From trade wars to battlefields: Tariff disputes have ignited some of history's biggest conflicts

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The U.S. Civil War: More Than Just Slavery

As early as 1793, British political reformer Thomas Hardy (not to be confused with the 19th century novelist) observed that once America industrialized, the nation would either fracture or become a monarchy. He doubted the republic could reconcile the conflicting interests of Northern industrialists and Southern planters.

Initially, Hardy's prediction appeared suspect. The United States not only held together but expanded territorially and experienced rapid economic growth, largely fueled by the production of cotton. Until the mid-19th century, the textile industry was the primary engine of industrialization, and cotton held a place in global trade comparable to that of oil in the following century. The “cotton revolution,” which dramatically lowered fabric costs, spurred tremendous production growth.

However, cotton grown in the Southern states primarily fueled the growth of the British textile industry, rather than America's own. By the mid-19th century, 65% of the U.S. cotton crop was exported, predominantly to England, where it accounted for four-fifths of the country's total cotton imports.

Cotton was America's chief export, and as a result, the Southern states contributed over half of the federal government's revenue — reaching up to 80% in some years. Simultaneously, income from cotton sales created substantial purchasing power in the South, making it a vital market for the North's industrial goods. The problem was that American manufacturing was less cost-efficient than its European — particularly British — competitors. The solution adopted was the introduction of import tariffs, initially set at 10%, to shield the Northern economy and help it compete against the work of European laborers, who were said to work 12-hour days in exchange for what were, by American standards, meager wages.

However, Northern industrialists quickly grew accustomed to this protection. Instead of focusing on improving the quality and competitiveness of their products, they pushed for higher tariffs. Southerners were left with a difficult choice: pay significantly higher prices for European goods due to the tariffs, or buy Northern-made products that were often more expensive and of lower quality. The South endured this arrangement until tensions boiled over during the 1832 Nullification Crisis, an event historian William Freehling described as “a prelude to the civil war.”

The situation intensified when an exorbitantly high protectionist tariff was introduced — exceeding 50% on certain goods. In the South, this was bitterly dubbed the “Tariff of Abominations.” South Carolina refused to implement the tariff and demanded the right to nullify federal laws — hence the “Nullification Crisis.” The state threatened secession if its demands were not met, and armed conflict was narrowly avoided after both sides eventually reached a compromise.

In 1833, an agreement was reached to gradually reduce tariffs back down to 20%. However, this compromise came alongside the passage of the Force Bill of 1833, which explicitly authorized the federal government to use military means to suppress “rebellion” — a clear reference to secession.

This fragile truce lasted until 1857, when, shortly after the tariffs were lowered significantly, the U.S. experienced its first large-scale financial crisis. The downturn bankrupted thousands of Northern entrepreneurs and led to the collapse of 1,400 banks.

Most modern economists attribute the 1857 crisis to other factors. However, many contemporaries were not inclined to delve into the complexities: “No mathematical calculation can more clearly prove that the recent disaster is entirely due to the repeal of protectionist duties,” declared fervent protectionist Horace Greeley, a leading American journalist and politician, in his influential New York Tribune.

Southerners, in response, largely dismissed these claims, viewing themselves as the North's benefactors. Senator James Hammond of South Carolina explained the situation from his side’s perspective:

“When thousands of the strongest commercial houses in the world were coming down, and hundreds of millions of dollars of supposed property evaporating in thin air; when you came to a dead lock, and revolutions were threatened, what brought you up? Fortunately for you it was the commencement of the cotton season, and we have poured in upon you one million six hundred thousand bales of cotton just at the crisis to save you from destruction. That cotton, but for the bursting of your speculative bubbles in the North, which produced the whole of this convulsion, would have brought us $100,000,000. We have sold it for $65,000,000 and saved you. Thirty-five million dollars we, the slaveholders of the South, have put into the charity box for your magnificent financiers, your ‘cotton lords,’ your ‘merchant princes.’”

Naturally, the orators of the North and South failed to sway one another. The newly formed Republican Party made raising tariffs a central plank of its platform in the 1860 presidential election, and the promise of protecting American workers in the populous North from “unfair” competition resonated strongly, making the party front-runners in the race.

But tariffs weren't their only selling point. The Republicans also actively promoted the Homestead Act, which promised the transfer of Western lands to settlers at nominal prices. The campaign slogan, “Vote Yourself a Farm — Vote Yourself a Tariff,” proved to be a powerful combination, effectively serving as the battering ram that opened the doors of the White House to Abraham Lincoln.

