US and global economies under Trump's neo-mercantilism economic agenda

Introduction

• "America First" and the rise of neo-mercantilism

Donald Trump’s 2024 campaign economic proposals cantered on an “America First” approach that echoes neo-mercantilist principles. Neo-mercantilism emphasizes maximizing exports, minimizing imports, and protecting domestic industries—essentially viewing trade as a zero-sum game where one nation’s gain is another’s loss.

• Adopting aggressive trade measures

Trump’s plans for steep universal tariffs, the reshoring of supply chains, and punitive measures against trading partners strongly reflect neo-mercantilist doctrine. For instance, he has proposed "universal baseline tariffs" on most foreign goods to "reward domestic production while taxing foreign companies."

Furthermore, he vows to revoke China’s Most-Favored-Nation trade status and phase out imports of critical goods from China over four years. He also suggests raising tariffs further if other countries engage in currency manipulation or unfair trading practices.

• Shift toward aggressive neo-mercantilism

This significant shift from free-trade orthodoxy towards an aggressive, nationalist trade stance is what analysts have termed “aggressive neo-mercantilism,” a robust approach that prioritizes national interests aggressively at the expense of global trade norms and partnerships.

The contemporary adaptation of the historical economic strategies of aggressive neo-mercantilism marks a significant shift from global cooperation to a more isolated, competitive stance that could reshape both the U.S. and global economies. Before we discuss how this might be done, it is important to examine Mercantilism's history, from its origins to its modern applications.

Historical context and modern adaptation of mercantilism

• Mercantilism: Foundation of modern economic nationalism

Mercantilism, an economic theory and practice that dominated European trade and economic policies from the 16th to the late 18th century, posits that national wealth and power are best enhanced by maximizing exports and minimizing imports.

Governments adhering to mercantilist principles sought to accumulate precious metals, establish colonies, and monopolize markets to ensure trade surpluses. They implemented policies such as high tariffs, subsidies for domestic industries, and strict regulation of colonies to control the flow of materials and goods.

Mercantilism led to significant government intervention in the economy and was driven by the belief that international trade was inherently competitive and zero-sum in nature—what one nation gained, another lost. This philosophy underpinned the rise of European colonial empires and influenced the development of the global economic system, setting the stage for both industrial capitalism and modern economic nationalism.

• Neo-mercantilism and global market domination

Neo-mercantilism is a modern economic strategy that echoes the mercantilist practices of the past, focusing on state-led development to achieve trade surpluses and enhance national power. Unlike historical mercantilism, which often involved the outright colonization of foreign lands, neo-mercantilism tends to use more sophisticated tools such as strategic tariffs, export-driven policies, and government support for key industries to dominate global markets.

• Aggressive neo-mercantilism: A heightened economic strategy

Aggressive neo-mercantilism refers to a heightened form of traditional neo-mercantilist policies, where a nation aggressively uses economic strategies to prioritize its own interests at the expense of global trade norms and partnerships.

This approach involves rigorous enforcement of trade protections, such as high tariffs and strict non-tariff barriers, to shield domestic industries from foreign competition. Additionally, aggressive neo-mercantilism may include the strategic use of currency manipulation and state subsidies to artificially enhance export competitiveness and reduce import penetration.

This intense focus on national economic supremacy often leads to trade wars, strained international relations, and disruptions in the global supply chain. By prioritizing national gain over international cooperation, aggressive neo-mercantilism challenges the stability of the global economic order and poses risks to the interconnected nature of modern economies.

In the sections below, we analyze how, if implemented, these neo-mercantilist policies could impact the U.S. economy, the global economy, international trade flows, manufacturing, the worldwide rise of economic nationalism, relations with key trading partners, global currencies, and commodities markets.

Implications for the US economy

• Economic protection vs. wider economic costs

Trump’s neo-mercantilist agenda would have profound but mixed effects on the U.S. economy. On one hand, high tariffs and “America First” procurement could provide short-term protection and demand for certain U.S. industries (e.g. steel, aluminum, electronics assembly) by raising the cost of imported alternatives.

Trump argues that “raising tariffs on foreign producers while lowering taxes for domestic producers” will keep jobs and wealth in the country. Indeed, tariff revenues could be used to fund domestic tax cuts – Trump suggests that as tariffs on imports go up, taxes on American workers and businesses can come down. In theory, this tax-for-tariff swap might stimulate some domestic investment and job growth in protected sectors.

