Working Paper: NBER ID: w25830
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: trade wars; trade blocs; interwar period; bilateral trade; protectionism
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 of the early 1930s (N41) | intensification of preexisting efforts towards the formation of trade blocs (F15) |
| trade wars of the early 1930s (N41) | trade between Commonwealth countries (F19) |
| trade between Commonwealth countries (F19) | decline in trade within the larger sterling area (F36) |
| average distance of bilateral trade flows (F10) | shift towards a more geopolitically driven goal (F52) |
| decrease in the influence of distance (R12) | significant shift in trade dynamics during the interwar period (F69) |
| trade wars of today (F69) | intensification of US- and China-centric trade blocs (F15) |