Trade wars are never solely about economics, as the Anglo-Irish tariff war of the 1930s reminds us.

In the sometimes dry language of economics, the 1920s and 1930s were a period of ‘deglobalisation’. In the final third of the 19th century and the first decade and a half of the 20th, rapid advances in communications and transport technology had seen the world knitted more tightly together. Goods, services and capital crossed borders at a rapid clip, as did people and ideas. By 1914, global trade as share of total global output had reached a peak that would not be seen again until the 1980s.

This ever-more closely integrated global economy did not survive the shock of the Great War. Over the course of the interwar period, capital markets became less international and more nationally focused and cross-border lending declined. Migration levels fell and, especially in the 1930s, in the aftermath of the great financial crash of 1929, tariff levels rose sharply and global trade contracted.

The memory of deglobalisation and the Great Depression of the 1930s have long cast a shadow over macroeconomics. Indeed, the discipline – as it exists today – was born out of a search for answers to the economic problems of that decade. As President Trump has hiked US tariff rates to their highest levels since that time, the period has often been invoked by commentators seeking some sort of historical analogy for current concerns. The go-to examples for those writing about 1930s trade tensions tend to be America’s Smoot-Hawley Tariff Act of 1930, Britain’s retreat from global free trade towards ‘Imperial Preference’, or the autarchic policies of Nazi Germany.

Many more examples exist, however. France’s tariff rate (which averaged 21 per cent between 1930 and 1940) was around three times higher than it had been in the 1920s, while that of Italy was around four times as high (16.8 per cent vs 4.5 per cent in the 1920s). Countries as diverse as Switzerland, Brazil and Estonia, together with more than a dozen others, went further than simply using import taxes to deter trade, and instead imposed actual quotas to control volumes.

The global trade in goods had been worth around 11 per cent of total global income in 1928, a level already well down from the 14 per cent of 1913. By 1935, that had fallen to five per cent and by 1938 it had recovered to just seven per cent. Trade wars and tariff hikes were common throughout this period and those seeking contemporary lessons do not need to restrict themselves to only the most familiar examples.

One of the more interesting trade disputes of this time, and one of those with the most useful lessons for modern policymakers, was the so-called ‘Economic War’ fought between the United Kingdom and the Irish Free State beginning in 1932. It is, if nothing else, a useful reminder that when it comes to a deep trade conflict, economics alone is rarely sufficient to understand the outcomes. History, politics and international security all play an equally crucial role.

Indeed, examining the economics of the Anglo-Irish trade dispute of the 1930s in isolation makes little sense. The Free State that contested the economic war had been born only a decade before from the Anglo-Irish Treaty of 1921, which both ended Ireland’s War of Independence from the UK and provoked a civil war over its provisions. The state created by that treaty was not fully independent, but was instead a self-governing element of ‘the community of nations known as the British Empire’, with a status equivalent to that of what was then the Dominion of Canada. It was this acceptance of continuing constitutional ties that had prompted the outbreak of civil war in Ireland.

Eamon de Valera’s Fianna Fail government, which took power for the first time in the Free State in 1932, was described at the time by its own leaders as an ‘only a slightly constitutional party’. ‘The gunmen and the communists are voting for Fianna Fail’, argued one newspaper advert during the campaign, seeking to firmly brand de Valera’s party as radicals who would take Ireland back to the dark days of the post-treaty civil war.

One of the government’s first acts was to suspend payments on land annuities paid to the United Kingdom. These transfers dated back to various Irish Land Acts from the 1880s onwards passed by the British Parliament, in which farmland had been compulsory transferred from British absentee landlords to Irish tenants as Gladstone sought to ‘pacify Ireland’. The Free State had pledged to maintain the flow of payments not only in the Treaty of 1921, but also in financial accords reached with Westminster in 1923 and 1926.

Together with some other payments related to pensions, they amounted to a transfer worth around £5 million per annum from the Free State to the United Kingdom. At the time, the total Gross National Product was only around £150 million per year, and it was said, by the new Irish government, that such payments represented, in per capita terms, a greater burden than Germany’s postwar repressions imposed at the Treaty of Versailles.

Sean Lemass, nowadays better remembered as the Taoiseach of the late 1950s and 1960s who oversaw the opening of the Irish economy and laid the groundwork for entry into the European Economic Community, served as Minister for Industry and Commerce throughout the dispute. In his first spell as a minister, in sharp contrast to his time heading a government decades later, Lemass – against the backdrop of the Great Depression – was determined to oversee an Ireland that was agriculturally and industrially self-sufficient.

The suspension of the annuity payments drew a harsh response from London. Emergency duties were imposed on Irish imports, especially of cattle, which now faced an effective tax rate of between 68 to 88 per cent. The severity of the British response can only be understood in the context of the politics of the wider situation. To the Cabinet in Westminster, the issue of land-annuity payments could not be seen in isolation. Instead, it was perceived, rightly as it turned out, as merely the first step in a programme to demolish the remaining constitutional ties between the Free State and the wider British Empire. De Valera was leading a minority government, with 72 of the 153 seats in the Dáil Éireann, and the British hoped that a campaign of high agricultural tariffs would ramp up the pain on Irish farmers. The result, it was assumed, would be declining approval of the Fianna Fail government and its eventual replacement by the more co-operative Cumann na nGaedheal party.

De Valera and Lemass did not play ball. Faced with new British tariffs, they responded in kind. The average Irish tariff rate rose from nine per cent in 1932 to 45 per cent by 1936, with the number of articles covered by duties soaring from 28 to 68. Particular restrictions were imposed on imports of British coal, cement, sugar, steel, iron and machinery. The old slogan of Jonathan Swift in the 1720s was dusted off: ‘Burn everything English but their coal’.

