Tariffs and Trade Policy After World War II: Liberalization and the Turn to Protectionism

In the aftermath of World War II, Allied leaders sought to rebuild shattered economies and prevent a repeat of the 1930s by forging an open, rule-based trading order. The 1947 General Agreement on Tariffs and Trade (GATT) embodied this vision: its framers pledged “substantial reduction of tariffs and other trade barriers… on a reciprocal and mutually advantageous basis” so that “economic recovery after World War II can be boosted.”investopedia.comlaw.cornell.edu. U.S. policymakers explicitly believed that lowering trade barriers would not only revive growth from the Depression and war, but also help “prevent international disputes that could lead to future conflicts”wilsoncenter.orginvestopedia.com. In short, postwar trade liberalization was justified by three linked goals: rapid economic recovery, international cooperation, and a peaceful world order grounded in interdependence.

To that end, the United States led the formation of GATT in 1947 and successive multilateral negotiating rounds. The first GATT conference (Geneva, 1947) drew 23 countries and produced tariff-cutting commitments covering over US$10 billion of world tradeinvestopedia.com. Early rounds continued this trend: by the third (Torquay, 1950) tariffs were cut by up to 25% on thousands of itemsinvestopedia.com. Ultimately eight GATT rounds (1947–1994) slashed barriers dramatically. Across this period the average tariff rate among members fell from about 22% to roughly 5%investopedia.comlaw.cornell.edu. Trade flourished: for example, U.S. imports+exports rose from only ~10.9% of GDP in 1947 to nearly 30% by 2008wilsoncenter.org. In 1995 the Uruguay Round created the World Trade Organization (WTO), which inherited GATT’s mandate and added binding dispute settlement and new domains (services, intellectual property, agriculture)en.wikipedia.orginvestopedia.com.

• Tariff reductions: GATT/WTO rounds produced steep cuts. Average import tariffs of signatories fell from ~22% in 1947 to ~5% by the mid-1990sinvestopedia.comlaw.cornell.edu. Tariffs (though still not zero) largely replaced quotas, and ‘most-favored nation’ (MFN) rules spread liberalization uniformly across partnersinvestopedia.cominvestopedia.com.

• Economic integration: As barriers fell, world trade expanded rapidly. Analysts note that the volume of global exports grew manyfold, helping fuel the unprecedented growth of the 1950s–2000s. One study observes that “the world would be a very different place without GATT”, given that trade as a share of OECD GDP roughly tripled after WWIIwilsoncenter.orginvestopedia.com.

• Preventing conflict: The multilateral trade regime was deliberately designed to bind economies together. GATT’s founding goal was “to eliminate the protectionist policies that hindered international trade in the years before and during World War II”investopedia.com. By tying countries into reciprocal commitments, policymakers hoped to discourage unilateral trade wars like Smoot-Hawley (1930) and, by extension, avert geopolitical conflict.

Modern Protectionism and Trade Wars

In recent years, however, major economies have reversed course on trade liberalization. Starting in 2018, the United States under the “America First” doctrine unilaterally imposed sweeping new tariffs. For example, the Trump administration applied a 25% tariff on steel and 10% on aluminum imports (citing national security)focus-economics.com. Simultaneously, it launched a broad trade war with China: Section 301 duties covered hundreds of billions of dollars of Chinese goodslinkedin.comfocus-economics.com. By 2025 a complex web of U.S. tariffs had been announced – including ‘reciprocal’ levies up to 145% on certain Chinese importsbuiltin.com – often with lengthy exemption processes and country-specific rate hikes. The Trump administration also threatened WTO withdrawal and aggressive trade renegotiations, marking a stark break from the previous orthodoxy of steady liberalizationlinkedin.comfocus-economics.com.

The Biden administration has largely continued this protectionist trend. Despite emphasizing alliances and a rules-based systemcommerce.gov, the Biden team conducted a Section 301 review that raised tariffs on dozens of Chinese products. In 2024 it announced tariff hikes on “strategic sectors” of commerce – for example, boosting duties on Chinese electric vehicles from 25% to 100%, and on semiconductors from 25% to 50%commerce.govcommerce.gov. Other increases applied to batteries, medical supplies, steel and aluminum, solar panels, and morecommerce.govcommerce.gov. Meanwhile, U.S. Section 232 investigations remain active on autos and tech, threatening further levies. In sum, governments now deploy tariffs as instruments of industrial policy and national security, rather than moving them steadily toward zero. Tariffs that once averaged single digits have again reached double or triple digits in some cases. This “trade war” era – with tit-for-tat barriers among the world’s largest economies – directly contradicts the postwar liberalization project.

Consequences of Protectionism

These protectionist policies undermine the very gains that postwar trade liberalization aimed to achieve. Economists emphasize several adverse impacts:

• Higher consumer prices: Tariffs are taxes on imports, so they directly increase costs for downstream businesses and households. For example, one analysis notes that U.S. tariffs on Chinese electronics and household goods “have led to increased costs for consumers”focus-economics.com. When imports become more expensive, domestic suppliers often raise prices as well. In practice, many U.S. products have become pricier for consumers since major tariffs were imposed.

• Retaliation and trade wars: Imposing unilateral barriers tends to provoke retaliatory actions. History is clear that one country’s tariffs elicit others’. The recent U.S.–China dispute illustrates this: after U.S. duties on Chinese goods, China responded with its own tariffs on American exports. Economists warn that such tit-for-tat measures risk escalating into protracted trade warsfocus-economics.com. In turn, firms may face tariff uncertainty, depressed export markets, and inefficiencies as deals unravel.

