Mercantilism and Neomercantilism in Global Trade
The Evolution of Mercantilism in Political Economy
Mercantilism is a state-centric perspective of international political economy (IPE) that prioritizes national security, power, and economic sovereignty. Originating between the 15th and 19th centuries, classical mercantilism focused on generating trade surpluses through export promotion and import restriction. States aimed to accumulate wealth, particularly in the form of gold and silver, to finance military strength and ensure their dominance.
According to Charles Tilly, war drove the consolidation of state power, and controlling trade and resources became essential to national security. Key thinkers advocated strong government intervention in trade, including:
- Thomas Mun
- Gerard de Malynes
- Antonio Serra
- Jean-Baptiste Colbert
Britain notably used tariffs and subsidies to dominate the wool industry.
Colonialism and the Zero-Sum Global Economy
Mercantilism viewed the world economy as a zero-sum game—one nation’s gain was another’s loss. This logic led to protectionist measures and colonization. Colonies served both as captive markets and sources of raw materials and cheap labor, often secured through monopolies and violence. The Dutch and British empires established charter companies and supported domestic manufacturing to strengthen their states. Slavery played a central role in extracting wealth from colonies, and colonialism itself was a key tool for nation-state development.
Economic Nationalism: Hamilton and List
In the United States, Alexander Hamilton and Friedrich List championed protectionist policies. Hamilton supported infant industry protection to strengthen national independence, while List emphasized the importance of production capacity over immediate wealth. Both criticized Britain for promoting free trade only after securing economic dominance. Their arguments reflect the broader theme of economic nationalism: using state power to advance national interests.
The Shift to Neomercantilism and Strategic Trade
Mercantilism continues today under the form of neomercantilism. Since the 1970s, economic insecurity, oil shocks, and global competition have pushed states to adopt defensive economic policies. Countries created strategic reserves, implemented tariffs and subsidies, and regulated foreign ownership. Japan and the Asian Tigers followed strategic trade and industrial policies to build competitive industries—policies later emulated by China.
Resistance from Developing Nations
Developing countries have resisted liberal economic models imposed through institutions like the IMF and World Bank, which often conditioned aid on the adoption of free-market reforms. Many Least Developed Countries (LDCs) argue that developed countries used protectionist tools during their industrialization but now prevent others from doing the same. The 1994 WTO agreement and Structural Adjustment Programs are seen by critics as forms of malevolent mercantilism.
Modern Interventions and Global Competition
In the 1980s and 1990s, Reagan and Thatcher promoted free markets domestically but pursued strategic interventions internationally. The U.S. used trade sanctions, IMF leverage, and aid to protect its interests. Reagan’s administration pressured allies and competitors to comply with U.S. trade goals, blurring the line between economic liberalism and mercantilism. Robert Gilpin distinguished between malevolent (offensive) and benign (defensive) mercantilism, both of which remain relevant today.
The 2008 financial crisis and recent globalization trends have reignited mercantilist concerns. Outsourcing, intellectual property theft, and economic inequality led to a reevaluation of open markets. Some states imposed tariffs, especially on strategic goods, and prioritized domestic resilience. China, for example, signed long-term contracts to secure resources globally. States also maintained public investment in infrastructure and industry, such as the U.S. Strategic Petroleum Reserve.
The Persistence of State-Centric Economics
Industrial and infrastructural policies continue to support domestic industries. Mercantilism and neomercantilism remain foundational to state behavior in global economics. As globalization increases interdependence, states continue to prioritize national security and economic sovereignty. Despite liberal rhetoric, all major powers employ protectionist tools when convenient. The legacy of mercantilism endures in modern trade wars, industrial policy, and debates over globalization’s fairness.
Trump and 21st-Century Economic Protectionism
Donald Trump’s economic policies are a modern expression of mercantilism. Like classical mercantilists, Trump views international trade not as a win-win cooperation, but as a zero-sum competition where one country’s gain is another’s loss. During his presidency, he imposed tariffs on Chinese, European, and Mexican goods, renegotiated trade agreements like NAFTA (now USMCA) to favor American industry, and promoted the return of strategic manufacturing to U.S. soil.
He has also openly stated that the U.S. should reduce dependence on foreign products and regain control over key sectors like energy, steel, and semiconductors. His current proposals follow the same logic: more protectionism, subsidies for domestic industry, penalties for companies outsourcing production, and a vision of the state as an active economic agent that defends national power against economic rivals like China and the European Union. In short, Trump applies mercantilist principles adapted to the 21st century, marked by strong nationalism and a deep skepticism toward global free trade.