Mercantilism: From Classical Empires to Modern Economic Nationalism

Posted on Oct 4, 2025 in Social sciences

The Mercantilist and Economic Nationalist Perspective

1. What is Mercantilism? Definition and Core Perspective

• Mercantilism is a state-centered approach in International Political Economy (IPE).
• It views the economy as a tool for national power and security, not as a neutral system.
• It is based on the idea that international relations are a continuous power struggle.
• It assumes that the international economy is a zero-sum game: one state’s gain is another’s loss.
• Wealth is considered finite, so every state competes to secure the largest share of it.

The primary goal of mercantilist states is to protect national sovereignty, increase power, and accumulate wealth, especially in the form of gold and silver.

2. Historical Mercantilism (16th–19th Centuries)

Classical mercantilism developed as modern nation-states emerged in Europe (e.g., France, England, Spain). It focused on:

• Export promotion and import restriction, with the aim of achieving a positive trade balance.
• Accumulation of bullion (gold and silver) as the basis of power.
• Maintaining strong armies and navies funded by wealth from trade and colonies.

Tools Used:

• Tariffs and subsidies
• Colonialism, where colonies served as markets and sources of raw materials.
• Monopolies granted to favored merchants and charter companies.
• Infrastructural development to unify markets and increase state control.

Examples:

• England’s Henry VII: Taxed imported wool and subsidized exports to weaken Belgian and Dutch competitors.
• Colbert in France: Promoted national industries and exports.
• British and Dutch empires: Created global trade systems with powerful state-sponsored companies.

Trade was strategic: more than just economic exchange, it was a method to build power.

3. Mercantilism and Imperialism

Colonialism was an extension of mercantilism:

• Colonies were treated as exclusive markets and sources of cheap labor and raw materials.
• Slave labor was used to boost production in colonies (e.g., sugar, cotton, tobacco).
• Trade between rival colonies was discouraged.

Mercantilism became closely tied to classical imperialism (1648–1815), with war, conquest, and economic exploitation at its center. The economy was militarized, meaning economic policy was subordinated to national survival and power-building.

4. From Classical Mercantilism to Neomercantilism

In the 20th century, the term neomercantilism emerged to describe modern protectionist and defensive policies used by states to secure their national economies in a global, interdependent system.

Influential Thinkers:

• Alexander Hamilton (U.S.): Argued for defending “infant industries” through tariffs and industrial support in the 1790s.
• Friedrich List (Germany): Advocated for industrialization behind trade barriers, arguing against free trade until all states could compete on equal terms.

  “The power of producing is more important than wealth itself.” — F. List

5. Core Tools of Neomercantilism

• Tariffs and import quotas
• Non-tariff barriers (NTBs), such as health and safety standards or domestic content rules.
• Export subsidies
• Strategic resource policies, including stockpiling oil, rare minerals, and pursuing energy independence.
• State support for “national champions” (e.g., Boeing, Airbus).
• Industrial policy, involving selective investment in industries to gain a competitive advantage.

6. Modern Case Studies and Examples

🇺🇸 United States

• Historical Protectionism: High tariffs in the 19th century; New Deal (Keynesian).
• Trump Administration:
  • Imposed tariffs on China and the EU.
  • Withdrew from the Trans-Pacific Partnership (TPP).
  • Emphasized military and infrastructure spending.
  • Used anti-globalist rhetoric.
• Biden Administration: More multilateral, but continues subsidies and support for national production.

🇨🇳 China

• Often seen as the most neomercantilist state today.
• Characterized by heavy state planning, subsidies, and state-owned enterprises (SOEs).
• Employs a “Going Out” strategy of strategic foreign direct investment (FDI) in Africa and Latin America.
• Seeks control over critical resources like oil, rare earths, and metals.
• Pursues export-led growth backed by strategic trade policy.

🇯🇵 Japan and the Asian Tigers

• Used industrial policy, export support, education, and infrastructure development.
• As noted by Robert Wade, their “developmental state” models show deliberate planning to compete internationally.

7. Game Theory: Mercantilism vs. Liberalism

Mercantilists believe states compete and power matters; Liberals believe states cooperate and efficiency matters.

8. Mercantilism in the Globalized Era

Even with globalization, states still use mercantilist logic for:

• Strategic control over supply chains.
• Response to crises (e.g., oil shocks, financial crashes).
• Defensive policies to protect from vulnerabilities like dependency and foreign dominance.

