Torn in the USA: Hello Protectionism, Goodbye Free Trade
Recent U.S. customs policies have marked a paradigm shift. Washington is now openly embracing protectionism, with a focus on reshoring production and promoting the ‘Made in America’ movement. This new direction is redefining the rules of the global economy and driving a profound reconfiguration of globalisation and international commerce.
A brief review of the history of globalisation sheds light on the key milestones that have shaped the current landscape and underscores the waning influence of liberal ideology in favor of strategic interventionism in the United States.
The period from 1990 to 2019 was marked by a phase of hyper-globalisation, characterized by the spread of neoliberal ideology focused on companies and markets, and the adoption of trade policies that complied with the global rules governing trade and investment flows established by the World Trade Organization (WTO).
Two Forces Driving De-globalisation
The international trading system, structured around global value chains, reflected the unilateral influence of the United States, the world’s sole superpower throughout the 1990s, 2000s and 2010s. This resulted in a positive-sum game that led to a convergence in growth rates between the Global North and Global South from 2003 to 2019.
Inequalities increased toward the end of this period and de-globalisation—though relative—intensified. This occurred for two reasons.
First, the financial crisis prevented highly indebted poor countries from capitalizing on their comparative advantages within global value chains that had become shorter and more regional. This has been particularly true for Bangladesh and Cambodia in the clothing and furniture sectors. The countries that have benefited instead are Turkey, Romania, and Bulgaria.
Second, geopolitical considerations have begun to outweigh purely economic ones, which has greatly increased the risk factors involved in location decisions, which in turn has led to a gradual fragmentation of the global landscape. For example, certain segments of aerospace and digital technology value chains previously based in China have been relocated to Vietnam.
From Free Trade to the Pursuit of Power
For the United States, the risk of falling behind China economically and technologically has intensified the focus on security, which has prompted efforts to secure key supplies, like rare earths and batteries, and to develop critical technologies for both economic and national security. International interactions appear to have contributed to rising trade deficits and growing financial indebtedness.
The power dynamics played out in two stages. The United States first reacted when it recognized that China’s political, economic and technological gains were eroding the United State’s relative influence, and came to view global power as a zero-sum game.
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The new paradigm was based on the idea that industrial policies do not oppose markets, but rather help to secure strong positions in markets that are strategically important both economically and geopolitically. As a result, new forms of protectionism emerged, as illustrated by two laws passed in 2022 under Joe Biden: the CHIPS and Science Act (semiconducteurs) and the Inflation Reduction Act (energy transition).
By contrast, Donald Trump believes that industrial decarbonization is not compatible with the reindustrialization of the United States. He therefore ended the subsidy and tax incentive plan for energy transition on July 7.
Power relations have been expressed through tariffs aimed at achieving economic and national security objectives. The idea is that the higher the tariffs, the more foreign companies will be encouraged to invest in the United States rather than pay them.
Reciprocal Trade… or Not
Yet foreign companies can be discouraged by the high cost of labor in the United States (sixteen times higher than in Vietnam, eleven times higher than in Mexico), and even more so by the difficulty of sourcing strategic intermediate goods, an aspect which free trade agreements previously facilitated.
The new tariffs form the basis of a “reciprocal” policy aimed at balancing trade between the United States and its trading partners, including developing countries.
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However, this “reciprocal policy” aimed at fairness often leads to significant imbalances in practice. For example, in the case of Vietnam, American exporters can sell tariff-free on the Vietnamese market, while Vietnamese exporters are required to pay a 20% tariff.
In this context, transactional globalisation, structured around negotiations and sanctions, as in the case of India, goes hand in hand with protectionist measures, the most notable of which include controls on imports deemed a threat to national security, restrictions on inbound and outbound investment, and the U.S. government taking a 10% stake in Intel, thus raising questions about the emergence of state capitalism.
The Fall of Liberal Orthodoxy
In January 2025, the Bureau of Industry and Security (Editor’s note: an agency of the U.S. Department of Commerce) imposed formal export restrictions on new advanced computing equipment, thus requiring the Taiwan Semiconductor Manufacturing Company (TSMC) to obtain a license for any shipments, in addition to introducing controls on large volumes of data needed to train artificial intelligence (AI) models.
The goal is to leverage economic interconnections—the flow of goods, patented knowledge, data, and financial transfers—for the purpose of obstruction and coercion. Liberal orthodoxy has been set aside in favor of strategic advantages, with the aim of achieving uncontested global leadership.
Assuming the EU remains a free-trade zone capable of projecting influence and working together with other countries to establish rules and fairness, globalisation would be structured around two overlapping frameworks: one for free trade in low- and mid-range goods, and another for strategic goods, whose scope is deliberately limited according to a ‘small yard, high fence’ principle enforced by both geopolitical and industrial entry barriers.
