What happens when a leading trading nation faces the reality that its supremacy is waning?
For the first country to grapple with this dilemma — Britain — it led to an enduring identity crisis that continues more than a century later. As the United States confronts a similar crossroads, it must weigh whether free trade or protectionism holds the promise of greater prosperity.
In the 19th century, the UK’s fusion of manufacturing prowess and open commerce propelled it to pre-eminence. By the late 1800s, it accounted for approximately a quarter of the world’s industrial output. However, beneath this imperial confidence lay deep-seated anxieties triggered by the ascent of new global powers.
In Chicago, the Union Stock Yards sprawled over an area half the size of the old City of London, employing tens of thousands and processing enough meat to feed 80% of America’s population. Henry Ford replicated the Yards’ production-line innovations in Detroit to establish car factories on an unprecedented scale. Meanwhile, in Ludwigshafen, south of Stuttgart, Britain ceded its early lead in chemicals to BASF SE, whose vast integrated plants conferred near-monopoly status on Germany by 1900.
Joseph Chamberlain, a former titan of the world’s largest screw-making business and now a prominent British politician, saw the solution in a departure from the Empire’s free-trade ethos. “Tariffs! They are the politics of the future, and of the near future,” he declared at a parliamentary dinner in 1902.
The resultant policy, Imperial Preference, proposed steep levies on imports from outside the Empire. This protectionist approach dominated until the Second World War shattered Britain’s global pretensions, casting a long shadow over its turbulent relationship with the European Union’s trading bloc.
The parallels with present-day America, grappling with China’s manufacturing prowess, are stark. Like late Victorian Britain, a dominant power faces a rival endowed with abundant land, labor, and capital, rapidly closing the gap. Moreover, China’s investments and monumental industrial infrastructure overshadow competitors. China’s dominance of the clean technology supply chain appears near-absolute, producing 84% of the world’s solar modules, 86% of lithium-ion batteries, and a substantial share of wind turbine components and electrolyzers for green hydrogen.
President Joe Biden’s recent remarks underscore America’s response to this challenge, signaling a stance against China’s economic practices with higher tariffs on its products.
The experience of Britain’s brief experiment with protectionism offers cautionary lessons. Despite early 20th-century angst, the UK remained a top-five manufacturing power until the 2000s, when it was overtaken by China, Italy, South Korea, India, Mexico, and Russia. In contrast, nations embracing protectionism encountered stunted manufacturing sectors and enduring debt burdens.
While the United States is unlikely to face such dire consequences, it faces a shifting global landscape where multiple industrial giants vie for dominance. Sustaining its hegemony will require avoiding isolationist tendencies and embracing strategic engagement in the global economy.