Breitbart Business Digest: How Commerce Flourished After Columbus's Discovery of the New World

The Establishment’s Liberation Day Panic

The True Economic History of Columbus’s Voyage of Discovery

Columbus Day should be a humbling moment for the critics of Donald Trump’s trade policies.

The just-so story Trump’s critics and many of the people who like to call themselves “free-traders”  like to tell is that Europe’s discovery of the Americas and the subsequent boom of overseas trade required the removal of so-called trade barriers such as tariffs, state-granted trade monopolies, and international cooperation. But economic history tells a very different tale.

In a 2002 paper published in the prestigious Journal of Economic History titled “After Columbus: Explaining Europe’s Overseas Trade Boom, 1500–1800,” economic historians Kevin O’Rourke of Trinity College Dublin and Jeffrey Williamson of Harvard University found that commerce flourished in a global market that was dominated by economic hurdles and interventions as varied as import duties, excise taxes, export restrictions, wars, and piracy.

And these were not trivial. If trade barriers were falling during the period, you would expect to see a sustained narrowing of price gaps between continents. Instead, O’Rourke and Williamson found, the price gaps persisted. Indeed, they were so strong that they overwhelmed improvement in shipping technology.

By examining import prices and the incomes of the Europeans buying overseas goods, the authors estimated that rising demand explained roughly half to two-thirds of the trade expansion. Overseas supply dominated the sixteenth century, while European demand accounted for the seventeenth-century boom. As affluent Europeans acquired more money to spend on spices, silk, and sugar, merchants had good reasons to brave the expensive voyages. Their customers’ growing purchasing power supported commerce through conditions that would have horrified today’s trade-policy establishment.

This can be seen as a triumph for the power of markets. Government interventions and high seas piracy were strong enough to keep price differentials high but not strong enough to prevent the growth of global trade. But it also suggests that governments could accomplish public goals such as protecting vital industries with trade policies that would send today’s establishment free traders into fits—without depriving their citizens of the benefits of trade.

This is important because critics of Donald Trump’s trade policies often act like there’s only one path for benevolent international commerce: Either we sign the Trans-Pacific Partnership—or whatever the latest multilateral trade pact is—or we plunge ourselves into economic isolation. Erect tariffs and we’ll never import anything again and spark ruinous trade wars. If not for “globalism,” we wouldn’t have burritos or pizza.

The real-life economic history of trade in the wake of the voyages of Christopher Columbus tells us this is nonsense.

We saw the effects of the globalist trade delusion in the reaction to President Trump’s Liberation Day tariff announcement. In April of last year, the World Trade Organization projected Trump’s new policies and retaliation from our trading partners would result in a 0.2 percent decline in global merchandise trade volumes, nearly three percentage points below its earlier baseline. A downside scenario envisioned a 1.5 percent contraction.

Instead, global goods trade volumes subsequently grew roughly four percent, U.S. imports increased, and the WTO now expects global merchandise trade to grow 3.9 percent this year.

The tariff collectors, meanwhile, enjoyed a considerably better year than the forecasters, with customs duties generating $195 billion in fiscal 2025, compared with $77 billion the year before. Fiscal year 2025, by the way, ended in September 2025, less than half a year after the tariffs were announced. Many of the tariffs were in place for even a shorter time span than that. The Congressional Budget Office attributes almost all of that $118 billion increase to the administration’s tariff changes. Trump managed to collect substantial additional revenue from international commerce while the trade contraction predicted by his critics failed to materialize.

We also saw a boom in U.S. manufacturing output and productivity. The labor market witnessed a reversal of the decline in manufacturing employment that dominated the end of Biden’s presidency. Business investment is booming. The construction of new manufacturing plants has survived the end of Biden’s subsidies at an elevated level.

One of the reasons trade held up stronger than expected is that businesses building AI infrastructure were ordering semiconductors, servers, and equipment for data centers in quantities that overwhelmed the gloomy forecasts. Trade in AI-enabling goods rose 21.9 percent in value in 2025, accounting for 42 percent of the increase in global merchandise trade value.

This was helped by the fact that the Trump administration’s tariff program preserved access to essential computing equipment while collecting revenue on other imports. Knowing that we are still dependent on imports for many high-tech products—and will be for some time, even under the most optimistic scenarios—the administration adopted a rational approach to facilitate, rather than frustrate, the AI boom.

In other words, the free-trade establishment underestimated the strength of private demand and the power of markets to adjust to tariffs. Just like in the post-Columbus world, markets mattered more. There’s a deep irony that so many self-styled free-traders consistently underestimate the power of markets. The people who profess the greatest faith in markets have spent much of the past two years predicting that a customs bill would bring them to their knees. It’s hard to escape the suspicion that they aren’t really advocates of trade and free markets at all but simply the valets of those who benefited from the particular trade arrangements that dominated before Trump arrived at the White House.

Tariffs are taxes on imports, and in some cases they really do drive up prices of those imports or convince merchants to source production domestically. But profitable investment opportunities keep businesses buying and suppliers competing. On Columbus Day, the expansion of trade through centuries of costly voyages should remind us how powerful those incentives can be.