For Southerners, the election of a president firmly committed to high tariffs — the Republicans planned an immediate hike to 37%, nearly reaching the levels of the notorious “Tariff of Abominations” — was the final straw. The South, more integrated into the global economy than the domestic one, was not dependent on Northern goods. Unlike the British industrial sector, the North did not have the capacity to absorb the quantities of cotton the South was producing.

Conversely, the North heavily relied on the South, both as a market for its industrial products and as a major source of federal revenue derived from tariffs on imported goods purchased with cotton wealth. Losing the Southern states spelled potential economic catastrophe for the North.

“Ultimately, it was a struggle between the commercial interests of England and America,” writes American sociologist Barrington Moore. But, as is often the case, the economic conflict increasingly took on a moral dimension.

Northerners tended to view Southern resistance as stemming from inherent depravity, arguing the South was “hopelessly corrupted by the original sin of slavery” and that the region was unwilling to make sacrifices “for the good of the united Union.” As runaway slave turned abolitionist Frederick Douglass declaimed: “Your shouts of freedom, your proud boasts, your solemn processions, your noisy celebrations — to me, this is merely empty tinsel, deception, hypocrisy, covering a crime that most blackens your nation. Is there a country on earth guilty of practices as horrifying and bloody as slavery in America?”

Southerners countered that they were financially subjugated, “even more so than our negroes,” and argued the North itself was hardly a beacon of republican virtue. In his 1857 book — provocatively titled “Cannibals All!” — Virginian George Fitzhugh contended that capitalist “free labor” inevitably led to the mass impoverishment of workers within an exploitative class system. “Free laborers must work constantly or starve, whereas slaves are maintained whether they work or not,” Fitzhugh argued.

While the debate over slavery often dominated the rhetoric, presenting the struggle for abolition as the sole cause of the Civil War overlooks crucial economic and political factors. School textbooks frequently emphasize the importance of slavery, but the statements of key participants show that the real story is more complicated. Abraham Lincoln famously declared, “If I could save the Union without freeing any slave I would do it.” Conversely, late in 1864, Confederate President Jefferson Davis was reportedly prepared to abolish slavery himself in exchange for diplomatic recognition and military aid from Britain and France.

The crux of the conflict, therefore, lay less in the morality of slavery itself and more in the fundamental question of whose interests the federal government would serve. Would Congress, as one Republican phrased it, be “a prostitute, vilely used by the slaveholding power,” or would it adhere to principles like those enshrined in the Confederate constitution, which stated, “no bounties shall be granted from the Treasury; nor shall any duties or taxes on importations from foreign nations be laid to promote or foster any branch of industry”?

The tariff dispute thus evolved into a broader conflict over central authority. Onto this central axis were overlaid the simmering issues of slavery, the Homestead Act, and the status of new territories. Southerners actively sought to slow the settlement of the West by free farmers, fearing that such expansion would increase the number of free states and consequently bolster Northern representation and power in Congress and the Senate.

These interwoven conflicts ultimately validated Thomas Hardy's earlier prediction. The republican model proved incapable of peacefully reconciling the divergent interests of industrialists and planters. In the face of an economic crisis, the North, with its 22 million people, appeared willing to sacrifice the interests of the 9 million-strong South (only 5 million of whom were white). However, Southerners refused to continue playing by democratic rules that now clearly favored the North. Consequently, from 1861 to 1865, the dispute was settled not through negotiation, but with iron and blood.

How tariffs pushed Austria and Prussia towards war

While America’s Southern states desperately sought to leave their union, a contrasting dynamic played out in Germany, where the southern power, Austria, suddenly desired to join one. This union was the Deutscher Zollverein — the German Customs Union — established under Prussia's initiative in 1833. Its original members included Bavaria, Württemberg, and Saxony, and it eventually grew to 18 German states. Austria, however, remained conspicuously outside.

Berlin's motivation for creating the Zollverein was purely pragmatic. The patchwork of borders established by the Congress of Vienna had made customs control exceedingly complex for Prussia, and the customs union offered a means of maximizing tariff collection while minimizing administrative costs. As an incentive, neighboring German states were granted access to the lucrative Prussian market. They did not even have to give up membership in the political entity known as the German Confederation (often called the German Union), a largely ineffective body whose political agency was paralyzed by the perpetual rivalry between Prussia and Austria.

Unlike the Confederation, the Zollverein was firmly under Prussian control. Other members simply received their agreed-upon share of the duties collected at the external borders. Efficient Prussian administration successfully curbed smuggling and fueled explosive growth in revenue, which surged from 14.5 million thalers in 1834 to 27 million by 1844 — a rate far exceeding population growth during the same period.

