robert Brent Toplin
Current efforts by the United States to put tariff pressures on China resemble the Confederacy’s efforts to pressure Great Britain during the American Civil War. In the early 1860s the Confederate leaders’ strategy backfired, damaging the southern economy and weakening the South’s military. Recent developments in the tariff fight with China suggest that President Trump’s strategy could backfire as well. America’s tariff negotiators should consider lessons from the record of Confederate missteps.
In the Confederates’ dealings with Britain and the Trump administration’s tensions with China, booming economies gave advocates of a tough negotiating stance exaggerated feelings of diplomatic influence. Southerners thought the robust cotton trade provided a powerful weapon in their efforts to secure official recognition from the British. President Trump expresses confidence that America’s flourishing economy can withstand a few temporary setbacks in order to win major trade concessions from the Chinese. In both cases, leaders failed to recognize that their gamble had considerable potential for failure.
During the 1850s, southern cotton planters enjoyed flush times. Sales of cotton to English textile mills brought huge profits to the owners of cotton plantations. “Our cotton is . . . the tremendous lever by which we can work out destiny,” predicted the Confederate Vice President, Alexander Stephens. Southerners thought English textile factories would have to shut down if they lost access to cotton produced in the United States and that closures would leave thousands of workers unemployed. To the Confederates, it seemed that the English would have no choice but to negotiate with them. Britain needed “King Cotton.” The Confederate government did not officially sponsor a cotton embargo, but the southern public backed it enthusiastically.
Presently, a booming economy has put the Trump administration in a strongly confident mood, too. President Trump’s advisers and negotiators on tariff issues, Peter Navarro and Robert Lighthizer, hope China will buckle under American pressure. They expect tariffs on China’s exports will force a good deal for the United States. President Trump encouraged the tariff fight, asserting trade wars are “easy to win.”
Economic pressures hurt the British in the 1860s and the Chinese recently, but in both situations coercive measures led to unanticipated consequences. During the American Civil War, some textile factories closed in Britain or cut production, yet British textile manufacturers eventually found new sources of cotton in India, Egypt, and Brazil. Now the Chinese are tapping new sources to replace lost trade with the United States. China is buying soybeans from Brazil and Argentina, purchasing beef from Australia and New Zealand, and expanding commercial relationships with Canada, Japan, and Europe.
The failed strategy of embargoing cotton represents one of the great miscalculations of the South’s wartime government. If the Confederacy had continued selling cotton to the English during the early part of the Civil War – before the Union navy had enough warships to blockade southern ports – it could have acquired precious revenue to purchase weapons of war. The absence of that revenue contributed to a wartime financial crisis. Inflation spiked. Economic hardship damaged morale on the home front. Many Confederate soldiers deserted after receiving desperate letters from their wives. Fortunately for African Americans, ill-conceived Confederate diplomacy speeded the demise of slavery.
Many economists now blame President Trump’s trade fights with China and several other nations for volatility in stock markets. They attribute a recent global slowdown in commerce largely to President Trump’s protectionist policies. More troublesome, though, may be the long-term consequences of the administration’s policy. Much like the South’s foolish cotton embargo, America’s tariff waris forcingthe Chinese to seek commercial ties with other countries. China appears to be moving away from close relationships with American business.
That shift could prove costly. American prosperity in recent decades owes much to commerce with China and the eagerness of Chinese investors to buy American stocks and bonds, including U.S. government debt. If the present conflict over tariffs leads to reduced Chinese involvement in American trade, the Trump administration’s risky strategymay be a reiteration of the Confederates’ foolish gamble on the diplomatic clout of King Cotton.
Posted with permission