Working Paper: CEPR ID: DP13716
Authors: David S. Jacks; Dennis Novy
Abstract: What precisely were the causes and consequences of the trade wars in the 1930s? Were there perhaps deeper forces at work in reorienting global trade prior to the outbreak of World War II? And what lessons may this particular historical episode provide for the present day? To answer these questions, we distinguish between long-run secular trends in the period from 1920 to 1939 related to the formation of trade blocs (in particular, the British Commonwealth) and short-run disruptions associated with the trade wars of the 1930s (in particular, large and widespread declines in bilateral trade, the narrowing of trade imbalances, and sharp drops in average traded distances). We argue that the trade wars mainly served to intensify pre-existing efforts towards the formation of trade blocs which dated from at least 1920. More speculatively, we argue that the trade wars of the present day may serve a similar purpose as those in the 1930s, that is, the intensification of China- and US-centric trade blocs.
Keywords: Commonwealth; Distance; Gravity; Interwar Period; Trade Blocs; Trade Wars
JEL Codes: F1; F3; N7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Trade wars (F19) | Intensification of trade bloc formation (F15) |
| Trade wars (F19) | Formation of trade blocs (F15) |
| Trade bloc formation (F15) | Increased trade within the Commonwealth (F19) |
| Trade wars (F19) | Deeper integration among Commonwealth countries (F15) |