Although the U.S. has long been a champion of free trade, President Trump waged a trade war by strengthening protectionist policies. Was his choice merely a political decision? We examine the background through the history of the U.S. economy and its structural changes.
President Trump: Why Did He Choose a Trade War?
When President Donald Trump (first term) first took office, the U.S. waged an unrelenting trade war against major nations around the world. Not only China, which is vying for global hegemony with the U.S., but also long-standing allies such as the EU (European Union) and Canada could not escape the blade of the trade war. Even traditional alliances proved useless in the face of a president with a business background who prioritized U.S. interests. The shadow of “protectionism” loomed large over the U.S. government as it unhesitatingly imposed high tariffs on imported goods to protect domestic manufacturing.
In fact, until President Trump took office and launched a massive trade war, the United States had maintained an image as a staunch defender of the “free trade” system. It was the United States that spearheaded the establishment of the WTO (World Trade Organization), the foundation of the international free trade system. Yet, after President Trump took office, the United States changed its stance very rapidly. As soon as he entered the White House, President Trump withdrew from the TPP (Trans-Pacific Partnership), which the previous Obama administration had painstakingly promoted. He also pushed forward without hesitation to renegotiate NAFTA (the North American Free Trade Agreement) with Canada and Mexico. He even hinted that the U.S. might withdraw from the WTO, an organization it had helped create. President Trump rolled out an increasing number of protectionist measures to protect U.S. interests in international trade.
The History of Protectionism
The Trump administration’s actions were a stark departure from the U.S. government we had known. Until then, the United States had been a champion of free trade, exerting every possible form of pressure on countries that erected trade barriers to block imports of foreign goods, insisting they open their markets. The sight of the U.S. raising its own trade barriers to protect its domestic manufacturing sector from imports felt worlds apart from the America we knew.
But is that really the case? In this blog post, I will explore the history of protectionism that the U.S. government steadfastly maintained for approximately 200 years, from the nation’s founding until the end of World War II. Some argue that protectionism was one of the key reasons why the United States, once a poor agricultural nation, was able to grow into the global superpower it is today. I will also briefly touch upon the support policies the U.S. government implemented to foster key industries.
For reference, this blog post was influenced by the book *Concrete Economics* by Steve Cohen and Bradford DeLong. Subtitled “The Hamilton Approach to Economic Growth and Policy,” this book explores how the United States became the economic powerhouse it is today. It traces the history of U.S. economic growth in connection with the decisions made by past political leaders and analyzes, based on recent data from U.S. research institutions, how the decline of manufacturing has affected the lives of low-skilled workers.
The authors of *Concrete Economics* argue that the image of the United States as a defender of the free trade system, as we have known it, was, historically speaking, very un-American. After reading this book, one realizes that the protectionist policies pushed by Trump have a very deep ideological foundation. In other words, the United States did not turn to protectionism simply because of President Trump’s unique personality and eccentric character.
The father of American protectionism, manufacturing promotion, and manufactured goods export policies is Alexander Hamilton, the first U.S. Secretary of the Treasury.
Depicted on the U.S. $10 bill and counted among the “Founding Fathers,” he implemented bold policies after becoming Secretary of the Treasury, despite opposition from his political rivals. These were bold measures designed to transform the U.S. economy—which had previously relied solely on the export of natural resources and agricultural products—into a manufacturing-centered economy. As late as the late 1700s, the United States was a typical agricultural nation that survived by exporting agricultural products harvested from large plantations in the South and various natural resources to advanced European nations.
Hamilton strove to change this economic structure and transformed the United States into the “workshop of the world,” a major exporter of manufactured goods. In the early days of the nation, America’s technological capabilities were embarrassingly inferior to those of advanced European nations, including Britain. American political leaders, led by Hamilton, believed that to foster domestic manufacturing, they must first protect domestic companies and markets from imported manufactured goods. Consequently, they imposed high tariffs of over 30% on imports, making it difficult for foreign companies to easily penetrate the U.S. market. The tariff revenue collected from these imports was reinvested into fostering American manufacturing. This high-tariff policy persisted for nearly 200 years, lasting until around the time of World War II. Viewed through the lens of American history, calling the United States a champion of free trade is simply absurd.
Hamilton’s impact on the U.S. economy did not end with his design of a manufacturing promotion policy based on protectionism. Today, we take it for granted that each country’s central bank—like the Bank of Korea—has a monopoly on printing money. But that was not the case back then. The idea of granting the exclusive right to issue currency to the central bank was one of the policies Hamilton pushed through despite fierce opposition from his opponents.
From the late 1700s to the 1950s, protectionism was not the only driver of U.S. economic growth. Successive U.S. administrations did not hesitate to actively intervene in the market to foster economic growth. Yet, when discussing the secret behind how the United States—a poor agricultural nation with little technological prowess—grew into the world’s largest economic power as it is today, exaggerated myths often accompany the narrative. Specifically, the narrative claims that this was achieved precisely because the government did not intervene in economic growth, leaving everything to the autonomy of the private sector and the spirit of entrepreneurship. The authors of *Concrete Economics* argue that the U.S. economy was able to grow because the government took the lead in pioneering areas where businesses could invest and provided various incentives to companies investing in new growth engines.
For example, throughout the 1800s, the U.S. government made massive investments in the railroad industry at the national level, driven by a plan to connect the vast expanse of the country and revitalize the economy. To ensure the success of such a massive project, it was essential to bring in private companies. Therefore, to foster private railroad companies, the government offered incentives—and the key incentive used was land. It is said that the land the U.S. government handed over for free to private railroad companies that built railways is roughly equivalent to the land area of modern-day Britain.