However, the costs to the broader U.S. economy are expected to outweigh the benefits. Tariffs are essentially a tax on imports, and studies of Trump’s first-term trade war indicate those costs were largely borne by American consumers and firms, not foreign countries. U.S. importers pay the tariffs at the port and typically pass on most of the cost as higher prices for consumers.

For instance, the National Retail Federation estimated that Trump’s floated tariff package (a 10–20% across-the-board import tariff plus 60–100% tariffs on goods from China) would cost American consumers $46–$78 billion annually in higher prices on everyday products like apparel, toys, furniture, appliances and footwear.

This amounts to a substantial hidden tax – roughly $200–$300 per U.S. household per year in added costs, according to the Tax Foundation. Tariffs implemented in 2018–2019 under Trump were called “one of the largest tax increases in decades”, totaling about $80 billion in new taxes on Americans.

• Macroeconomic impact and supply chain disruptions

The macroeconomic impact of a tariff-centric policy is likely to be negative for U.S. growth. Higher import costs feed into inflation, eroding consumers’ real purchasing power. Business costs also rise, especially for manufacturers reliant on imported inputs (e.g. machinery parts, specialty materials).

A Federal Reserve study in 2019 found Trump’s tariffs raised input costs for U.S. producers and led to “relative reductions in manufacturing employment and relative increases in prices”. Any small gains in employment in protected industries were more than offset by job losses elsewhere due to retaliatory foreign tariffs and higher input prices

A 2024 NBER paper led by MIT economist David Autor similarly concluded that the 2018–2019 tariff war “had neither a sizable nor significant effect on U.S. [manufacturing] employment,” while foreign retaliatory tariffs “had clear negative employment impacts particularly in agriculture,” only partly mitigated by federal farm subsidies.

In short, broad tariffs act as a drag on economic growth –Trump’s new proposals would raise costs and reduce U.S. GDP growth relative to baseline. Additionally, major trade uncertainty and disruption of supply chains would likely dampen business investment. If companies fear an era of ever-shifting tariffs and trade barriers, they may delay capital expenditures or relocation decisions.

Financial markets could react negatively as well. Higher inflation from tariffs might force the Federal Reserve to keep interest rates higher for longer to contain price pressures, which restrains credit and investment.

Oxford Economics, for example, nearly halved its forecast for U.S. industrial output growth in 2025 (from 2.1% to 1.1%) after factoring in Trump’s newly announced tariff agenda, citing the hit to business confidence and slower easing of monetary policy.

• Economic trade-offs and potential benefits

Thus, while Trump’s mercantilist approach aims to boost American factories, it could also raise recession risks if escalating trade conflicts undermine consumer spending and corporate investment.

On the positive side, the U.S. government would collect significant tariff revenue (effectively transferred from consumers). Trump’s team projects trillions in revenue over a decade from a universal 10% tariff, theoretically offsetting other taxes. But this comes directly out of Americans’ wallets and from downstream businesses. If those funds are not perfectly redistributed (e.g. via tax cuts or subsidies to those hurt), the result is a net economic loss.

In sum, a neo-mercantilist second Trump administration might boost a few domestic industries and garner tariff revenues, but Americans broadly would likely face higher prices, retaliatory job losses in export sectors (like farming and aerospace), and slower growth relative to a free-trade scenario.

Implications for the global economy

• Economic downturn and supply chain disruptions

A sharp U.S. turn toward mercantilist protectionism would send ripples through the global economy, generally dampening worldwide growth. The United States is the world’s largest importer, so sweeping U.S. tariffs and import substitution would reduce demand for other countries’ goods. This, in turn, can slow growth in export-oriented economies from Asia to Europe.

In Trump’s first trade war with China, both countries experienced slightly lower real incomes and GDP than they would have otherwise​. A second, broader trade war could have larger effects, especially if it finally extends, as it seems, beyond U.S.-China to encompass North America and Europe.

• Revised economic forecasts and market instability

Global forecasters have already begun downgrading growth projections in anticipation of renewed U.S. protectionism. In early 2025, amid Trump’s tariff threats, Oxford Economics cut its global industrial production growth forecast for 2025 by 0.5 percentage points​. The downgrade reflects the expectation of worldwide tariffs, policy uncertainty, and higher-for-longer interest rates creating a drag on investment and manufacturing.

In effect, a tariff surge acts like a negative supply shock (raising costs) and a negative demand shock (reducing trade volumes) for the world economy. The IMF and other institutions have in past episodes warned that a full-blown U.S.-China trade war could shave tenths of a percent off global GDP.

