2025 is shaping up to be one of the most tense years in the history of global trade. Almost immediately after taking office, Donald Trump reimposed tariffs on China for a second time, and in early April he imposed sanctions on a large number of countries and territories around the world. Since then, the international economic landscape has been constantly changing.
Some countries managed, while the moratoriums were in place, to renegotiate the terms of trade with the US. However, this aggressive policy has already caused a significant depreciation of the dollar and has increased distrust of globalization itself. The word is used everywhere, but do we really know what it means?
The first known mention of the term “globalization” is found in the correspondence of the German philosophers Karl Marx and Friedrich Engels in the late 1850s. Marx used it to describe the then higher level of international trade, which had been boosted by the entry of Japan and California (which was added to the United States in the late 1840s). This information comes from the biography “Karl Marx: World Spirit” by the French economist Jacques Attali, who was highly critical of Marxism.
However, the concept of “globalization” was introduced into academic discourse much later. In 1983, the American economist Theodore Levitt published an article in the Harvard Business Review entitled “The Globalization of Markets”, in which he described a future dominated by “global corporations”. These multinationals, as he predicted, would consolidate their production and service provision, giving absolute priority to cost reduction and not to local consumer preferences.
Economist Andrei Bunich recalls that globalization has its roots in the doctrine of free trade, which is based on the principle of non-state intervention in the economy.
From mercantilism to free trade
Before the spread of free trade in the late 18th and early 19th centuries, the dominant economic concept in Europe was mercantilism – that is, the emphasis on a positive trade balance through the superiority of exports over imports.
The emergence of classical political economy, with the works of Adam Smith and David Ricardo, overturned this old doctrine. Ricardo, with his theory of comparative cost, argued that each country should specialize in the production of products that it can produce more cheaply and import those that other countries produce more efficiently.
The spread of capitalism was based precisely on free trade, with the dominant powers being Great Britain and later the United States, which had strong shipping and manufacturing. However, some states – mainly many German states and France – resisted.
The German economist Friedrich List, in the early 19th century, developed the theory of “educational protectionism”, proposing a different economic strategy for developing countries.
After World War I, there were attempts to liberalize trade, but the Great Depression overturned them. Countries imposed tariffs, carried out competitive devaluations and abandoned the gold standard.
After World War II, in the context of a bipolar world, full trade liberalization was further delayed. The great comeback of free trade came after the collapse of the USSR. From the 1990s onwards, the term “globalization” dominated the public sphere.
The 21st century and the reversal
As Bunich explains, the proponents of globalization promoted the principles of classical economists. The phenomenon peaked in the second half of the 1990s and the 2000s, until the crisis of 2008. Then the World Trade Organization (WTO) reached the peak of its influence. After 2008, however, the model began to collapse.
The US itself found itself losing the game it had created, especially against China, which proved to be the biggest winner of free trade. That is why, from the very beginning of his term, Trump pursued policies that were contrary to the old American doctrine. His close associates, such as Peter Navarro, argued that “free trade does not exist.”
The former US trade representative, Robert Lighthizer, put it clearly in his book “No Trade Is Free: Changing Course, Taking on China, and Helping America’s Workers.” The new US authorities have essentially adopted a neo-mercantilist approach: trade is considered a political process and the balance always favors one at the expense of another. The EU is now moving along the same path, although with greater difficulties due to limited energy resources.
Neomercantilism: the new reality
Since the 19th century, ambitious emerging countries have protected their markets in order to grow. Otherwise, they would have been crushed by the already dominant economic powers that benefited from open trade. Today, China is the biggest advocate of the abolition of trade barriers, because it benefits from the WTO system and structures. Along with it are India, ASEAN countries and economies with low production costs in general.
Nevertheless, the international system is entering a period of neomercantilism. Free trade phases are historically short: they last as long as the winners enjoy the status quo and the losers do not react. A central role in globalization is played by multinational corporations (TNCs), which emerged in the 1960s and 1970s after the collapse of colonial empires.
Direct political domination was replaced by economic dependence through TNCs, which extracted profits from less developed countries. Initially, Europe – especially France – tried to resist. Due to the absence of a single tax center, multinationals transfer profits between countries through intra-group pricing, payment timing and exchange rate manipulation.
Free trade has contributed substantially to technological progress, although it has also allowed the exploitation of colonies. The most important benefit is the concept of “comparative efficiency”, that is, the reduction of costs through specialization.
However, these benefits are not distributed evenly over time. Some countries win for decades, but then lose. A typical example is the US, which has become accustomed to operating with a huge negative trade balance – which in 2024 reached -903 billion dollars.
