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 United States waged an unrelenting trade war against major countries around the world. Not only China, which is locked in a struggle 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 of little use in the face of a president with a business background who prioritized U.S. interests. The U.S. government’s willingness to impose high tariffs on imports without hesitation to protect its domestic manufacturing sector cast a deep shadow of “protectionism.”
In fact, until President Trump took office and launched a massive trade war, the United States had been seen 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, following President Trump’s inauguration, 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 ahead 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 safeguard U.S. interests in international trade.
The History of Protectionism
The Trump administration’s actions presented a completely different image from the U.S. government we had known before. Until then, the United States had been a champion of free trade, a nation that mobilized every form of pressure to force countries erecting trade barriers against foreign goods to open their markets. The sight of the U.S. raising its own trade barriers to protect its domestic manufacturing sector from imports felt a world away from the America we knew.
But is that really the case? In this blog post, I will explore the history of protectionism, which the U.S. government maintained unwaveringly for about 200 years—from the nation’s founding until the end of World War II. Some argue that protectionism was one of the key reasons the United States, once a poor agricultural nation, was able to grow into the global superpower it is today. I will also briefly touch on the support policies the U.S. government adopted 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 staunch defender of the free-trade system—as we have come to know it—was, historically speaking, quite un-American. After reading this book, you will realize that the protectionist policies pushed by Trump have very deep-rooted ideological foundations. In other words, the United States did not turn to protectionism simply because of President Trump’s unique personality and eccentric temperament.
The father of U.S. protectionism, manufacturing promotion, and industrial 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 pursued 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 exports 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 subsisted 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’s founding, America’s technological capabilities were so underdeveloped that they paled in comparison 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 gain a foothold in the U.S. market. The tariff revenue collected from these imports was reinvested into fostering American manufacturing. This policy of high tariffs 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 preposterous.
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—such as 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 a central bank was one of the policies Hamilton pushed through despite fierce opposition from his opponents.
From the late 1700s to around 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. However, when discussing the secret behind how the United States—a poor agricultural nation with little technological capability—was able to grow 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 but left everything to private-sector autonomy and 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, with 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 primary incentive used was land. It is said that the land the U.S. government gave away for free to private railroad companies that built railroads is roughly equivalent to the land area of modern-day Britain.
Protectionism vs. Free Trade
So when did the image of the United States 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 in earnest to establish a free-trade system. This was a period of intense Cold War conflict with the communist bloc, centered on the Soviet Union. To prevent its allies from falling into the communist camp, the U.S. ultimately had to help the citizens of those nations achieve a better standard of living; to support the economic growth of its allies, it could no longer prioritize the interests of its own manufacturing sector as it had in the past. It was therefore 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 its manufacturing sector 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 gave up on fostering 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. 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. In addition to the Internet, countless technologies and products—including supercomputers, semiconductors, transistors, the Boeing 707, and microwave ovens—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 unprecedented phenomenon in history. This naturally raises the question: “Why is the Trump administration trying to return to protectionism, going back more than half a century?” The answer to this question can be found by examining the current reality of the U.S. economy. Since the 1980s, the United States has abandoned policies to promote manufacturing and begun restructuring its economy around new industries. The plan was to entrust the role of the “world’s factory” to Asian countries 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 United States was able to achieve sustained GDP growth. However, there were also 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 and jobs were lost, 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 U.S. workers 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, professors at Yale University, argues that the hardships faced by low-skilled workers are 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 Chinese competition—were primarily located. Suicide rate statistics reveal that middle-aged white men, who once worked in manufacturing and enjoyed a middle-class lifestyle, are sinking 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 affected by manufacturing decline, commonly referred to as the “Rust Belt.” Manufacturing workers, who were mired in disappointment and frustration, actively responded to his pledge to revive 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 rather emerged from long-standing economic discontent and shifting political trends within the United States. In particular, countries like South Korea—which are highly export-dependent and rely heavily on trade with the United States—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 of a former president successfully winning re-election. During the election campaign, he regained support in the Rust Belt and Sun Belt regions and, building on his strong base within the Republican Party, succeeded in mobilizing a large number of voters.
The Trump administration’s 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 by maintaining existing tariffs or imposing additional increases. 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 an expansion of domestic production in industries such as automobiles, steel, and semiconductors, and exerted 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 take strategic measures to reduce their dependence on China, expand direct investment in the United States, and strengthen 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, such as South Korea, this marked a period in which new challenges and opportunities coexisted.