Protectionism vs. Free Trade
So when did the image of the U.S. as a champion of free trade, as we know it today, first emerge? Experts analyze that it wasn’t until the 1950s, after the end of World War II, that the U.S. government began to actively pursue the establishment of a free trade system. This was a period of intense Cold War conflict with the communist bloc, centered around the Soviet Union. To prevent its allied nations from falling into the communist camp, the U.S. ultimately had to help the people of those countries prosper; it could no longer prioritize the interests of its own manufacturing sector as it had in the past to support the economic growth of its allies. It was necessary to open the U.S. market—the world’s largest—to its allies to support their economic growth and prosperity. Of course, having focused on fostering manufacturing for nearly 200 years, the U.S. was confident that its technological capabilities were among the world’s best. There was also a calculation that opening the doors to overseas markets would be more beneficial to the U.S. economy than locking the doors to its domestic market.
However, choosing free trade over protectionism did not mean the U.S. government abandoned efforts to foster its domestic manufacturing sector. Even after setting protectionism aside, it advanced its fundamental science and engineering through various military technology development projects funded by astronomical budgets. It nurtured cutting-edge manufacturing by transferring various core technologies developed by the government to private companies. The ARPAnet, the precursor to the internet, is the most representative example. Similarly, if one delves into the history of the internet, one can see that it was a technology developed by the U.S. Defense Advanced Research Projects Agency (DARPA) for military purposes. Not only the internet, but also supercomputers, semiconductors, transistors, the Boeing 707, and microwave ovens—countless technologies and products—were developed through U.S. government-led military projects before being transferred to the private sector.
Based on what has been explained so far, it is clear that the Trump administration’s policy of strengthening protectionism is not an unfamiliar phenomenon in historical terms. This naturally raises the question: “Why is the Trump administration attempting to return to protectionism, going back more than half a century?” The answer can be found by examining the current reality of the U.S. economy. Since the 1980s, the U.S. has abandoned policies to foster manufacturing and begun restructuring its economy around new industries. The plan was to entrust the role of the world’s factory to Asian nations such as South Korea, China, and Japan, and instead restructure the U.S. economy around the financial services sector.
By shifting its economic structure from a manufacturing base to a financial services-centered one, the U.S. achieved sustained GDP growth. However, there were significant side effects. The problem is that the fruits of GDP growth went exclusively to the highly educated elite working in the financial sector. As manufacturing lost its competitiveness, factories closed, jobs disappeared, and the resulting hardship fell on the shoulders of the many low-skilled manufacturing workers.
There is a representative study that illustrates the suffering endured by low-skilled workers in the U.S. due to the decline of manufacturing: suicide rates. A 2016 report titled “Trade Liberalization and Mortality: Evidence from U.S. Counties,” authored by economists Justin Pierce and Peter Short of Yale University, argues that the suffering of low-skilled workers is leading to rising suicide rates. It notes that suicide rates among white men are increasing, particularly in regions where manufacturing plants—forced to close due to losing out to competition from China—were primarily located. Suicide rate statistics reveal that middle-aged white men, who once enjoyed a middle-class lifestyle working in manufacturing, are falling into a pit of despair alongside the decline of the manufacturing sector.
In the 2016 U.S. presidential election, Donald Trump received strong support in the regions of the United States experiencing manufacturing decline, commonly referred to as the “Rust Belt.” Manufacturing workers, who were mired in disappointment and frustration, actively responded to his declaration promising the revival of manufacturing under the slogan “Make America Great Again!” Once elected president, Trump had to meet the expectations of this support base and adopted a strategy of protecting domestic manufacturing by imposing high tariffs on imported goods.
The Trump administration’s first term pushed aggressive protectionist measures, such as tariff hikes, even at the cost of trade disputes with allies. These measures were not merely the result of Trump’s unique political style, but emerged from long-standing economic discontent and the tide of political change within the United States. In particular, countries like South Korea—which are highly export-dependent and rely heavily on trade with the U.S.—needed to accurately understand the context of this trade war and respond accordingly.
Trump began his second term after defeating Democratic candidate Kamala Harris in the 2024 presidential election. This marked his return to the White House four years after his defeat in the 2020 election, representing a rare instance in U.S. history where a former president successfully secured re-election. During the campaign, he regained support in the Rust Belt and Sun Belt regions and succeeded in mobilizing a large number of voters based on his strong foundation within the Republican Party.
The Trump administration in its second term further strengthened the protectionist policies pursued during his first term and focused on realigning trade relations with countries around the world, including allies. In particular, it reignited the trade war with China and implemented measures to maintain existing tariffs or raise them further. Furthermore, he restricted Chinese companies’ access to the U.S. market and accelerated decoupling from China in the semiconductor, battery, and advanced technology sectors.
Allies, including South Korea, were not spared from Trump’s protectionist stance. He demanded expanded domestic production in industries such as automobiles, steel, and semiconductors, and applied additional trade pressure on South Korea, Japan, and the European Union (EU). In particular, he hinted at the possibility of reviewing the Korea-U.S. FTA and the USMCA (United States-Mexico-Canada Agreement), demanding revisions to these agreements aimed at reducing the U.S. trade deficit.
Furthermore, Trump accelerated the restructuring of global supply chains and pursued a policy of actively utilizing countries such as Vietnam and Mexico as “alternative production bases” to China. Consequently, South Korean companies found themselves in a situation where they had to reduce their dependence on China and implement strategic responses, such as expanding direct investment in the U.S. and strengthening their presence in Mexico and Southeast Asia.
The economic policies of Trump’s second term prioritized the revival of U.S.-centered manufacturing and the protection of domestic industries, which brought about significant changes to the global trade order. For countries with export-oriented economies like South Korea, this marked a period where new challenges and opportunities coexisted.
