Protectionism has met with plenty of criticism over the last several months, but the magnitude of the danger it poses is not yet fully appreciated. Much of the discussion surrounding the tariffs proposed by U.S. President Donald Trump has focused on their short-term consequences—stock market disruption, rising inflation, retaliation, and a potential recession. But as bad as these outcomes are, a worse possibility looms. Protectionism, if allowed to linger, could lead to a complete disfiguration of U.S. capitalism and democracy as they are known today.

Latin America experienced such a devolution in the mid-twentieth century. Driven by a logic similar to that which the Trump administration seems to be following today, leaders implemented protectionist tariffs and trade restrictions as part of an effort to encourage domestic manufacturing and rebalance trade relationships that they perceived to be unfair.

The result, however, was not an economic renaissance but financial unrest and undemocratic governance. As long as Washington follows a similar playbook, it risks a similar fate.

After the Great Depression took hold in the 1930s, several of Latin America’s strongmen leaders—such as Getúlio Vargas in Brazil, Lázaro Cárdenas in Mexico, and, later, Juan Perón in Argentina—concluded that the answer to the region’s many problems was industrialization. Since the colonial era, Latin America had been an extractive enclave, producing and exporting mostly agricultural products while importing most industrial goods. In the 1930s, many politicians and intellectuals deemed this an unfair trade structure because it kept the region under-industrialized and thus underdeveloped.

Leaders thus set out to rebalance their countries’ trade relationships. If Latin America went heavy on protectionism and blocked imports from industrial trading partners, they believed, local manufacturing would proliferate. Governments enacted policies that came to be known as import substitution industrialization, or ISI: increased tariffs, enormous barriers to foreign investment, and high spending on newly created state-owned enterprises, especially utilities and infrastructure.

These policies did lead to manufacturing growth. But they also made Latin American industry one of the least competitive in the world and fueled corruption. By the 1960s, the damage was palpable. Countries that had embraced this strategy developed huge macro- and microeconomic problems. Inflation soared, reaching annual rates that were often three times higher than the world average (except in oil states Mexico........

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