Does anyone remember the New York Times columnist Thomas Friedman’s bestseller, The Lexus and the Olive Tree? Or the better (though less famous) book by John Micklethwait and Adrian Wooldridge, then journalists at the Economist, A Future Perfect? These accounts, encomiums to globalisation, were scarcely solitary in their genre. And it was through volumes like these that a contingent historical process became intellectualised and reified into an inevitability, a notion that dominated economic thought and policy for decades. This perspective, and its near-theological acolytes, has been on the defensive since the twin victories of Brexit and Donald Trump in 2016. But the last year, and Trump’s second victory, has seen its final defeat. We can therefore see globalisation and its cheerleaders in perspective for the first time – and begin to take the measure of their teleological hubris.
Trump’s rhetorical populism – promising higher tariffs, attacks on immigration, denunciations of elites, defence of workers, and a “buy American” economic nationalism – took dead aim at globalisation’s basic principles. But he hasn’t been shy of giving his enemy a name: addressing workers in Ohio in August 2020, he charged that “globalisation has made the financial elites… very wealthy but it’s left millions and millions of our workers with nothing but poverty and heartache – and our towns and cities with empty factories and plants”. America had, he added, “rejected globalism and embraced patriotism”.
Compare this with the quixotic history offered by Friedman – which peddled the “Golden Arches theory” that no two countries hosting branches of McDonald’s would go to war with each other because of their mutually beneficial bonds of economic interdependence. Reducing barriers to trade and financial flows to a minimum and integrating China into the global economy, Friedman and likeminded pundits averred, was the best way to lift all boats and would benefit everyone, pretty much everywhere, regardless of wealth, skills, or location in the world. When queried about the ill effects, including increased economic inequality and job losses or wage reductions resulting from “outsourcing” production, Friedman et al. either glossed them over or replied that they would be outweighed by lower prices, greater innovation, and higher living standards created by increased competition and the optimal use of labour and capital.
Friedman was writing in 1999, at the end of globalisation’s triumphant decade, its high noon. The economic order that emerged after the end of the Cold War championed the removal of restrictions on international trade and capital flows across borders to an extent unsurpassed during the first four decades following the Second World War. But in some ways it extended principles that had prevailed for much of the 20th century. A principal pillar of the post-war order had been the General Agreement on Tariffs and Trade (GATT). Signed in 1947, it reduced tariffs through eight rounds of multi-round negotiations, based on reciprocity.
Post-Cold War globalisation went much further. It called for liberalising the trade in goods, as GATT had, but also of services, capital flows, and agriculture. The World Trade Organization (WTO), created in 1995, institutionalised these ideas, issuing verdicts from above on disputes between states and substantially reducing governments’ leeway to protect national industries from foreign competition. And following China’s abandonment of Maoist economics, starting in the late 1970s, and the collapse of the Soviet bloc between 1989 and 1991, globalisation’s geographical ambit came to far exceed that of the preceding liberal economic order.
Anyone who challenged globalisation’s market-driven fundamentalism – supplemented in the political realm by “End of History” certitude about liberalism’s victory in the war of ideologies, now discredited by the resurgence of the right and far-right in the United States, Europe, and elsewhere – risked being mocked as a member of the Flat Earth Society. Bill Clinton likened globalisation to “a force of nature – like wind or water”. Tony Blair extended the ecological metaphors, mocking calls to curtail the process as equivalent to demanding the abolition of the seasons. In this heady milieu, full-on challenges to the Zeitgeist were rare. (A notable exception was the British political theorist and New Statesman contributor John Gray. His book, False Dawn, a worthy successor to Karl Polanyi’s classic, The Great Transformation, explored the spread of economic liberalism in the 19th century and the eventual backlash against the disruptions it caused and predicated its revival.)
What figures like Gray understood was that the high priests of globalisation were ahistorical. They had failed to comprehend that theories prescribing unencumbered economic exchange have always been championed by certain countries at certain times out of self-interest. But these theories were not timeless truths. Dominant or rising economic powers would praise economic liberalism when it suited their interests and depart from, even defenestrate it, when the circumstances changed. Today, it has again become apparent that economic policy, power politics and nationalism are inextricably intertwined. The stance of an individual nation on global free markets depends upon its economic position relative to others at a given time, as well as its history and culture, and the interests of the most powerful segments within its society.
