Failed 2012 presidential candidate Mitt Romney has been claiming that Donald Trump's (and by logical implication, Bernie Sanders') proposed rejection of free trade would start a trade war and tip America into recession.
But I have a simpler one: Trade wars are mythical. They simply do not happen.
If you google "the trade war of," you won't find any historical examples. There was no Austro-Korean Trade War of 1638, Panamanian-Brazilian Trade War of 1953 or any others. History is devoid of them.
Please don't respond with that old canard about the Smoot-Hawley tariff of 1930 starting a trade war and causing the Great Depression. It doesn't stand up, as actual economic historians from Milton Friedman on the right to Paul Krugman on the left have documented. See here, and here, and here.
The Depression's cause was monetary. The Fed allowed the money supply to balloon during the late 1920s, piling up in the stock market as a bubble. It then panicked, miscalculated, and let it collapse by a third by 1933, depriving the economy of the liquidity it needed to breathe. A wave of bank failures in 1930 spread the collapse around the country. Trade had nothing to do with it.
As for the charge that Smoot caused the Depression to spread worldwide: it was too small a change to have plausibly so large an effect. For a start, it only applied to about one-third of America's trade: about 1.3 percent of GDP. Our average tariff on dutiable goods went from 44.6 to 53.2 percent--not a large jump. Tariffs were higher in almost every year from 1821 to 1914. Our tariff went up in 1861, 1864, 1890, and 1922 without producing global depressions, and the recessions of 1873 and 1893 managed to spread worldwide absent tariff increases.
Neither does the myth of a spiral of retaliation by foreign nations stand up. According to the official State Department report on this question in 1931:
With the exception of discriminations in France, the extent of discrimination against American commerce is very slight...By far the largest number of countries do not discriminate against the commerce of the United States in any way.
Trade wars are an invented concept, a bogeyman invented to push free trade.
The giveaway, of course, is that free traders claim both that a) trade wars are a terrible threat we must constantly worry about, and b) it's obvious no nation can ever gain anything from having one. Think about that for minute.
Now my challenge to free traders (and to my readers) is this: write to me and name a trade war. I promise to publish any results I get.
Note: Trade wars started for non-economic reasons in wartime, with the deliberate intention of screwing up the other side's economy, don't count. We were quite right not to be selling Germany steel in 1942.