Obscure and inconsequential in terms of political or strategic achievements, the War of 1812 made its major impact on the pockets of merchants, tradespeople, and consumers. Ship losses, declining trade, and rising prices affected every aspect of American and British life. For the first time, a small but feisty American navy challenged British naval dominance with seafaring and sea-fighting skills that rivalled Great Britain's. The Royal Navy's gradual blockade of American shipping, a rigorous convoying policy, and skyrocketing marine insurance rates raised commercial risk to unacceptable heights. Once the United States and Great Britain realized that the cost of continuing the war outweighed any possible gains, either economic or political, both sides agreed to peace. Economic pressure — not decisive military or fleet actions — finally brought the war to an end.

In 1812, neither nation could afford all-out war. British troops in Spain, and later in North America, depended on American foodstuffs that were transported to them legally under licence or covertly out of blockaded ports. Despised by privateers and navies on both sides, the licensed trade was a necessary evil that kept markets open and generated profits to help defray the cost of the war. In fact, the intent of nineteenthcentury commercial warfare was not to destroy an enemy's trade completely, but rather to drain its wealth by halting its exports and forcing it to purchase one's own. British merchant interests, harassed by hundreds of enthusiastic American privateers, continually lobbied the Admiralty for better convoy protection. The Royal Navy found itself torn between a “political” obligation to protect trade and the strategic naval demands of war at sea.

Commercial Warfare

In June 1812, American headlines trumpeted the cause of free trade as a reason for declaring war. The United States was not attempting to usurp Britain's role as a mercantilist nation by acquiring new markets, but rather to ensure America's continued access to European markets as a neutral nation. As both sides soon discovered, the price of free trade was not cheap. Historian Stanley Bonnet calculates America's war cost at least 1,877 lives and $13 million. Britain, too, paid dearly for antagonizing the United States to the point of war.