With the U.S. now also targeting allies and neighbors, the cumulative impact could be significant – potentially stalling global growth if multiple major economies slip into slower expansion or mild recessions.

• Decoupling and redefinition of supply chains

Trump’s intent to "completely eliminate U.S. dependence on China" and incentivize U.S. firms to reshore or "friend-shore" production could accelerate the ongoing decoupling between Western and Chinese economic spheres.

This shift might lead to the development of parallel supply networks—one centered on the U.S. and its allies, and another based in China—replacing the previously integrated global supply chains.

This shift is likely to increase production costs globally, raise consumer prices, and reduce corporate profit margins. It also redistributes economic growth, possibly benefiting countries like Vietnam, India, and Mexico as investment shifts away from China.

• Erosion of the multilateral trade system

Crucially, the return of mercantilism erodes the multilateral trading system that has underpinned global growth for decades.

Under the second Trump term, the World Trade Organization would likely remain sidelined or even further weakened. (Trump has long disparaged the WTO and already crippled its appellate court by blocking judge appointments​).

Without a functioning WTO to adjudicate disputes, tit-for-tat tariff wars could proliferate with no neutral arbiter to enforce rules.

• Geopolitical tensions and global market uncertainty

This climate of trade policy uncertainty – where tariffs can be imposed overnight based on political whims – acts as a brake on global investment and innovation.

Smaller countries in particular could suffer as the two giants (U.S. and China) pursue their zero-sum strategies; as one observer put it, “middling and small powers have little choice but to imitate or drown” in an aggressive mercantilist environment.

In summary, Trump’s neo-mercantilist policies would likely reduce global trade volumes, disrupt supply chains, and dampen world GDP growth. Some emerging markets might attract new factories as supply lines shift, but worldwide business confidence and cooperation would decline.

The global economy could enter a period of “managed trade” blocs and slow growth – “a paradigm shift... from free trade... to an embrace of protectionism justified by national security”​.

Impact on global trade flows and trade policy

• Reorientation of trade flows

The second Trump administration will profoundly reshape global trade flows. The immediate effect will be a reorientation of U.S. imports away from tariff-targeted countries.

With the implementation of a universal tariff ranging from 10–25% on virtually all imports, there would likely be a decline in total import volume and a shift toward domestic products or imports from "exempted" countries.

Trump has suggested that he might offer tariff breaks to favored nations on a reciprocal basis, potentially sparing allies who strike trade deals or meet specific demands related to immigration or drug enforcement from certain tariffs, while others might face the full impact.

• Trade diversion and shifts in manufacturing

This dynamic would accelerate trade diversion, with countries like Vietnam, India, and Mexico possibly gaining market share as U.S. importers seek to circumvent high tariffs on Chinese goods.

This pattern was evident during the 2018–2019 U.S.-China trade war, where China's share of U.S. imports decreased as other low-cost exporters like Vietnam experienced significant export growth to the U.S. This trend could intensify if Trump succeeds in phasing out imports of Chinese "essential goods" over four years, shifting the production of electronics, steel, and pharmaceuticals either to the U.S. or to other countries not facing U.S. tariffs.

Concurrently, U.S. exports might also redirect; China, for example, has already reduced its dependence on U.S. agriculture and might decrease purchases of U.S. manufactured goods further, pushing American exporters to seek alternative markets or rely more on domestic consumption.

• Consequences for global trade dynamics

However, global trade flows in aggregate are likely to contract. The imposition of tariffs and counter-tariffs by multiple major economies could render some trade unfeasible, leading to an overall reduction in global trade volumes.

The U.S.-China trade war previously resulted in lost trade that wasn't fully compensated by other partners, slowing global trade growth significantly in 2019. A broader trade conflict might push the world toward a scenario reminiscent of the competitive protectionism of the 1930s.

Trade patterns could shift from a framework of multilateral openness to more bilateral, transactional deals. Trump's preference for one-on-one trade negotiations over comprehensive multilateral agreements could lead to a series of bilateral discussions where the U.S. might pressure countries like the UK or Japan for concessions in exchange for tariff exemptions.

• Unpredictability and politicization of trade policy

Global trade policy would become increasingly unpredictable and politicized. Trump’s proposal for “reciprocal tariffs,” which would match any foreign tariff with an equivalent U.S. tariff, signifies a departure from stable tariff bindings towards more ad hoc retaliation.

Furthermore, trade policy could be used to pursue non-trade objectives, such as Trump’s threats of further tariffs on Mexico and Canada unless they enhance border security measures, or on China to compel reforms in various practices.

