ISTANBUL
Protectionist trade policies under US President Donald Trump’s second term have pushed countries to shift focus toward domestic production, echoing a revival of mercantilism, analysts say.
The rising use of artificial intelligence (AI) technologies and the growing prominence of clean and renewable energy sources had inspired hopes that the global economy could become more flexible, but protectionist trade has cast dark clouds with deepening uncertainties.
Analysts say that significant technological progress and its positive impact on the global economy are being overshadowed by protectionist trade policies, which is fueling concerns that the mercantilist system of the 1500s may be making a comeback.
Mercantilism, which began in the 15th century and lasted until the mid-18th century, was a period in which economic wealth was measured solely by the amount of gold and silver a country held. Protectionism and import restrictions were put in place in order for countries to accumulate more gold, and economies relied on export-oriented policies.
A return to the past
Mercantilism prompted countries to increase exports and reduce imports to ensure the inflow of gold and silver, while high customs duties on foreign goods and policies discouraged imports and encouraged domestic production.
Different systems came to the fore in the years that followed, the free-market economy being one of them.
Scottish philosopher Adam Smith’s concept of the “invisible hand” in his book “The Wealth of Nations” was built on the idea that people acting in self-interest can sometimes coincidentally act in interests that can also serve social welfare.
World War I and II, the Great Depression, and other economic crises showed that the free market was not able to reach a balance by the 20th century.
Keynesian economics, named after British economist John Maynard Keynes, came to the fore after the Great Depression as a model and theory to emphasize the significance of state intervention, as Keynes said the total demand (or the total spending in the economy) influences the economic output and inflation.
Many countries intervened in the economy by developing policies to support production, employment, and demand, especially after the Great Depression of 1929.
The new international monetary system, referred to as the Bretton Woods system, was established after World War II with the representatives of 44 countries in a meeting in Bretton Woods, New Hampshire.
The signatories designated the US dollar as the global reserve currency and established the rules for commercial relations, thereby creating the first ever fully-negotiated monetary order to manage monetary relations between independent countries.
Today, more and more people believe AI should shape the future. AI is deemed to be the greatest breakthrough of our age, and experts say that combining past experiences with AI could create a new economic order. However, some countries may not agree.
Despite the expectations of an AI-driven evolution in the world economy, mercantilist policies appear to be on the rise since the start of 2025. The US’ high tariffs and similar steps by other countries show that free trade is being overshadowed by protectionism.
Mercantilism may not be temporary
Michael Every, a global strategist at Rabobank, stated that the new version of mercantilism, which he called Trumpism, focuses more on domestic production rather than accumulating gold or silver.
Every noted that markets should not consider this neo-mercantilist period as temporary, as the ideology behind the trend has to be defeated first.
He recalled former German Chancellor Angela Merkel’s administration, which brought on Germany’s neo-mercantilist period. He said her model appeared to be a liberal economy with no tariffs, very few subsidies, and no cheap loans, with a goal of creating a large trade surplus via policies that deliberately suppress domestic demand.
Every stated that in the past, neo-mercantilists were divided on their approaches even though they agreed on rejecting free trade. What they did not agree on was which products were to be tariffed and which sectors supported with subsidies.
Every also pointed out that Trump’s tariffs are very high compared to the neo-mercantilist policies of the past.
Mercantilism pushes risk of war amid intense competition
Rahmi Incekara, a faculty member at Istanbul-based Bahcesehir University, stated that Trump’s “strong dollar” and “gold reserve” moves point to his mercantilist approach, adding that blockchain ecosystems and crypto instruments are the precious metals of the 21st century.
“The elements needed for the technology can be interpreted within the framework of a ‘digital mercantilism,’” he said. “Mercantilism led to global conflicts since it’s based on protectionism, giving rise to the risk of war during intense competition.”
Incekara noted that mercantilism can bring great uncertainty to the world economy with trade wars, imbalances, and protectionism, as it has in the past.
Gold on record-breaking course with fluctuations
The developments since the start of the year have led to sharp rises in gold prices and despite the decline in the ounce price of gold after the US–China tariff agreement and the 90-day tariff pause, the ongoing risk of trade wars is supporting gold prices amid the heightened risk appetite in global markets.
Influenced by tariff concerns, the price of an ounce of gold reached $3,500 on April 21.
Despite recent reports regarding easing restrictions between the US and China on rare earth has led to a decline in gold, geopolitical risks due to the Israel–Iran crisis and the ongoing risk of trade wars pushed gold from $3,290 to $3,450 per ounce.