Intriguingly, during the early years of the Customs Union, Berlin actually appeared to be on the losing end of the arrangement. Tax revenues flowing into the Prussian treasury initially dropped by 25%, taking five years to recover to previous levels. In contrast, most other member states saw immediate financial gains. Furthermore, Prussia frequently relinquished portions of the revenue it was entitled to based on population, redirecting the funds to its Zollverein partners.

British historian A.J.P. Taylor wryly observed that had Prussia possessed a parliament at the time, its members might well have blocked the Zollverein's creation, deeming it clearly disadvantageous to the nation — a point perhaps underscored by the concurrent political struggles in the United States.

However, the long-term perspective revealed the Customs Union to be beneficial for all involved. Its success was so ingrained that even during the Austro-Prussian War of 1866, states like Bavaria, Württemberg, and Hanover — despite siding militarily with Austria against Prussia — continued to collect customs duties and dutifully remit them to Berlin as per the treaty obligations. Remarkably, Prussia then distributed the funds fairly at the end of the fiscal year, not even penalizing its recent adversaries by a single pfennig.

As for Prussia, any initial shortfall in customs revenue was more than compensated for by significant economic growth. The architects of the Zollverein hadn't explicitly planned for this surge, as their primary focus was on managing sprawling, hard-to-control borders and saving on customs administration costs. But this Prussian experiment yielded a remarkable side effect: in the medium term, the elimination of internal tariffs spurred a significant increase in trade volume across Germany, which in turn stimulated the construction of railways.

This railway boom subsequently fueled the expansion of coal mining, iron and steel production, and machine building. The expanding transport network enhanced the security of commerce, particularly for bulk goods, which further encouraged investment, ultimately leading to Germany's industrial revolution.

The Zollverein and railway construction became two intertwined forces, the “Siamese twins” driving modernization in Germany. As the coal mines and steel mills of the Ruhr region expanded, Prussia transformed into a first-rank economic power. In the words of Russian-Soviet historian Alexey Dzhivelegov, the creation of the Customs Union proved to be “a more decisive victory for Prussia than even the victory at Sadowa” — the decisive battle of the Austro-Prussian War.

While the resulting economic boom may have come as a welcome surprise, the political side effects of the Zollverein were recognized early on by more perceptive Germans. Prussian Finance Minister Friedrich Motz, who passed away before the union's formal creation, presciently wrote:

“If it is true in political science that customs duties are merely the consequence of the political separation of different states, then it must also be true that the unification of these states into a customs and trade union entails their unification into one political system.”

August Hoffmann von Fallersleben, author of the German national anthem — “Deutschland, Deutschland über Alles” — expressed the political significance of the Zollverein even more bluntly in verse:

You shall forge the Germans into a nation,
Awaken the thrill of greatness.
More than the Confederation –
You shall return our Fatherland to us!

By “Fatherland,” von Fallersleben clearly envisioned not just a nebulous German identity, but a unified, powerful, and centralized Reich.

In Vienna, too, key figures soon realized that such a potent instrument of influence as the Zollverein could not be left solely in Prussian hands — it needed to be either dismantled or joined. Austrian Chancellor Prince Metternich was among the first to sound the alarm, warning that, “Austria is on the verge of being, to some extent, excluded from the rest of Germany and regarded as a foreign country.”

However, his attempts to integrate the Habsburg Empire into the Customs Union repeatedly stalled against the staunch opposition of Austrian industrialists and powerful Hungarian magnates. These groups preferred the safety net of protectionist tariffs to protect their revenues, rather than risk their fortunes in the highly competitive open market envisioned by the Zollverein. Only in the more economically developed region of Bohemia did the prospect of joining the union find notable proponents.

It was in the wake of the revolutionary turmoil of 1848-49 that the Austrian government, under Prince Felix Schwarzenberg, finally managed to break the resistance of its domestic economic opponents. Time was becoming critical, as 1850 saw Prussia make its first serious bid to unify Germany under its own banner. This initiative took the form of the so-called Erfurt Union, a federal project proposed by the Prussians at a congress of German princes held in that Thuringian city.

The Austrian army began massing troops in Bohemia and was prepared to use force if necessary to prevent the federation's formation. Prussia responded by declaring its own mobilization. The crisis was defused by the intervention of the Russian government in St. Petersburg. Prior to the Crimean War, Russia acted as the undisputed arbiter in German affairs, and Tsar Nicholas I's policy favored maintaining a fragmented Germany. Unsurprisingly, the Russian emperor sided with Vienna.

The result was the November 1850 Agreement of Olmütz — known in German tradition as the “Humiliation of Olmütz,” in which a chastened Berlin consented to dissolve the Erfurt Union and restore the German Confederation.