It’s therefore scarcely surprising that in the 19th century – more specifically from the 1820s onward – Britain, then climbing to the top of the international economic hierarchy, was the leading proponent of free trade. Given Victorian Britain’s unrivalled wealth and capacity for technological innovation, it could outcompete other countries and had a self-evident reason to claim that the reduction of trade barriers would prove universally beneficial. But this ardour waned in the early 20th century along with its economic dominance. As Britain’s relative decline began to take hold, tariffs were championed once more, culminating in the 1932 Import Duties Act. By comparison, the United States, which was only embarking on its industrialisation in the 19th century, didn’t buy the free trade gospel. It practised protectionism, and the Republican Party, regarded as the champion of international free trade for most of the decades after World War II, was in the 19th century an proponent of protectionism.
The United States’ position in the liberal economic order that emerged after the Second World War mirrored that of Britain in the 19th century. The US emerged from the conflict with the world’s most powerful economy. Its mainland was spared from destruction. The war had damaged, even partly destroyed, the countries that would have been, and once were, its competitors; many of them had even come to depend on American aid and protection. It was therefore logical that the United States would become the principal proponent of a liberal international economy. At the same time, its leaders and intelligentsia warned that protectionism was a path back to the economic ruin and wars of the 1930s, and that their country was the custodian of economic openness.
Yet as early as the 1970s there were signs that international economic liberalism was starting to lose its lustre in the United States. Other centres of global economic power – Western Europe, Japan, and later South Korea – were on the rise. Industries long dominated by the US – steel, automobiles, electronic consumer goods – faced unprecedented competition. American workers’ economic well-being, even their jobs, were at stake. This was context in which the Reagan administration (in 1981) limited the number of Japanese-made cars permitted in the American market to 1.68 million, a quota raised in 1984 and 1985 and retained until 1994.
The edict, though dressed up as a “Voluntary Export Restraint”, was a response to pleas from auto industry titans, notably Lee Iacocca, chairman of Chrysler, for relief from foreign competition. Long before Donald Trump’s first presidential campaign, Iacocca was deriding free trade as a “myth” and warning that it would gut American industry and compromise U.S. national security. But it is worth noting that this was the period when Donald Trump began to hone his “Tariff Man” schtick, calling for taxes on Japanese imports on television. “America is being ripped off,” he said, not for the first time.
With the end of the Cold War and the emergence of a unipolar world, a millenarian triumphalism about the spread of democracy developed, nourishing theories like Friedman’s. But even as America’s “thought leaders” smiled upon this new landscape, the ground was moving beneath their feet. Dissatisfaction started to spread as globalisation’s gains (after taxes and social benefits) were increasingly reaped by people in the top deciles of the income distribution. Those at the bottom witnessed wage stagnation, if they were lucky, and were also those hardest hit by deindustrialisation, in the United States as well as parts of Europe. There are, doubtless, debates on the extent of globalisation’s retreat and its culpability for outcomes – such as wage stagnation – that enriched an economic elite at the expense of workers. But its once-sacrosanct maxims are now undeniably under unprecedented assault, and “Davos Man” the target of opprobrium.
Trump’s rise now has a straightforward explanation: he was more adept than his rivals at tapping into this dissatisfaction. And he won the White House in 2016 on a platform that included a simple promise, namely to raise tariffs that would stop other countries from eating America’s lunch. It wasn’t mere talk. Trump hiked tariffs on a variety of imports, especially those from China, even if he was more cautious in government than he was on the campaign rostrum. But during his 2024 presidential campaign he went further, vowing to impose a 60 per cent tariff on imports from China and 20 per cent on everything else – from anywhere. Though Trump’s protectionism focused on China, it now extends to the principal trade partners of the United States: Mexico and Canada, as well as Europe.