• Supply-chain disruption: Today’s manufacturing often spans multiple countries. High tariffs “disrupt intricate international supply chains, inflating costs and reducing efficiency”focus-economics.com. Inputs for computers, cars, or renewable energy components might come from anywhere, so a 25–100% duty on intermediate goods can cripple production lines. For example, U.S. duties on Chinese batteries and electric-vehicle parts – intended to boost domestic industry – instead made vehicle assembly more expensive and complicated sourcing. Likewise, restrictions on telecom gear or critical minerals have raised costs for electronics and energy projects, illustrating how protectionism in one sector ripples through the entire economy.

• Diminished innovation and growth: By sheltering domestic industries, tariffs can blunt competitive pressure. Analysis finds that protection often reduces incentives for efficiency and innovationfocus-economics.com. Firms under tariff protection may become complacent, investing less in productivity. Over time this can slow long-term growth and leave consumers with inferior products at higher prices. In contrast, exposure to global competition tends to spur firms to improve and cut costs. The recent spike in global trade in the postwar era – and the technological diffusion it enabled – was a key engine of prosperity, now at risk under renewed nationalism.

These costs run counter to the original motivations for free trade. In fact, tariff-driven strategies risk invoking the very outcomes avoided by GATT: economic conflict and fragmentation. The late Peter Navarro (a former Trump advisor) even acknowledged that trade wars can shrink trade and harm growth. In blunt terms, using tariffs to “balance trade deficits” often has perverse effects, slowing U.S. investment and increasing consumer pricesfocus-economics.com. By contrast, the early GATT rounds lifted living standards by lowering barriers (the world economy grew rapidly as trade barriers fellinvestopedia.comwilsoncenter.org).

Inconsistencies and Selective Enforcement

Political considerations have also led to uneven enforcement of trade policy. Some sectors and firms effectively receive preferential treatment, while others bear the brunt of new barriers. A striking example is the U.S. approach to consumer electronics versus heavy industry. Apple Inc., which designs iPhones in California but sources over 90% of iPhone components from China, successfully lobbied for relief from the latest tariffswashingtonpost.com. In April 2025, U.S. Customs announced that smartphones and laptops would be excluded from a new wave of “reciprocal” tariffspbs.org. Critics note that this carve-out effectively shielded Apple and other tech giants – a departure from Trump’s usual “no exemptions” rhetoric. In private, White House officials even classified these electronics under a separate Section 232 probe “not up for negotiation,” highlighting how national-security clauses were used selectivelywashingtonpost.com. In contrast, industries like steel, solar panels, and agricultural goods faced blanket 25–100% tariffs with no special exemptions. U.S. solar companies and EV manufacturers, for instance, warned that tariffs on Chinese wafers and batteries (hiked to 25–100%) would raise costs on U.S. projects and vehicles.

Similarly, U.S. policy toward Chinese telecommunications equipment has been far stricter than toward consumer tech: companies like Huawei have been effectively banned over security concerns, even as Apple’s China-dependent supply chain was temporarily spared. This asymmetry reflects political and strategic priorities: tech companies with strong U.S. ties can lobby successfully, while traditional manufacturing and national-security sectors face broad restrictions. In sum, trade enforcement has become as much about geopolitics and corporate influence as economics. The result is an inconsistent mix of high tariffs, sectoral bans, and select exemptions that contrasts sharply with the even-handed, reciprocal liberalization of the postwar era.

Apple’s iPhones (pictured above) are largely assembled in China. In 2025, Apple lobbied the U.S. government for tariff exemptions on electronics after new “reciprocal” tariffs were announced, reportedly securing a temporary reprievepbs.orgwashingtonpost.com. Such industry-specific treatment highlights tensions between political strategy and fair trade rules.

Conclusion

The post-World War II trading system was founded on the lesson that open, multilateral trade promotes growth and peace. The reduction of tariffs under GATT/WTO was a deliberate counter to the protectionism that had provoked global depression and warinvestopedia.comwilsoncenter.org. But today’s resurgence of tariffs and trade conflicts flies in the face of that legacy. While supporters argue tariffs protect jobs or national security, the broader effects are contradictory. In a highly interdependent global economy, high tariffs on inputs and consumer goods raise costs everywhere – contrary to postwar goals of shared prosperity. They invite retaliation and friction among allies (remember that GATT itself arose to prevent exactly that).

Analysts warn that continued protectionism may ultimately degrade both U.S. and world economic welfare. The very institutions designed to enforce free trade are being sidelined by unilateral actions. If large trading nations persist in weaponizing tariffs, they risk undermining the cooperative trade order. In light of modern supply chains and the widespread impact on consumers, many experts argue for a return to more predictable, rules-based commerce. Such a shift would realign policy with the original purposes of GATT/WTO – namely, stable economic recovery and peaceful global integrationinvestopedia.comwilsoncenter.org – rather than the zero-sum trade confrontation of today.

Sources: Contemporary analyses of GATT/WTO history and postwar trade policyinvestopedia.comwilsoncenter.org; official White House and news reports on recent U.S. tariffscommerce.govcommerce.gov; media coverage of Apple’s tariff exemptionspbs.orgwashingtonpost.com; economic studies on the effects of tariffsfocus-economics.comfocus-economics.com.