Trade war. Surely the clue is in the name. Incredible as it may seem, the United States has just declared war. Not on adversaries like North Korea, Iran or Russia. Instead it has declared war on Europe, on us. The modern world has lost the habit of thinking in a historical way about free trade.

Today’s global economy has been predicated for more than half a century on open international markets. Through most of that period, arguments over trade have been arguments about good forms of free trade – such as the tariff-free flow of products that boosts prosperity all round – versus the bad forms – such as lower labour standards, tax avoidance or the undermining of public institutions.

As a result, perhaps we have forgotten that the alternative to trade peace is not only trade war, but sometimes war itself.

In an abstract sense, Donald Trump may have been right to invoke national security this week when he slapped a 25% tariff on European and Canadian steel and 10% on aluminium. “Economic security is military security,” declared the US commerce secretary, Wilbur Ross. That remark echoes Adam Smith’s celebrated observation in the 18th century that defence was more important than opulence.

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Trade and national security are indeed umbilically linked. Each provides the conditions and stability necessary for the other. But trade can also be used as a weapon of war when states are enemies. Smith lived in a Europe where trade and military conflicts often overlapped. We don’t – at least not recently and not yet. Neither Europe nor Canada is in reality an enemy of the US. With China, it’s not so clear.

Over a century ago, in June 1904, 10,000 people gathered at Alexandra Palace in north London. They were there to mark the centenary of the birth – the 214th anniversary falls tomorrow – of Richard Cobden, the anti-corn law campaigner and the embodiment of Victorian liberal free trade. The audience contained women’s groups, co-operative groups, workers’ groups and political radicals of many kinds. Among the speakers were the men who would be Britain’s two major 20th-century wartime leaders: David Lloyd George and Winston Churchill.

But the main speech was given by the Liberal leader and later prime minister, Henry Campbell-Bannerman. “We stand today at the parting of the ways,” he told the crowd. “One road – a broad and easy one – leads to protection, to conscription, to the reducing of free institutions to a mere name … The other road leads to the consolidation of liberty and the development of equity at home, and to treaties of arbitration and amity, with their natural sequences in the arrest and ultimate reduction of armaments, and the lightening of taxation, which presses upon our trade and grinds the faces of the poor.”

Back then, as the historian Frank Trentmann – who cites the Cobden centenary at the start of his 2008 history of the free trade movement – puts it, free trade was “uniquely central to democratic culture and national identity in Britain”. The defence of cheap food was linked to a popular narrative about a free, vibrant, increasingly secure and increasingly democratic civil society – in contrast to the militarist path of more authoritarian and protectionist societies, Germany above all.

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Over the decades that followed, that centrality gradually disappeared. Britain ceased to shape the global trading system as it had done in the 19th century. Public services were consolidated in the aftermath of war, not in conditions of unending peace. But Campbell-Bannerman’s two roads – one of free trade, peace and growing equality, one of protection, war and inequality – were real choices then and remain real choices today.

Trump has chosen his road. He has forced his trade partners to respond in like terms. But the disruption that he has deliberately inflicted on Europe marks a turning point. It declares us America’s enemies. In Britain, it tells us that the Atlantic alliance is at risk of becoming a chimera. It makes a mockery of the Brexiters’ vision of a buoyant free trade deal with the US. That’s nothing but self-deceiving fantasy now. And, as Campbell-Bannerman would have recognised, it makes clear that we are Europeans.

The consequence of free trade is the binding of nations together. We will have to see what the consequences of Trump’s move are – but the precedents do not inspire hope.

• Martin Kettle is a Guardian staff columnist