Introduction
This essay examines a significant policy shift in US international economic strategy, focusing on how it can be interpreted through the theoretical lenses of liberalism and mercantilism within the field of international political economy (IPE). Specifically, it addresses the recent US emphasis on protectionist measures and trade restrictions, which have marked a departure from previous commitments to free trade. The purpose of this analysis is to explore how liberal and mercantilist theories explain this shift, critically assess their applicability, and justify which framework provides a more robust explanation for the current US approach. The essay is structured into sections that first outline the policy shift, then analyse it through each theoretical lens, and finally evaluate their relative explanatory power. By drawing on academic sources and evidence, this discussion aims to provide a sound understanding of the complex dynamics shaping US economic policy.
Context of the US Policy Shift
In recent years, the United States has adopted a more protectionist stance in its international economic policies, most notably under the administration of Donald Trump (2017–2021) and with certain continuities under President Joe Biden. This shift is evident in actions such as the imposition of tariffs on Chinese goods, the renegotiation of trade agreements like NAFTA into the USMCA, and a rhetorical emphasis on “America First” policies aimed at prioritising domestic industries (Irwin, 2019). These measures contrast with the post-World War II era, during which the US championed free trade and multilateral institutions like the World Trade Organization (WTO). The rationale behind this pivot includes concerns over national security, job preservation, and addressing trade imbalances, particularly with China. Understanding this shift requires a theoretical framework, and the lenses of liberalism and mercantilism offer contrasting perspectives on the motivations and implications of such policies.
Liberal Interpretation of the Policy Shift
Liberalism in IPE posits that international economic relations should be governed by free markets, open trade, and cooperation among states to achieve mutual benefits (Gilpin, 2001). From a liberal perspective, the US shift towards protectionism appears as a deviation from the principles of economic interdependence and globalisation, which have historically underpinned American policy. Liberals argue that free trade fosters efficiency, reduces costs for consumers, and promotes global stability through interconnected economies. Therefore, the imposition of tariffs and trade barriers is seen as counterproductive, potentially leading to retaliatory measures and trade wars, as observed with China’s counter-tariffs on US goods (Cohn, 2019).
Moreover, liberals might interpret this policy shift as a response to domestic political pressures rather than a coherent economic strategy. For instance, the focus on protecting American jobs in industries like steel and manufacturing could be viewed as pandering to specific voter bases rather than adhering to the broader benefits of global trade liberalisation. However, a limitation of the liberal lens is its assumption that states consistently prioritise economic rationality over political or security concerns, which may not fully account for the multifaceted motivations behind US policy (Gilpin, 2001). Indeed, while liberal theory critiques the current approach as regressive, it struggles to explain why a leading global power would retreat from a system it helped establish.
Mercantilist Interpretation of the Policy Shift
In contrast, mercantilism, or economic nationalism, emphasises state intervention in the economy to maximise national power and wealth, often through protectionist policies and trade surpluses (Heckscher, 2013). From a mercantilist viewpoint, the US policy shift aligns closely with the objective of securing economic sovereignty and reducing dependence on foreign goods, particularly in strategic sectors. The tariffs on Chinese imports and the push for reshoring manufacturing can be seen as efforts to bolster domestic industries, protect national security by limiting reliance on adversaries, and address trade deficits—key mercantilist concerns (Irwin, 2019).
Furthermore, mercantilism accounts for the role of power politics in economic decision-making, suggesting that the US is responding to the rising economic challenge posed by China by reasserting control over critical supply chains, such as semiconductors and rare earth minerals. This perspective frames the policy shift as a strategic move to maintain geopolitical dominance rather than a mere economic misstep. While mercantilism effectively explains the prioritisation of national interest, it may overemphasise state-led economic planning and undervalue the benefits of global cooperation, which have historically contributed to US prosperity (Heckscher, 2013). Arguably, this lens offers a more immediate justification for the current US stance, given the explicit focus on security and self-sufficiency.
Comparative Evaluation: Which Theory Explains the US Approach Better?
Evaluating the explanatory power of liberalism and mercantilism requires considering their respective strengths and limitations in the context of the current US policy shift. Liberalism provides a normative critique of protectionism, highlighting the risks of economic isolation and the erosion of multilateral trade systems. However, it falls short in addressing the political and security imperatives driving US actions, such as concerns over China’s growing influence or domestic demands for economic fairness (Cohn, 2019). The liberal assumption of mutual benefit through trade does not adequately capture the zero-sum perceptions that appear to dominate current US rhetoric.
On the other hand, mercantilism offers a more fitting explanation for the emphasis on economic nationalism and strategic autonomy. The focus on tariffs, reshoring, and reducing trade deficits mirrors mercantilist principles of prioritising national interest over global cooperation (Irwin, 2019). Moreover, mercantilism accounts for the geopolitical tensions underlying economic policy, particularly the US-China rivalry, which liberalism tends to downplay. While mercantilism may not fully explain the long-term costs of isolationist policies, it better reflects the immediate motivations and rhetoric of the US approach, such as the “America First” doctrine.
Thus, mercantilism is arguably the more applicable theory for interpreting the current US policy shift. It captures the interplay of economic and political objectives, providing a logical framework for understanding why a global hegemon might adopt protectionist measures in response to perceived threats. That said, elements of liberal critique remain relevant, as sustained protectionism could undermine the very economic strength the US seeks to preserve.
Conclusion
In summary, this essay has explored the recent US policy shift towards protectionism through the lenses of liberal and mercantilist theories of international political economy. While liberalism critiques the move as a retreat from beneficial global trade norms, it struggles to account for the political and security motivations behind the policy. Conversely, mercantilism offers a more robust explanation by framing the shift as a strategic pursuit of national power and economic security, particularly in light of geopolitical challenges. Therefore, mercantilism is deemed the better explanatory theory for the current US approach, though the liberal perspective raises important warnings about long-term implications. This analysis underscores the complexity of international economic policy, where economic rationality often intersects with broader strategic imperatives. Future research could explore how this shift impacts global economic stability and whether hybrid approaches combining elements of both theories might emerge as viable frameworks for understanding US policy.
References
- Cohn, T. H. (2019) Global Political Economy: Theory and Practice. Routledge.
- Gilpin, R. (2001) Global Political Economy: Understanding the International Economic Order. Princeton University Press.
- Heckscher, E. F. (2013) Mercantilism. Routledge.
- Irwin, D. A. (2019) Clashing over Commerce: A History of US Trade Policy. University of Chicago Press.
