Protectionism, sometimes referred to as trade protectionism, is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations. Proponents argue that protectionist policies shield the producers, businesses, and workers of the import-competing sector in the country from foreign competitors and raise government revenue. Opponents argue that protectionist policies reduce trade, and adversely affect consumers in general (by raising the cost of imported goods) as well as the producers and workers in export sectors, both in the country implementing protectionist policies and in the countries against which the protections are implemented.
Protectionism has been advocated mainly by parties that hold economic nationalist positions, while economically liberal political parties generally support free trade.
There is a consensus among economists that protectionism has a negative effect on economic growth and economic welfare, while free trade and the reduction of trade barriers have a significantly positive effect on economic growth.Mankiw, N. Gregory (24 April 2015). "Economists Actually Agree on This: The Wisdom of Free Trade" . The New York Times. Retrieved 10 August 2021. "Economists are famous for disagreeing with one another.... But economists reach near unanimity on some topics, including international trade."Poole, William (September/October 2004). "Free Trade: Why Are Economists and Noneconomists So Far Apart" . Federal Reserve Bank of St. Louis Review. 86 (5): pp. 1–6. "... most observers agree that '[t]he consensus among mainstream economists on the desirability of free trade remains almost universal.'" Quote at p. 1. Many mainstream economists, such as Douglas Irwin, have implicated protectionism as an important contributing factor in some economic crises, most notably the Great Depression. A more reserved perspective is offered by New Keynesian economist Paul Krugman, who argues that tariffs were not the main cause of the Great Depression but rather a response to it, and that protectionism is a minor source of allocative inefficiency. Although trade liberalization can sometimes result in unequally distributed losses and gains, and can, in the short run, cause economic dislocation of workers in import-competing sectors, free trade lowers the costs of goods and services for both producers and consumers.
Protectionist policies
A variety of policies have been used to achieve protectionist goals. These include: Tariffs and import quotas are the most common types of protectionist policies.Paul Krugman, Robin Wells & Martha L. Olney, Essentials of Economics (Worth Publishers, 2007), pp. 342–345. A tariff is an excise tax levied on imported goods. Originally imposed to raise government revenue, modern tariffs are now used primarily to protect domestic producers and wage rates from lower-priced importers. An import quota is a limit on the volume of a good that may be legally imported, usually established through an import licensing regime. Protection of technologies, patents, technical and scientific knowledge Restrictions on foreign direct investment,Ippei Yamazawa, "Restructuring the Japanese Economy: Policies and Performance" in Global Protectionism (eds. Robert C. Hine, Anthony P. O'Brien, David Greenaway & Robert J. Thornton: St. Martin's Press, 1991), pp. 55–56. such as restrictions on the acquisition of domestic firms by foreign investors.Crispin Weymouth, "Is 'Protectionism' a Useful Concept for Company Law and Foreign Investment Policy? An EU Perspective" in Company Law and Economic Protectionism: New Challenges to European Integration (eds. Ulf Bernitz & Wolf-Georg Ringe: Oxford University Press, 2010), pp. 44–76. Administrative barriers: Countries are sometimes accused of using their various administrative rules (e.g., regarding food safety, environmental standards, electrical safety, etc.) as a way to introduce barriers to imports. Anti-dumping legislation: "Dumping" is the practice of firms selling to export markets at lower prices than are charged in domestic markets. Supporters of anti-dumping laws argue that they prevent the import of cheaper foreign goods that would cause local firms to close down. However, in practice, anti-dumping laws are usually used to impose trade tariffs on foreign exporters. Direct subsidies: Government subsidies (in the form of lump-sum payments or cheap loans) are sometimes given to local firms that cannot compete well against imports. These subsidies are purported to "protect" local jobs and to help local firms adjust to the world markets. Export control: Export controls are often used by governments to regulate the export of goods, software and technology. Export subsidies: Export subsidies are often used by governments to increase exports. Export subsidies have the opposite effect of export tariffs because exporters get payment, which is a percentage or proportion of the value of exported. Export subsidies increase the amount of trade, and in a country with floating exchange rates, have effects similar to import subsidies. Exchange rate control: A government may intervene in the foreign exchange market to lower the value of its currency by selling its currency in the foreign exchange market. Doing so will raise the cost of imports and lower the cost of exports, leading to an improvement in its trade balance. However, such a policy is only effective in the short run, as it will lead to higher inflation in the country in the long run, which will, in turn, raise the real cost of exports, and reduce the relative price of imports. International patent systems: There is an argument for viewing national patent systems as a cloak for protectionist trade policies at a national level. Two strands of this argument exist: one when patents held by one country form part of a system of exploitable relative advantage in trade negotiations against another, and a second where adhering to a worldwide system of patents confers "good citizenship" status despite 'de facto protectionism'. Peter Drahos explains that "States realized that patent systems could be used to cloak protectionist strategies. There were also reputational advantages for states to be seen to be sticking to intellectual property systems. One could attend the various revisions of the Paris and Berne conventions, participate in the cosmopolitan moral dialogue about the need to protect the fruits of authorial labor and inventive genius...knowing all the while that one's domestic intellectual property system was a handy protectionist weapon." Political campaigns advocating domestic consumption (e.g. the "Buy American" campaign in the United States, which could be seen as an extra-legal promotion of protectionism.) Preferential governmental spending, such as the Buy American Act, federal legislation which called upon the United States government to prefer US-made products in its purchases. Regulations obstructing the importation or sale of articles not made to local standards or barring certain types of promotion.