The ineffectiveness of the World Trade Organization to enforce rules, exacerbated by its debilitated appellate body, leaves little to restrain nations from engaging in such behavior.

This situation could lead to a drift into managed trade and protectionist blocs, where the U.S. opposes not just China but potentially allied economies as well, each erecting barriers under the guise of fairness or security.

• Redesigning global trade maps

In essence, Trump’s aggressive neo-mercantilist approach would redraw global trade maps, favoring nations that align with U.S. demands and sidelining those that do not. This shift would generally diminish the efficiency and volume of international trade.

For example, after U.S. tariffs prompted China’s retaliation, Brazil emerged as China’s top soybean supplier, a change in trade flow that has solidified over the years. A similar redistribution could occur in manufacturing sectors; for instance, if U.S. tariffs make Chinese electronics uncompetitive in the American market, producers in Vietnam or Mexico might step in to fill the void.

However, such shifts require time and investment, and in the interim, supply bottlenecks or shortages of certain goods could disrupt production in various countries, highlighting the complex and often unintended consequences of aggressive trade policies.

US and global Manufacturing trends

• Revitalizing US Manufacturing

U.S. manufacturing would be a central focus of Trump’s policies, with the aim to rejuvenate domestic industry by protecting it from imports and incentivizing local production. Broad tariffs would initially boost some American manufacturers by making imported competing products more expensive. Trump claims his tariff-centric approach will “bring back millions of American jobs” and position America as a “manufacturing powerhouse like the world has never seen.”

In practice, these policies might prompt some companies to expand U.S. production to avoid tariffs, as seen during 2018-19 when foreign automakers and appliance makers increased their capacity in the U.S.

New government incentives for "reshoring" could further encourage the return of production, with proposals such as tax credits for companies relocating factories to the U.S. and denying federal contracts to firms that outsource to China.

• Challenges in Manufacturing employment

Despite these efforts, the overall trend in manufacturing employment may not align with the optimistic rhetoric. Advances in automation and productivity mean that even if factories return, they might employ fewer people than before.

Tariffs implemented in Trump’s first term raised costs for U.S. factories, reducing their competitiveness without significantly boosting job numbers. The 2024 Autor et al. study found that tariffs on Chinese goods had “no significant effect on U.S. employment” in manufacturing, while foreign retaliatory tariffs negatively impacted U.S. jobs, particularly in sectors like farm equipment manufacturing.

Rather than reshoring at scale, import sources shifted to other low-cost countries, sometimes leading U.S. firms to lay off workers or offshore operations to places like Vietnam to bypass tariffs.

• Global redistribution of Manufacturing

Globally, the redistribution of manufacturing might not result in a net increase but rather a shift in location. China, targeted by U.S. policies, might pivot from low-end export manufacturing to higher-tech industries and more self-sufficient domestic supply chains.

Labor-intensive manufacturing displaced from China could find new homes in developing nations like those in South/Southeast Asia. U.S. allies such as Mexico could benefit from near-shoring as companies could move production closer to the U.S. However, imposing tariffs on these allies negates these benefits.

• Sector-specific impacts and strategic focus

In specific sectors like steel and aluminum, Trump's policies might temporarily boost domestic output. The proposed 25% tariff on all steel/aluminum imports could encourage U.S. mills to restart production, benefiting from higher domestic prices.

However, downstream industries such as automotive, aerospace, and construction would face higher material costs, potentially making their products less competitive and causing job losses.

Strategic industries such as semiconductors, pharmaceuticals, and electric vehicles might see targeted support through tariffs and government policies, possibly mirroring initiatives like Biden’s CHIPS Act and IRA, albeit framed differently.

• Outlook for global Manufacturing efficiency

In summary, the global manufacturing landscape under a resurgent mercantilism would likely be characterized by less integration and more duplication of efforts. The U.S. might see modest gains in output and capacity in protected sectors, but a broad-based revival of manufacturing jobs remains uncertain and historically unsupported.

Globally, manufacturing growth may realign towards countries exempt from U.S. tariffs or those benefiting from "friend-shoring," while high-tariff targets like China might experience a slowdown in export-oriented manufacturing.

Overall, global manufacturing efficiency is likely to decline as companies restructure not for cost optimization but to navigate geopolitical barriers, reshaping the manufacturing sector under the influence of aggressive neo-mercantilist policies.

