When the colonies won independence from England they were cast out of the empire's free trade network. How big of a problem was this?

by RusticBohemian
Conno999

In the short term this was a major problem. The American trading network at the end of the Revolutionary War was in shambles. Pre-1775 approximately 75% of all American exports went to Britain, Ireland, Scotland or the West Indies with an estimated 40% going to Britain itself and virtually all colonial imports had gone through Britain or her colonies. After 1783 Britain put severe restrictions on trade with America, with import restrictions meaning the purchase of approximately only 10% of American exports during the early 1780s. British law further prohibited trade with Britain's sugar colonies in the Caribbean which severely damaged one of the major sources of colonial-era commerce.

To compound this, ironically Britain began to export increasingly large quantities of British goods to the USA after 1783. Between 1784 and 1785 the United States imported goods from Britain worth over $7.5 million, selling less than one third of that in return, which led to a large trade deficit. British goods were often easier to make and were sold at far lower prices than American manufacturers could charge, leading to many American merchants going out of business. The flow of money to Britain to meet the trade deficit helped to depress American trade and led to slower economic recovery. American merchants also no longer enjoyed the protection of the British Navy and were now in direct competition with the British trade network.

To many at the time the economic situation looked incredibly bleak. Prices were depressed, private and public debt levels were heavy and the lack of a central government in the immediate aftermath of independence made trade regulation and economic policy chaotic. The US had a huge national debt, $41 million in 1783, with an added $2.4 million in annual interest.

Despite all this, however, the economic situation was not to remain this way forever. The United States was free of working within the British trade system and could now export to new markets in Europe and the Far East. Trade in tobacco from the South and Phildelphia, for example, boomed by the early 1790s as the price for exported American commodities remained high. The loss of access to traditional markets forced American merchants to adapt and shipping began directly to continental Europe which sidestepped English or Scottish middlemen. Many of the British trade restrictions could be evaded, especially in the West Indies where smuggling and concealed trade became common. Many of the trade restrictions were relaxed by Britain by the end of the 1780s. The share of US traders in Britain's cotton market, for example, was 0.2% in 1786-90 but by 1796 the share was up to 24.1%. In the longer term the American trade network would recover and thrive, with Brtiain increasingly reliant on imports of American commodities and raw materials during the 19th century. This is indicated in the ironic anecdote that by 1815 American traders had grown rich by selling tea in continental Europe, at a lower price than any British merchants were able to match.