However, Schwarzenberg, who envisioned a unified customs zone stretching from Hamburg to Trieste, failed to capitalize on this diplomatic victory, and Austria's application to join the Zollverein was almost unanimously rejected at a conference of its members in Dresden in 1851. A pivotal role in this decision was played by a then relatively unknown young politician serving as Prussia's envoy to the Federal Assembly: Otto von Bismarck.

Bismarck argued that an economic union could only function effectively if it brought together states with similar levels of development, comparable political systems, and related cultural traditions. What common ground, he rhetorically questioned, existed between an unassuming Galician and a prosperous Rhinelander, or between a Slovak peasant and a Hamburg hairdresser?

This line of reasoning resonated even within German states that were politically aligned with Vienna. The prospect of a single customs area encompassing Austria — with its less developed industrial base, its protectionist tariffs, and its cheap agricultural goods — held little economic appeal. Furthermore, due to corruption, the Austrian Empire's borders were notoriously porous, and the resulting influx of smuggled goods threatened the fiscal interests of the existing Zollverein members.

Bismarck, meanwhile, clearly understood that the struggle extended beyond mere economics. “Our policy,” he asserted, “due to purely geographical reasons, has no other arena than Germany, and it is precisely this arena that Austria seeks to exploit for its own purposes; there is not enough room here for both.” As a consolation prize, Vienna was promised that its membership application would be reconsidered when the Zollverein treaty came up for renewal in 1864.

That year saw a temporary military alliance between Vienna and Berlin form against Denmark. Together, they swiftly defeated the small northern kingdom, annexing the German-speaking duchies of Schleswig-Holstein. It might have seemed the perfect moment to welcome the Austrian Empire into the Zollverein fold, and Austrian Foreign Minister Count Rechberg persistently pressed Bismarck on the issue. But yet again, Bismarck torpedoed the idea, and in doing so he received the full backing of the union's members.

After that, Austria's policies grew increasingly erratic, its finances were strained, and even political sympathizers began losing faith in what some disparagingly termed the “European China” (a far from complimentary comparison at the time). The prevailing fear was that Austria, if it were admitted to the union, would manipulate tariffs to benefit its own economic agents, whose interests diverged sharply from those of the North German bourgeoisie and Prussian Junkers. Tellingly, even Bavaria and Württemberg — Vienna's staunchest allies within the German Confederation — voted against Austria's admission to the Zollverein. Ultimately, their own economic interests took precedence over political allegiances.

“The Zollverein problem created a greater rift [between Prussia and Austria] than all the political actions of these years,” summarizes historian A.J.P. Taylor. Count Rechberg, who had advocated for cooperation between the two powers, was dismissed. In Vienna, the “war party” gained ascendancy, convinced that it was time to teach the arrogant Northerners a lesson. Encouraging this sentiment was the assessment of most military experts (including, notably, Friedrich Engels) who favored the Austrian army in any potential conflict.

This proved to be one of the most significant expert miscalculations in military history. Thanks to the political acumen of Bismarck, the military genius of Helmuth von Moltke, and the often-cited “Prussian schoolteacher” — a phrase symbolizing Prussia's superior education and organization — Prussia needed just six weeks to decisively defeat the Austrians at the 1866 Battle of Sadowa. Prussian forces advanced towards Vienna, ultimately securing an honorable peace treaty and establishing the North German Confederation in the war's aftermath.

The subsequent Franco-Prussian War of 1870-71, during which the unified German Empire was proclaimed, was merely the endgame of a contest Bismarck had effectively already won. It is telling that in 1906, forty years after Sadowa, Napoleon III's widow, Empress Eugenie, confessed: “It was in that July [1866] that our fate was sealed.”

The outcomes of these two vastly different wars, fought an ocean apart, proved remarkably similar: both resulted in the creation or preservation of unified economic spaces that served as incubators for explosive industrial growth, and within a generation, the United States and Germany surpassed Great Britain in several key industrial production metrics.

By the late 19th century, British Prime Minister Lord Salisbury acknowledged a world divided into “living” and “dying” powers — with the United States and Germany universally recognized as belonging to the former category. Experts began debating not if Pax Britannica would end, but rather which of these rising nations would inherit it.

This era also saw the emergence of the “theory of three world empires,” which posited that in the coming century, only three (or perhaps even just two) major global powers would retain full sovereignty, while second and third-tier nations would inevitably be drawn into the orbits of the blocs created by these superpowers. The subsequent struggle to determine precisely which nations would achieve this status became the defining conflict of the 20th century.