(FORTUNE Magazine) – President George Bush is a free-trader. So is every last one of his economic advisors. "Certainly the rhetoric has been the strongest of any President since Roosevelt in favor of free trade," says Dartmouth economist and trade expert Douglas Irwin.

But now, in one of those delicious ironies that makes American politics so maddeningly interesting (think Nixon goes to China), free-trader George Bush appears to be dragging us back to the protectionist past.

It started, as these things do, with the 2001 recession. When economic times are tough, American voters--or at least key voters in key states whose jobs happen to be disappearing--lose patience with vague talk about how trade benefits us all. So in 2002 the President slapped a 30% tariff on steel imports and signed a farm bill chock full of protectionist measures. This November he imposed a quota on Chinese bras and bathrobes. The plan, if you can call it that, was to keep pushing for free trade through forums like the World Trade Organization but grab headlines (and votes) with a few high-profile protectionist moves.

The problem with this split policy is that George Bush is not the only political leader on the planet who has to answer to an electorate worried about jobs and suspicious of foreigners. Voters abroad also happen to be, as a rule, particularly suspicious of President Bush--for reasons that have little to do with trade--and they are always alert for signs of American hypocrisy. Put it together, and few of Bush's overseas counterparts see any political capital in cutting him slack on trade.

The Chinese--with an unelected government and 9% GDP growth--may give the U.S. a pass on the bra thing. If other battered U.S. industries begin petitioning for relief from Chinese competition and getting it, though, China's leaders will look for ways to retaliate. Meanwhile developing nations frustrated with U.S. and European intransigence on farm subsidies scuttled World Trade Organization tariff-reduction negotiations in Cancun in September. A Western Hemisphere trade meeting in Miami in November did make limited progress--along with drawing the usual crowd of antiglobalization protesters. But it took place amid growing U.S. tensions with Western Europe--where Bush is especially unpopular--over steel.

The Bush administration has until mid-December to scrap the steel tariffs, which the WTO declared illegal in November. When FORTUNE went to press, Bush's people were trying to craft a compromise, but the Europeans were demanding unconditional surrender. European Union trade commissioner Pascal Lamy has already drawn up a long list of products from swing-vote states (such as Florida and Pennsylvania) on which the Europeans will slap retaliatory tariffs if the U.S. doesn't back down.

"There is a Mid-Atlantic trade storm whipping up," Niall FitzGerald, co-chairman of Anglo-Dutch food and consumer-products giant Unilever, told the BBC in late November. "There will be retaliation and then retaliation to that retaliation, which could lead us to a 1930s decline."

That's a stretch--the steel tariffs and the planned European response are nowhere near the size or scope of the Smoot-Hawley Tariff Act that set off the 1930s trade wars. And while Smoot-Hawley and its foreign counterparts worsened the Great Depression, hardly anybody thinks they caused it.

There is a valid concern, though, that the great lowering of tariffs and opening of world trade that began after World War II may have run its course. "The predictions of a trade war are probably far-fetched at the moment," says Columbia economist Glenn Hubbard, a top Bush economic aide until early this year. "That doesn't mean we shouldn't be worried."

We should be worried in part because trade barriers almost always hurt more than they help. In the case of the steel tariffs, the economic damage to other U.S. manufacturers from higher steel prices has almost certainly outweighed the gains enjoyed by steelmakers. For all the dislocation it brings, international trade is America's--and the world's--best hope for increasing living standards and improving lives. As one free-trade advocate put it back in 2001, "When there's more trade, there's more commerce and there's more prosperity, and a prosperous society is more likely to be just."

That was President Bush, of course. What will it take to get him talking like that again? Most likely the end of the 2004 election campaign or a couple million new jobs. The danger is that neither of those will come soon enough to avert a messy, acrimonious global return to protectionism.

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