During the reign of George III Britain lost the prosperous American colonies. It was a hard blow on English prestige and policy.

The traditional policy applied by the Governments in London had been mercantilistic. Mercantilism meant: (from Wikipedia)

• forbidding colonies to trade with other nations

• monopolizing markets with staple ports
• banning the export of gold and silver, even for payments
• forbidding trade to be carried in foreign ships
• subsidies on exports
• promoting manufacturing through research or direct subsidies
• limiting wages
• maximizing the use of domestic resources
• restricting domestic consumption through non-tariff barriers to trade.

Mercantilism was avoided by the Americans through smuggling and by illicit trade with France and Spain – even during the Seven Years War. Mercantilism had produced a disastrous trade balance for the Americans and the taxes imposed after the end of the war with France got things worse. It was the beginning of revolution. Parliament passed a Declaratory Act confirming the right to impose taxation on the colonies. The Government’s act arose intense sympathy for the Americans in all liberal circles. In 1767 Townshend imposed a whole series of import duties. The colonists’ fury was intense, and a pattern of revolutionary organization and leadership began to emerge. The British Government hesitated and withdrew all taxes except the tax on tea. At Boston in 1773 the colonists boarded the ships which brought the tea from England and threw it into the sea. War started in 1775 when 293 British soldiers were ambushed and killed on their way back to Boston.

The war was conducted with incompetence on both sides, but the British hesitations merged with the help which both France and Spain gave to the Americans. The war ended in disaster for England in 1781. The peace was signed in France in 1783. America became independent, Spain got Florida, Louisiana was French, Britain maintained Canada and Nova Scotia.