Trade wars are usually portrayed as destructive forces that fragment markets and undermine trust. Yet, history suggests a more nuanced story. Our recent research, published in the Journal of Management Studies, revisits a largely forgotten trade war between Norway and Portugal in the early 1920s to show how conflict can also generate renewal. We demonstrate how businesses, working alongside, and sometimes ahead of governments, can actively rebuild international supply chains, transforming disruption into long-term competitiveness and resilience.
From Decoupling to Recoupling
Trade wars disrupt not only the flow of goods but also the circulation of ideas, relationships. and trust. Our study examines the 1921–1923 trade conflict triggered when Norway banned imports of fortified wine as part of its national prohibition policy. Portugal retaliated by imposing high tariffs on Norwegian salted and dried cod, abruptly ending a centuries-old trade relationship.
What followed was not permanent rupture but what we call symmetric recoupling: both countries ultimately restored their disrupted international supply chains on equal terms. Through sustained diplomacy and institutional cooperation, Norwegian fish exporters and Portuguese wine producers helped rebuild trade ties, leading to a durable and mutually beneficial recovery. Rather than exiting global markets, firms on both sides adapted and coordinated to re-establish their position in international trade.
A Typology of Trade Wars
To explain why some trade wars heal while others don’t, we developed a typology based on two dimensions: the degree of coordination within international supply chains, and the economic reach of the conflict. This framework distinguishes four outcomes. One outcome is symmetric recoupling, as in the Norway-Portugal case, where industries in both countries regain their market positions regarding export to the other country. Another is asymmetric recoupling, where industries in one of the countries concedes more; for example, the US-Japan semiconductor trade conflict of the 1980s, in which Japan accepted several concessions, including voluntary export restraints. A third outcome is recoupling of through third parties, such as Vietnam’s growing role in global production networks during the US-China trade conflict under the first Trump administration. The last is permanent decoupling between nations, illustrated by long-lasting cases such as the US-Cuba embargo which has lasted more than six decades. This typology helps scholars and policymakers understand why some trade wars stabilize industries, while others generate lasting fragmentation and inefficiency.
Business Associations as Diplomats
One of the most striking findings is that business associations, not only multinational enterprises, acted as diplomatic agents. In the absence of strong international trade institutions, exporters, importers, and chambers of commerce became de facto diplomats. Their negotiations culminated in the 1929 Lisbon Agreement and the 1934 bilateral trade treaty, which formalized trade quotas and restored trust between Norway and Portugal. By highlighting the role of business associations, our study contributes to a growing literature on business diplomacy – the ability of firms and collective organizations to mediate political tensions and rebuild economic cooperation during periods of deglobalization.
Lessons from History for Today
Our findings offer timely insights for a world facing new forms of economic fragmentation. As governments increasingly resort to tariffs and trade restrictions to defend national interests, businesses need not be passive victims or strategic battlegrounds. History shows that when firms and industry associations coordinate across borders, they can act as bridges, turning rivalry into recovery.
Notably, the first trade agreement following the Norway – Portugal trade war was concluded by business associations rather than governments. Understanding these historical dynamics helps managers, policymakers, and citizens recognize the critical role of cooperation within global value chains, and the potential for trade wars, under the right conditions, to heal rather than harden divisions. In a new global context with changing relationships between the government, for example in the USA, and international business operations, our findings contribute to the research literature on the governance of global value chains.