Structural Adjustment Policies (SAPs) promoted by the IMF and World Bank are criticized by Least Developed Countries (LDCs) as a form of modern malevolent mercantilism.

9. Developing Countries and Mercantilism

LDCs argue that:

• Rich countries used protectionist policies to industrialize but now impose liberalism on the Global South.
• Institutions like the WTO and IMF serve developed country interests.
• As per Ha-Joon Chang, they are “kicking away the ladder.”

These critiques point to the hypocrisy of advanced nations using liberal rhetoric while defending their interests through protectionism.

10. Key Terms and Authors to Know

• Charles Tilly: War and state formation.
• Robert Gilpin: Benign vs. malevolent mercantilism.
• Hamilton & List: Early economic nationalists.
• Robert Wade: Developmental state strategies.
• Ha-Joon Chang: Critique of liberalism in development.

11. Conclusions

• Mercantilism is not outdated—it remains a powerful lens for understanding international economic relations.
• The emphasis on state power, sovereignty, and security remains relevant in an unstable global economy.
• Both developed and developing countries continue to use protectionist tools to defend or enhance their position.
• Neomercantilist ideas help explain policies under Trump, as well as in China, the EU, Japan, and more.
• In the 21st century, interdependence and competition coexist, and mercantilism helps explain this paradox.

Analysis: Is Trump an Expression of Economic Nationalism?

Introduction

This analysis will define the concepts of economic nationalism and mercantilism and explain how they are historically and theoretically connected. It will then analyze Donald Trump’s economic policies and political discourse, identifying the extent to which they reflect a neomercantilist approach. By applying these ideas to real examples from Trump’s presidency, this response will assess whether he can be considered a modern expression of mercantilism, concluding with a summary of the argument and the contemporary relevance of this tradition.

Body

1. Defining Mercantilism and Economic Nationalism

Mercantilism is a historical and theoretical perspective that views international economic relations as a zero-sum game in which states compete for a finite amount of wealth and power. The state plays a central role in protecting national sovereignty and accumulating resources, especially through trade surpluses, protectionist policies, and colonial expansion. Key thinkers such as Thomas Mun and Jean-Baptiste Colbert promoted state intervention to maximize exports and limit imports.

Economic nationalism is the modern continuation of this tradition. It emphasizes the primacy of the nation-state in economic decision-making and the use of government policies to protect domestic industries, preserve jobs, and ensure economic security. Neomercantilism, as used by scholars since the 1970s, refers to the adaptation of mercantilist ideas in a globalized world through tools like tariffs, subsidies, import quotas, and strategic control of resources.

2. Trump’s Policies and Discourse: A Neomercantilist Approach

Donald Trump’s presidency (2016–2020) is widely interpreted as a return to economic nationalism. His economic program emphasized:

• Tariffs on Chinese and European imports, especially steel, aluminum, and manufactured goods.
• Renegotiation or withdrawal from trade agreements, such as the Trans-Pacific Partnership (TPP) and NAFTA (replaced by USMCA).
• Use of “America First” rhetoric, prioritizing national sovereignty and domestic employment.
• Promotion of military investment and infrastructure development, aiming to boost national strength.

These policies align with mercantilist logic: the economy is a tool to enhance state power and independence in a competitive international environment. Trump viewed international trade as a threat to national strength when it generated trade deficits or harmed domestic producers.

However, there are also contradictions. Trump was suspicious of government institutions, often leaving key administrative posts unfilled. Unlike traditional mercantilists, who saw the state as a positive and necessary actor, Trump distrusted the state bureaucracy. Furthermore, his policies were sometimes unilateral and unpredictable, which differs from the long-term strategic planning of classical mercantilist states.

3. Authors and Theoretical Interpretations

• Robert Gilpin distinguishes between benign and malevolent mercantilism. Trump showed elements of both: he sought to protect domestic industries (benign) but also used aggressive rhetoric and trade threats (malevolent).
• Friedrich List argued that only once a country is strong can it engage in free trade. Trump echoed this logic by claiming that only powerful countries can benefit from open markets.
• Critics argue that Trump’s mercantilism was more rhetorical than structural; despite trade conflicts, the U.S. economy remained deeply integrated into global supply chains.