In 2016, Trump could be dismissed as an economic troglodyte and an aberration – his election was an accident, if not a Russian plot. Now his detractors must perform a rapid reinterpretation: he represents a deeper trend, a rethinking of the economic axioms that have governed our minds and bodies for a generation. The fate of the once-dominant ideas and policies favouring the free flow of trade and capital cannot, however, be attributed to Trump alone. After winning the 2020 presidential election, Joe Biden retained Trump’s tariffs – which exceeded $200 billion – on China. In fact, in May 2024, Biden doubled duties on Chinese-made solar cells to 50 per cent and raised those on certain Chinese aluminium and steel products from their existing range of 0-7.5 per cent to 25 per cent. In September, he imposed a 100 per cent tariff on Chinese-made electric vehicles (EVs) and supplemented these steps with bans on the export to China of high-end computer chips along with prohibitions on the flow of American-related venture capital to China. He has also blacklisted dozens of Chinese companies on various grounds, provoking parallel countermeasures from Beijing as well as bans on the export to the United States of critical minerals: gallium, germanium, and antimony. Biden also adopted Trump’s rhetoric on China, portraying as not merely as a ruthless economic competitor but also as the foremost threat to American primacy.
The revival of protectionism is not confined to the United States. Canada raised tariffs on Chinese EVs to 100 per cent and on steel and aluminium products to 25 per cent, emulating the United States. In October, the EU raised tariffs on Chinese-made EVs to as much as 45.3 per cent for five years, prompting China to lodge a complaint with the WTO. That particular dispute may be resolved by the EU cancelling the tariff increase in exchange for Beijing’s commitment to offset its subsidies by establishing a minimum price for EVs sold in the EU. Still, the spat itself is indicative. For now, Europe has limited itself to providing financial support to its solar panel companies rather than raising tariffs on those made in China, but that too is a form of protectionism. And these may prove to be opening moves. European steel manufacturers, hard hit by low-cost Chinese competition, will continue to plead with their governments for help. More generally, Europe will not want to leave its firms and workers undefended against the inflow of Chinese products shut out of the American market.
That China is now appealing to the WTO – seen in some quarters as a tool for imposing neoliberal hegemony on the third world – is also instructive. For three decades after the 1949 revolution that brought the Communist Party to power, China’s economy was state-run and state-owned, and the government relied on “import substitution” to shield “infant industries”. Today, it has become the world’s staunchest defender of free trade. In 2017, President Xi Jinping praised globalisation by name, at the Davos World Economic Forum no less. And at the November 2024 APEC summit he warned that “unilateralism and protectionism are spreading” and that “hindering economic cooperation under various pretexts, insisting on isolating the interdependent world, is reversing the course of history”. Clinton and Blair could have written the scripts.
Beijing’s role reversal reflects China’s emergence as an economic powerhouse. Before Deng Xiaoping’s market-based reforms gained momentum, China’s share of global exports of goods and services was negligible: 0.6 per cent in 1970. By 2023, it had reached 18 per cent. In the mid-1980s, primary products and basic manufactured goods accounted for almost all of China’s exports; now it’s a leader in a range of high-end products and technologies. In short, its current economic problems notwithstanding, China has become a technologically advanced country. In 2023, its exports totalled $3.5 trillion, placing it ahead of the United States, and despite a decline of 11 per cent, its hi-tech sales alone exceeded $728 billion in 2023, putting it in first place.
The global economy isn’t headed toward the disastrous, “beggar-thy-neighbour” policies of the 1930s. But it will see increased protectionism and more trade- and investment-centered disputes. Nation-states will be guided by national industrial policy, and will be increasingly sensitive to the national security risks of supply chains involving political and military adversaries. And in the United States, as well as Britain and Europe, companies that moved production abroad in the heyday of globalisation based on marginal gains in costs and profit margins are recalculating, and many appear to be returning to their home markets (reflecting what has been called a “reshoring renaissance”), whether because of increasing tariffs on imports in their home markets or incentives or pressure from their governments.
Our question for the future is whether protectionism will largely be limited to Western countries restricting imports from China or whether Trump’s pledge to increase tariffs on all imports, if implemented, will trigger a much wider trade war. For now, this much is clear: the international economy’s trajectory will dash the hopes and dreams of globalisation’s early proselytisers. History has not resolved itself in the manner implied by the suggestive title of Wooldridge and Micklethwait’s 2000 book: a “future perfect”, settled and utopian. Instead, it has reverted to the turbulent contingencies that have always governed human existence. A future that is always open, and always imperfect.
[See also: Could Donald Trump end the war in Ukraine this year?]
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