Impacts on global currencies

• Potential for a currency war

The revival of mercantilist policies under the second Trump administration will significantly influence currency markets, potentially igniting a currency war alongside the ongoing trade war. Historically, mercantilist-minded governments have favored a weaker domestic currency to boost exports. While the U.S. does not engage in explicit devaluation due to the dollar's free-floating status, Trump has expressed frustration with a "too strong" dollar and suggested that the Federal Reserve might lower interest rates to weaken it.

Large trade deficits and new tariff barriers could lead to unpredictable fluctuations in the U.S. dollar (USD). In the short term, heightened global tensions and tariffs might paradoxically strengthen the dollar as a safe-haven asset, as investors typically turn to U.S. Treasuries and the USD during times of uncertainty. This reaction could ironically undermine some of the intended effects of tariffs by making U.S. exports more expensive globally.

• Intervention and responses

Trump might exert public pressure on the Federal Reserve for more accommodating monetary policy or might even consider direct intervention to depreciate the dollar's value to support U.S. exporters. On the other side, the Chinese yuan (CNY) is likely to face downward pressure in response to escalating trade tensions. Anticipating U.S. tariffs, Chinese policymakers have considered allowing the yuan to depreciate to offset the impact on Chinese exporters.

• Impact on other currencies

Other Asian exporting nations such as South Korea, Taiwan, and Malaysia might also feel compelled to let their currencies weaken to maintain competitiveness against a devaluing yuan, setting the stage for a broader currency war in Asia.

For the euro (EUR), the impact would largely depend on Europe's economic performance and policy responses. If U.S. tariffs lead to economic stagnation in Europe, the European Central Bank may adopt a dovish stance to stimulate growth, which could depress the euro's value. Conversely, if Trump's policies result in economic weakness in the U.S. or lead the Fed to cut rates, the dollar could weaken, potentially strengthening the euro.

• Currency market volatility

In summary, currency markets are likely to experience increased volatility. The EUR/USD exchange rate could fluctuate dramatically based on perceptions of which economy is suffering more from the trade disputes.

This environment of uncertainty and reactive policy measures could destabilize global financial markets, complicating efforts to predict currency movements and plan economic strategies.

Effects on commodities markets

(Energy, Metals, and Agricultural Goods)

• Energy sector impacts

A more protectionist Trump administration would significantly impact global commodities, including energy sectors like oil and gas. Trump's "energy dominance" agenda from his first term, which included loosening regulations on oil, gas, and coal and exiting the Paris climate agreement, led to record U.S. output, making the U.S. a net energy exporter for the first time in decades.

A continuation of these policies would likely see further increases in fossil fuel production, approvals for pipelines, and LNG export terminals, creating a favorable environment for oil and gas companies. This could exert downward pressure on global oil and gas prices by increasing supply, although U.S. exports of LNG to Europe and crude oil to Asia might grow, making global energy markets more competitive.

Conversely, Trump's trade conflicts could dampen global energy demand, particularly if tariffs and economic nationalism slow global growth—especially in China, the world's largest commodity consumer.

• Metals and mining disruptions

The metals sector, particularly industrial metals like steel, aluminum, copper, and rare earths, would be directly affected by Trump’s tariff-centric policies. The administration’s clear intent to protect U.S. metal industries with tariffs (25% on steel and 10% on aluminum globally) could continue or even intensify.

Such measures would likely boost U.S. domestic steelmakers and aluminum smelters in the short term, potentially spurring more mining of iron ore and bauxite domestically. However, global metal prices might diverge, with U.S. prices potentially rising due to tariffs, while a glut of metal in international markets could depress prices abroad.

Over time, this could shift capacity—foreign producers might reduce output or seek other markets, and new capacity might be built in the U.S. if investors believe tariffs will endure.

However, industries consuming these metals in the U.S. would face higher input costs, reducing their competitiveness and potentially harming sectors like U.S. auto and machinery manufacturing.

• Agricultural sector repercussions

The agricultural sector could experience some of the most significant impacts. Agriculture is often targeted first for retaliation in trade wars because of its political sensitivity in the U.S. heartland.

For example, in response to U.S. tariffs, China imposed a 25% tariff on U.S. soybeans, corn, pork, and other farm goods in 2018, leading to a sharp decline in U.S. exports to China and substantial losses for American farmers.

If tariffs escalate, this pattern could intensify, with countries like Brazil and Argentina potentially filling the gap in China's market. Indeed, Brazil has already overtaken the U.S. as China's largest agricultural supplier.

New U.S. tariffs could lead to further retaliatory measures, further shrinking market access for U.S. farmers in one of their largest markets and potentially resulting in gluts of certain commodities in the U.S.

