Tariff War Today, Troops in Trenches Tomorrow? A Warning From History

The probability of a 'Financial World War' remains as tariffs significantly disrupt markets, writes Deepanshu Mohan.

The probability of a 'Financial World War' remains as tariffs significantly disrupt markets and supply chains on an unprecedented scale.

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There is a high probability of a 'Financial World War' as tariffs significantly disrupt markets and supply chains on an unprecedented scale.

Amid the governing dynamics of changing turns in global political economy landscape, tariffs as trade tools have always been used as measures to achieve narrow economic or political interests.

From the tariff wars of the early 19th century to the retaliatory trade spins of the 20th century, lessons from economic history consistently caution that accentuated protectionism – even with the best of intention – rarely protects or achieves its intended goal.

What does happen though is a higher probabilistic scenario of a military conflict between countries when trade-anchored interdependence weakens.

As the Donald Trump administration’s tariff war continues to wreak havoc, and crash stock markets, its relationship with the one critical target of the induced trade conflict, China, offers a complex and complicated path ahead.

Historical Context of Trade and Tariffs

Trade, in essence, has never been apolitical.

From Ancient Rome to 17th century Europe, states have regularly used tariffs to weaken opponents and regulate trade. History witnessed that whenever access to trade is blocked, states often engage in violent conflicts. The Anglo-Dutch Wars in the 17th century is a classic example wherein trade supremacy and tariff played a role in conflict. Over a century later, a similar pattern emerged.

The 1773 Boston Tea Party was sparked by the Tea Act, which gave the British East India Company a tax advantage, undercutting local merchants, and thus creating a government-backed monopoly over the lucrative tea trade.

Similarly, the tariff wars throughout the interwar period, like the Weimar Republic's trade dispute with Poland in the 1920s, increased nationalistic and economic tensions, resulting in political instability in the area.

These events suggest a trend that protracted trade disputes can weaken and sometimes cut the diplomatic relations between states, provoke ultra-nationalist sentiment, and serve as triggers for violent conflicts.

Present Tariff Conflicts and the Potential for Escalation into Global Hostilities

The current tariff disputes between the US and China have raised concerns about the possibility of escalating into a severe global crisis.

With China imposing taxes up to 145 percent on exports to the US and the US retaliating with 125 percent tariff duties on Chinese Imports, the tariff rates between the two countries have drastically increased. These aggressive economic positions exemplify the protectionist instincts that preceded World War I, considered as the precursor to greater conflicts.

US President Trump has publicly accepted the dangers, threatening a possible rise in the tariffs and emphasising the probability of an economic dispute transforming into a major geopolitical conflict. His controversial rhetoric reflects a weak bond between economic policy and national security issues in a global context.

Analysts underline the fact that while there is a possibility of armed conflict, it is not unavoidable. Different factors such as diplomatic channels and economic interdependence, may help in reducing conflict. The probability of a 'Financial World War' remains as the tariffs significantly disrupt markets and supply chains on an unprecedented scale.

Consequences of Disruptions Caused by Tariff Wars

Tariff wars impact economies on multiple levels, creating intricate disruptions that go well beyond the customs offices. In the beginning, the tariffs increase consumer and producer prices, resulting in inflationary pressures. Tariffs enacted during the US-China trade war have significantly elevated the costs, with projections indicating an average tax burden rise of over $1,300 per US household in 2025.

Moreover, entwined manufacturing supply chains, which depend heavily on reliable and inexpensive worldwide flow of goods and products, encounter huge disruptions. Tariffs on essential sectors, like steel, aluminium, electronics, and automobiles, necessitate that corporations reevaluate their sourcing strategy and logistics, frequently increasing prices and diminishing efficiency. This realignment increases consumer prices and shrinks the company margins, resulting in decreased output and reduced employment in impacted sectors.

Trade conflicts create extensive economic uncertainty and weaken company and consumer confidence. Surveys indicate a shift in attitude, mirroring concerns about inflation, unemployment, and a deceleration in economic growth. This uncertainty inhibits investment and employment, thereby slowing GDP growth and exacerbating recession risks.

Again the geopolitical disturbances are often accompanied by economic repercussions. Countries imposed with tariffs frequently respond with reciprocal taxes, heightening tensions and undermining diplomatic relations.

This landscape of retaliatory tariffs has expanded to encompass numerous states, including the European Union, Canada, Mexico, and ASEAN nations, so complicating the governance of international trade and security. This reciprocal escalation may devolve into detrimental trade wars that diminish trade volumes and hinder global economic growth. Historical instances encompass the Smoot-Hawley Tariff of 1930 and the present US-China trade conflict.

It is worth noting how, across history, tariffs have never operated in a vacuum. They can fracture long-term alliances, provoke retaliatory policies, and ignite arms races. While protectionism does create polarisation, trade linkages promote opportunities for diplomacy.

Nations frequently resort to force when containment fails.

Could the 2025 US Tariffs Accentuate Military Conflict?

Given this pattern, based on economic history evidence, the possibility of a larger military conflict accentuated by a conflicted US-China dynamic cannot be dismissed. The US in 2025 is targeting China strategically, not just economically. China sees this as containment, not trade policy.

History shows that when trade barriers threaten a nation’s survival, escalation often follows. The trade war could bring the global economy on the brink of recession, by slashing the global GDP by up to 7 percent.

The South China Sea is a high-stakes economic route, accounting for more than 30 percent of all international traffic. Beijing may retaliate by fortifying important trade routes or imposing blockades, particularly in the Taiwan area, as US tariffs and technological limitations on China escalate in 2025.

This is similar to the Napoleonic Wars, in which the US was drawn into the War of 1812 as a result of British and French trade restrictions that transformed neutral waters into combat zones. Military might soon become the deciding factor in control of trade waterways.

Similarly, China views US assistance for Taiwan through trade, weaponry, and semiconductors as a component of a larger containment strategy. Similar to the American oil embargo on Japan in 1941, the economic pressure of today can be viewed as a strategic threat that prompts Beijing to take preventative action.

The risk is increased by the WTO's stagnation, which leaves no credible system in place to settle trade disputes amicably, this might even lead to more than a 1 percent contraction in global trade. This is similar to the 1930s, when retaliatory tariffs, economic isolationism, and poor global governance built the way for World War II.

In Summation

Historically, the trade wars have acted as triggers for confrontations. The current tariff wars especially between the US and China, deepen these apprehensions, increasing the economic strain and political disagreement at an important moment for international cooperation.

The possibility of escalating into a global military conflict, similar to World War III, remains uncertain; nonetheless, the economic and social disruptions caused by tariff wars already have considerable adverse effects. The intersection of economic instability and geopolitical tensions underscores the urgent need for strategic diplomacy and multilateral collaboration to prevent another global crisis arising from protectionism and economic nationalism.

History warns that tariff disagreements can lead to substantial warfare; current tariff issues require careful management to avoid repeating past mistakes and to uphold global peace and prosperity. History demonstrates that while tariffs can fulfill specific short-term goals, lasting economic stability and global peace rely on strategic, multilateral approaches and diplomatic engagement rather than increased protectionism.

(Deepanshu Mohan is a Professor of Economics, Dean, IDEAS, Office of Inter-Disciplinary Studies, and Director of Centre for New Economics Studies (CNES), OP Jindal Global University. He is a Visiting Professor at the London School of Economics, and a 2024 Fall Academic Visitor to the Faculty of Asian and Middle Eastern Studies, University of Oxford. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)