In the modern trade arena, many other initiatives besides tariffs have been called protectionist. For example, some commentators, such as Jagdish Bhagwati, see developed countries' efforts in imposing their own labor or environmental standards as protectionism. Also, the imposition of restrictive certification procedures on imports is seen in this light.
Further, others point out that free trade agreements often have protectionist provisions such as intellectual property, copyright, and patent restrictions that benefit large corporations. These provisions restrict trade in music, movies, pharmaceuticals, software, and other manufactured items to high-cost producers with quotas from low-cost producers set to zero.
Impact There is a broad consensus among economists that protectionism has a negative effect on economic growth and economic welfare, while free trade and the reduction of trade barriers has a positive effect on economic growth.See P. Krugman, "The Narrow and Broad Arguments for Free Trade", American Economic Review, Papers and Proceedings, 83(3), 1993; and P. Krugman, Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations, New York, W.W. Norton & Company, 1994.William Poole, Free Trade: Why Are Economists and Noneconomists So Far Apart , Federal Reserve Bank of St. Louis Review, September/October 2004, 86(5), pp. 1: "most observers agree that '[t]he consensus among mainstream economists on the desirability of free trade remains almost universal.'" However, protectionism can be used to raise government revenue and enable access to intellectual property, including essential medicines.
Protectionism is frequently criticized by economists as harming the people it is intended to help. Mainstream economists instead support free trade and argue that protectionism reduces the overall economic efficiency, stifles innovation and raise prices for consumers. Without foreign competition, domestic industries are insulated from market forces, which can reduce their incentive to innovate, improve efficiency or maintain high-quality standards. The principle of comparative advantage shows that the gains from free trade outweigh any losses as free trade creates more jobs than it destroys because it allows countries to specialize in the production of goods and services in which they have a comparative advantage.Krugman, Paul (24 January 1997). The Accidental Theorist . Slate. Protectionism results in deadweight loss; this loss to overall welfare and subsidies gives no-one any benefit, unlike in a free market (without trade barriers), where there is no such total loss. Economist Stephen P. Magee claims the benefits of free trade outweigh the losses by as much as 100 to 1.
Economic impact Living standards A 2016 study found that "trade typically favors the poor", as they spend a greater share of their earnings on goods, as free trade reduces the costs of goods. Other research found that China's entry to the WTO benefited US consumers, as the price of Chinese goods were substantially reduced. Harvard economist Dani Rodrik argues that while globalization and free trade does contribute to social problems, "a serious retreat into protectionism would hurt the many groups that benefit from trade and would result in the same kind of social conflicts that globalization itself generates. We have to recognize that erecting trade barriers will help in only a limited set of circumstances and that trade policy will rarely be the best response to the problems [of globalization]".
In 2026, during the deadly heat wave in Europe, the European Union threatened another trade war with China, in a time when Chinese manufacturing could easily meet the demand for air conditioning units that are retrofitted to existing apartments or office spaces, for example in France and other parts of Western Europe. Statistics in Europe show that such units are increasingly purchased from Chinese local warehouses than through cross border shipments. While these stockpiles are depleted, future imports of cooling products into the European Union will be costlier and more difficult to obtain by private individuals and small companies.Miao H. (2026, July 1). "Europe learns it's hard to start a trade war with China during a heat wave." wsj.com. Accessed 2 July 2026.
Growth An empirical study by Furceri et al. (2019) concluded that protectionist measures like tariff increases have a significant adverse impact on domestic output and productivity. A prominent 1999 study by Jeffrey A. Frankel and David H. Romer found while controlling for relevant factors, that free trade does have a positive impact on growth and incomes. The effect is quantitatively large and statistically significant.