International trade in a polarized world - lessons from history (1): neutrality and triangular trade

On 2 April 2025 US President Donald Trump announced a list of tariffs on imports from several countries. These tariffs respond to the many changes in international trade over the past decades. In the press comments on the tariffs, it was stressed that they will result in higher inflation and have detrimental effects on global trade. However, their impact on trade routes has not been analyzed often.

In January 2025, a report of the Boston Consulting Group estimated that an increase of US tariffs on imports of Chinese goods and new tariffs on Canada and Mexico would result in a further strengthening of the trade relations between Russia and China, and in a stronger orientation of China towards Asian partnerships. The US tariffs, therefore, exacerbate existing trends. China’s trade with the Global South will increase. Moreover, some countries that are at the edge of the US sphere of influence, and which maintain contacts with China and Russia as well, are likely to prosper in the new constellation (think of, mainly, India and Brazil).

This situation would then likely result in a revival of triangular trade. In a highly polarized world, trade between countries belonging to opposite camps often goes through third nations.

This is where history comes in, to shed light on what may happen.

Throughout history there have been several episodes in which triangular trade was important. Initially, this was due to opportunity. Goods of high value could be sold overseas, the returns of which could be reinvested in merchandise that was profitable in the domestic market. In the eighteenth century, British ships brought valuables to the African coast, where they took slaves. These ships then ventured to the Americas or the Caribbean, where the slaves were sold and commodities were bought to be shipped to the mother land. In the later Middle Ages, it was normal for Hanseatic merchants to send wood and furs from the Baltic to a port in England, from where tin, lead, beeswax or grain were shipped to a port in France or the Low Countries. In the latter port, cargo destined for sale at home (for example, cloth) was bought.

In the seventeenth and eighteenth centuries countries imposed restrictive rules on trade with their colonies, with the goal of restricting competition from other countries. These mercantilist policies were often haphazard. Smuggling through ports that were close to the country or colony that was under a protectionist regime was usual.  Moreover, monarchs could suspend the rules mentioned when they needed funds, which were then secured in exchange for exclusive licenses to foreign investors. It is not unlikely that due to increased frictions between China and the US, Chinese products will be shipped indirectly to the US, via a third country. The economic sanctions on Russia have already greatly increased trade to and from states that formerly were part of the USSR.

History provides some interesting data on the advantages of neutrality in trade. Much of the fifteenth century was marked by the Hundred Years’ War between France and England. During this war, which ended in 1453, the county of Flanders and the duchy of Brabant could profit. Officially, they sided with one or the other belligerent. In 1435, the Burgundians switched from the English to the French side in the conflict. Even so, Bruges and Antwerp attracted traders that travelled to either country, in particular Italians, Castilians and Portuguese. Moreover, cities did not always implement the international policies of the Burgundian rulers, when maintaining ties with nations that had ended up in the camp of the enemy. A breach in international relations could result in the revoking of privileges that had been granted earlier. However, there were several years in both the fifteenth and sixteenth centuries in which, for example, the Scottish were stapling in a Dutch town that was formally at war with Scotland. In the Italian Wars, Scotland often sided with France, which fought against England and the Habsburgs. In 1506 the Scottish staple in Middelburg was annulled, due to new frictions in the English-Scottish relations, which made that Scotland again coalesced with France against England and Habsburg. However, in 1522, when the English king Henry VIII still pursued an anti-Scottish policy, Scotland – then, as before, an ally of France – received a reconfirmation of the earlier staple rights in Middelburg. Since 1518, the Low Countries were again on friendly terms with England. In the period of c. 1510-c. 1530, Middelburg served as the proverbial third dog, running away with the bone that was contended by Bruges and Antwerp. Foreign merchants used Middelburg as a bargaining chip: they regularly threatened to leave Antwerp if no reductions in tolls were granted. In the 1510s and 1520s, Middelburg managed to attract Portuguese and English expat communities. The policies of Middelburg in the end failed, because of the attraction of the Antwerp fairs.

Other cities could thrive in a context of “grey” trade. For example, the city of Tournai was a major exchange point between French and Dutch trade during the Italian Wars (between 1496 and 1559). It flourished in close connection to Antwerp, with which it was linked through the River Scheldt. French traders were not welcome in Antwerp until the Peace of Catteau-Cambrésis (1559).

Economic importance mattered. Cities could defy the international political situation by seeking connections to traders from enemy countries if their economic weight was sufficiently high. In the 1490s, 1500s and 1510s, Florentine merchants were active in Antwerp, even though Florence then sided with the French enemy. The Habsburg rulers Maximilian, Philip the Fair and Charles V turned a blind eye on this, mainly because of the heavy involvement of Florentines in the English wool trade, which was of vital importance to the Flemish and Brabantine textile industries.

When projecting these examples on the present-day situation, on can derive therefrom that a neutral position in a highly dichotomic trading environment is potentially very rewarding. However, also, economic weight is a factor that de facto underpins neutrality. The example of Middelburg shows that policies of attracting investors cannot of itself change the appeal other markets and must have economic foundations. And in that regard the contemporary globalized economy is not very different from international trade in the past. In the end, money flows into economies when investors consider them as potentially rewarding. Dividing the world into trading blocs cannot replace that.

Bibliography:

P. Arbour et al., Great Powers, Geopolitics and Global Trade, www.bcg.com

E. Coornaert, Les Français et le commerce international à Anvers (fin XVe et XVIe siècle), Paris, 1961, 2 vols.

W.H. Finlayson, The Scottish nation of merchants in Bruges. A contribution to the history of medieval Scottish foreign trade, Glasgow, 1951.

M.P. Rooseboom, The Scottish Staple in the Netherlands. An Account of the Trade Relations Between Scotland and the Low Countries from 1292 Till 1676, Edinburgh, 1909.

W.S. Unger (ed.), Bronnen tot de geschiedenis van Middelburg in de landheerlijke tijd, vol. 3, The Hague, 1931.