When Tariffs Turn To Trenches: How Trade Wars Could Spark The Next Global Conflict – OpEd

“When goods do not cross borders, soldiers will.” – Frédéric Bastiat

What begins with tariffs may end with tanks. The escalation of economic hostilities between the United States and China—a tit-for-tat trade war involving hundreds of billions in goods—carries echoes of a darker past. History reminds us that prolonged economic aggression among nations, especially great powers, often metastasises into political and even military confrontation. The current trajectory of decoupling, protectionism, and nationalist rhetoric may not lead directly to war. But to ignore the historical pattern is to court catastrophe.

Donald Trump once declared that “trade wars are good, and easy to win.” That sentiment has now outlived his presidency but not its consequences. Under both Trump and Biden, Washington has shown remarkable bipartisan resolve in pursuing trade restrictions against Beijing—from punitive tariffs to semiconductor export bans and restrictions on Chinese tech firms. China, for its part, has responded in kind, manipulating the value of its currency, weaponising its vast domestic market, and deepening state-led industrial policy. Each side now regards the other as an economic adversary to be constrained rather than engaged.

This is not merely a quarrel over deficits and intellectual property. It is a comprehensive economic disengagement with global ramifications. And while both Washington and Beijing continue to profess their commitment to open trade in principle, their policies in practice suggest otherwise. The rhetoric is of decoupling; the reality is of confrontation.

The Forensic Dissection of Tariff Wars

The mechanics of trade war are now familiar. In 2018, the Trump administration imposed tariffs of 25% on $34 billion worth of Chinese imports, with subsequent rounds escalating the figure to $360 billion. China retaliated on goods worth over $110 billion. The Biden administration, far from reversing these measures, has reinforced them, tying economic security to national security. The European Union, India, Japan, and others have all adjusted their trade strategies in response—many by erecting new barriers of their own.

Tariffs, by design, raise the cost of foreign goods. In theory, they protect domestic industries from unfair competition. In practice, they function as a tax on consumers, distort supply chains, and trigger retaliatory measures. Worse, they often mask deeper anxieties—about technology, sovereignty, and status in a shifting global order.

What separates the current trade war from earlier episodes is the convergence of economic decoupling with geopolitical flashpoints: the Taiwan Strait, the South China Sea, and a volatile global energy market. In such an environment, the boundary between economic hostility and military tension becomes dangerously porous.

The Currency Trap and Competitive Devaluation

The tariff war is increasingly accompanied by a stealthier but equally corrosive conflict: the currency war. When tariffs reduce the competitiveness of exports, countries are tempted to devalue their currencies to offset the impact. Since 2018, the renminbi has undergone several steep depreciations, leading many to accuse Beijing of currency manipulation. China’s central bank insists it is merely allowing market forces to determine the exchange rate, but the political signal is unmistakable: Beijing is prepared to fight on every front.

A race to the bottom in currency values risks global monetary instability. If every country attempts to devalue simultaneously, none benefits, and all suffer. Such beggar-thy-neighbour policies contributed to the global economic unravelling in the interwar period. The breakdown of the gold standard, the 1930 Smoot-Hawley Tariff Act, and competitive devaluations in Europe and the United States deepened the Great Depression and, ultimately, inflamed the conditions that led to the Second World War.

The Lessons of History: A Grim Mirror

In 1913, on the eve of the First World War, the global economy was—like today—tightly interconnected. The classical gold standard was in place. Trade was expanding. Capital flowed freely. Yet it took only a series of tariff and currency interventions, amplified by nationalism and militarism, to upend the order. By 1930, the Smoot-Hawley Act raised tariffs on over 20,000 imports. Countries retaliated in kind. Global trade contracted by over 60% within five years. Mass unemployment followed. So did extremism.

The link between protectionism and war is not linear, but it is causal. Trade barriers fuel distrust. Economic isolation breeds nationalism. Nationalism seeks scapegoats. And governments under pressure—economic, social, or political—tend to take the path of confrontation. Japan’s invasion of Manchuria in 1931, Germany’s rearmament under Hitler, and the eventual descent into global conflict were all, in part, consequences of economic collapse and isolationist policy.

Today, the signs are again ominous. China’s economic slowdown, exacerbated by demographic decline and property-sector distress, has pushed it to adopt more inward-looking industrial policies. America’s CHIPS Act and Inflation Reduction Act, while addressing legitimate strategic concerns, also contain clear protectionist clauses. Allies like the EU and South Korea find themselves caught in the crossfire—encouraged to decouple from China but punished when they outcompete American firms.

The World Trade Organisation, once the bulwark of liberal trade norms, has been sidelined. Its appellate body remains paralysed. Regional trade blocs are fragmenting the global system. And amid this fragmentation, there is no credible mechanism for dispute resolution—only escalation.

The Moral Stakes

There is a temptation to treat trade wars as bloodless, technocratic affairs—matters of tariffs and subsidies, not life and death. But this is a dangerous illusion. When two superpowers lock economic horns, the resulting instability does not remain confined to customs data and growth charts. It spreads to supply chains, capital flows, alliances—and eventually, to strategic theatres where military force becomes a real possibility.

Taiwan is already the most perilous flashpoint. Any military move by China, driven by economic desperation or nationalist fervour, would force the United States into a position of direct military response. And while neither side seeks war, the logic of escalation is unforgiving. In a world where chips are as strategically vital as oil once was, economic warfare is increasingly indistinguishable from real warfare.

The human cost of such a conflict would be catastrophic—not just in the Indo-Pacific, but globally. Trade routes would collapse. Energy prices would spike. Food insecurity would soar. And the very global order that trade once underpinned would dissolve in flames.

A Closing Warning

History does not repeat, but it does rhyme. The trade wars of the 20th century ended not with negotiated settlements, but with violence. Today’s leaders would do well to study those lessons. The costs of losing a trade war may be measured in GDP. The costs of letting one spiral into real war may be measured in lives.

What is required is not naïve globalism, but pragmatic restraint. The global trading system, though battered, still offers a framework for compromise. Its institutions must be reformed, not discarded. Tariff disputes must be resolved through law, not force. And economic competition must be decoupled—if not from values—then at least from violence.

Otherwise, the spectre of Bastiat’s warning may once again become prophecy.