In economic terms this was a David and Goliath contest. The total size of the Irish economy, as already noted, was just £150 million while that of the United Kingdom was (in 1930s prices) more than £4 billion. Ireland was entering into an economic conflict with an economy more than 25 times as large. What is more, the Irish economy of 1932 had total annual exports of £36 million, of which £35 million, essentially almost all of them, went to the United Kingdom. By contrast, Britain’s exports to the Irish Free State were worth around £40 million.

In other words, if the Irish had burned everything English but their coal and ceased all imports from the United Kingdom, the hit to Britain’s total national income would be worth around one per cent. Whereas if the United Kingdom were to respond in kind the hit to the Irish economy would be worth more like a quarter of national income.

Like the biblical contest between David and Goliath, somehow David won. The coal-cattle pact of 1934 de-escalated the conflict with the Irish reducing duties on British coal and the UK reducing duties on Irish cattle, although the conflict dragged on until a final settlement in 1938. Trade duties were rolled back and the land-annuities issue was settled with a one-off payment of £10 million – even while the British Treasury calculated that the capitalised value of the annuities was worth at least £100 million.

The economic historian Kevin O’Rourke has estimated that the total costs of the economic war to the Irish economy between 1932 and 1938 amounted to around £31.5 million. Set against around £90 million in savings on the land annuities, a plausible case can be made that Ireland won in raw financial terms. What is more, the final settlement saw the so-called Treaty Ports, British naval facilities in Ireland that had been retained in 1921, returned to Irish control, and a plebiscite passed in 1937 saw the adoption of a new constitution by which the Irish Free State became Ireland, and the role of Governor-General was replaced by that of a President. Fianna Fail, then, was able to achieve its political and constitutional objectives, which had provoked such outrage in London. In 1938, after the end of the trade war and after the passing of the new constitution, Fianna Fail rewon its majority.

Ireland endured real economic hardship in the 1930s. Even in the absence of the Economic War, the Great Depression would have taken its toll. The large fall in the price of global agricultural goods would always have been a problem for the very agriculturally focused Ireland. Rising restrictions on the movement of both people and money reduced the old safety valves of emigration and remittances from overseas, both of which had long been important to Ireland’s economy.

But this economic hardship did not disrupt the rise of Fianna Fail. At the 1933 general election, once the trade war was underway and before the de-escalation that came with the cattle-coal pact, it increased its haul of seats in the Dáil from 72 to 77, securing a small majority. And while that was narrowly lost at the 1937 election, it remained only one seat short of an absolute majority and able to stay in power. The referendum on the new constitution – championed by de Valera – held on the same day as the 1937 general election, passed by 56.5 to 43.5 per cent.

How was the Fianna Fail government able to win re-election – twice – and pass its constitutional reforms in the face of such economic pain? A partial answer can be found in the British government making things easier for them. Sky-high tariff rates imposed on key exports by the former colonial power, just a decade after a war of independence, gave the Irish government a clear external target to blame for the economic campaign. Fianna Fail argued that that the hardship was something that had be born as part of a national project to throw off the remaining shackles of British control.

Just as importantly, that pain was not felt equally. London assumed that its emergency duties would hit the incomes of Irish farmers and reduce support for Fianna Fail. Yet the impact in the countryside was more complex. In general, small farmers lost less than large farmers and their incomes were protected by the expansion of unemployment insurance to them from 1933 onwards. The lack of British coal also saw a mini-boom in rurally focused peat extraction. Ultimately, Fianna Fail was generally able to maintain the farmers’ support.

Even more importantly, a major domestic consequence of the economic war in Ireland was a redistribution of income from the countryside to towns and cities. It is going too far to dismiss, as some contemporaries did, Irish industry in the late 1920s as consisting of merely ‘beer and biscuits’, as exemplified by the Dublin firms of Guinness and Jacobs. But it is true that only two dozen or so manufacturing firms employed more than 400 workers in 1929. The severe tariffs placed on British manufactured goods by de Valera’s government, coupled with state support, saw strong growth in urban-based new industries, especially in sectors such as cement-making. Industrial employment increased by around 50 per cent over the course of the economic war, even as unemployment as a whole remained high. As income and employment grew in the cities and towns, so, too, did support for de Valera’s party. This was the time of the ‘greening of Dublin’, with Fianna Fail’s vote share in the capital passing 40 per cent for the first time in 1933.

Rather than weakening the domestic position of de Valera’s government, London’s tariffs helped to entrench it. By 1938, following the 1933 and 1937 Irish elections and the 1937 constitutional referendum, it was clear to British policymakers that their attempt to shift Irish politics through trade policy had failed.

Equally, the international security environment had shifted considerably. By 1938 the United Kingdom was re-arming rapidly in the face of German, Italian and Japanese threats. The ‘loss’ of the land annuity payments, always very small fry in the context of Britain’s overall economy, was seen as a small price to pay for good relations with its nearest neighbour at a time of international tension.

Pure economic reasoning would not lead one to believe that an economy should be able to win a trade war against an opponent with 25 times its economic weight, especially when its own exports are almost totally focused on its opponent who is a leading player in international trade with a diverse set of trading partners. Yet things are never as simple as they seem. The (very) particular history of Ireland and the United Kingdom shaped the economic war’s outcomes, with London easily cast in Ireland as the party responsible.

De Valera’s government had a much better handle on the domestic political economy of Ireland than the administration in London, and was able to increase its vote share even as Westminster attempted to bludgeon it into submission through import duties. The final settlement owed as much to changing geopolitics and London’s security concerns as it did to the initial causes of the dispute. Trade wars are never solely about economics.