• Broader commodity market effects

Overall, Trump’s neo-mercantilist policies would likely increase volatility across all commodity markets.

Energy markets might see an ample supply but moderated demand growth, keeping oil and gas prices relatively stable barring major geopolitical supply disruptions.

Metals markets could experience disruptions from tariffs, potentially increasing domestic prices while creating surpluses elsewhere.

Critical minerals might emerge as a strategic flashpoint, particularly if China retaliates by restricting exports of rare earths, which could drive up prices for these essential components used in electronics and defense.

Agricultural goods would likely be among the hardest hit, with U.S. farmers possibly losing even more global market share as trade partners retaliate and fortify their food security by sourcing from non-U.S. suppliers.

In a world increasingly driven by economic nationalism, even the flow of basic commodities may realign along geopolitical lines, producing new winners and losers in global markets and contributing to overall increased volatility until a new trade equilibrium is established.

Rise of economic nationalism worldwide

• Global shift toward economic nationalism

Trump’s neo-mercantilist approach is both a reflection of and a catalyst for a broader surge in economic nationalism across the globe. This trend has been intensified by recent challenges such as the COVID-19 pandemic and escalating great power competition, leading many nations to prioritize domestic industries and supply chain security over global market integration.

The return of Trump to the White House further consecrates the shift towards nationalist economics on the world stage, marking a stark contrast from the U.S.'s previous leadership in global free-trade initiatives.

• Protectionism and global trade dynamics

The U.S., which once led global free-trade initiatives, now openly champions protectionism. This could embolden other nations to follow suit. Indeed, the paradigm shift is already underway. As The Diplomat observes, international trade is moving “away from free trade and toward an aggressive form of neo-mercantilism,” led by U.S. and China each embracing tit-for-tat protectionism​. Both Washington and Beijing now see trade as a strategic arena, not just an economic one – “tariffs aren’t just about tariffs” but about power and security​.

• Impact on smaller nations and global trade policies

In this climate of increased rivalry and diminishing cooperation, smaller countries that once depended on a rules-based international trade system are finding themselves compelled to adopt defensive measures to either align with larger powers or risk economic marginalization. Countries like India have responded by raising tariffs and promoting "Make in India" initiatives to bolster domestic manufacturing. Similarly, Russia has implemented import substitution policies and has even targeted Chinese products with tariffs to protect its industries. Europe is also shifting its stance, increasingly discussing "strategic autonomy," actively screening foreign investments, and subsidizing the production of critical goods within the EU.

• Acceleration of nationalist trends under Trump

The second Trump term accelerates this global nationalist trend in several ways:

• Erosion of global trade norms: With the U.S. setting a protectionist example (and sidelining the WTO), other countries may feel free to ignore multilateral rules and raise their own barriers. We may see more trade wars among other pairs of countries, not just involving the U.S. (e.g. Europe and China have sparred over solar panels and may do more of that if norms weaken).
• Copycat tariff policies: Governments facing populist pressure might emulate Trump’s “tariff first” approach. For instance, a country suffering an influx of imports could impose Trump-like “reciprocal tariffs” or demand “fair trade” deals. The political narrative of putting one’s own nation first – even at the cost of global efficiency – is a powerful one that could resonate in many democracies and authoritarian states alike.
• National industrial planning: Economic nationalism often goes hand-in-hand with industrial policy. The U.S. under Trump uses tariffs plus incentives to boost domestic manufacturing. China has its state-driven industrial plans (Made in China 2025, etc.). Europe is responding with its own subsidies for green tech and semiconductors. As each tries to out-subsidize and protect their industries, we get a more fragmented global economy where state intervention in markets is routine.
• Geopolitical blocs: Economic alliances may align with geopolitical ones. We could see a U.S.-led bloc of like-minded nations that trade more freely with each other but maintain barriers against the “outside” (e.g. an expanded USMCA or allied network), while China leads its own sphere (deepening ties with willing partners via Belt and Road, RCEP, etc.). This bifurcation reinforces nationalist economic policies within each bloc, as they strive for self-sufficiency vis-à-vis the other.

In short, Trump’s approach exemplifies a wider global shift – a neo-mercantilist moment where countries prioritize their own industrial revival and trade advantages, even at the expense of global cooperation​. We should expect an uptick in protectionist rhetoric worldwide, more trade restrictions, and a more contentious international economic atmosphere.

The risk is a feedback loop: U.S. protectionism -> retaliation -> global norm change -> more countries doing the same -> a cycle of competitive economic nationalism that is difficult to reverse.

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