The End of the Free Trade Era?
On April 2, United States President Donald Trump declared “liberation day,” unveiling a new tariff (tax on imported goods) regime that targets virtually all countries of the world, featuring historically high rates unmatched since the beginning of the 20th century. It imposes punitive tariffs of up to 34 percent on China and 49 percent on Cambodia, 20 percent on the European Union, and a 10 percent baseline for all other countries. This measure stands in direct contradiction to previously negotiated trade agreements. In fact, the new tariff regime has been described as imposing economic sanctions on countries in an effort to push them to change their policies. Such an approach departs from the traditional use of tariffs, which are typically levied on specific goods rather than directed at countries as a whole. Therefore, there is really no economic rationale for the level and range of the tariffs announced last week.
As a consequence, the global stock market has declined, wiping out $5 trillion in wealth after “liberation day” at the time we wrote this. The fear of rising costs and disruptions in global supply chains has sparked global economic and political uncertainty due to unfairness, and the potential impact of such measures, increasing concerns about a possible recession, the escalation of a trade war, and fears of power concentration in the U.S.
All of this raises the question: are we witnessing the end of the free trade era?
Beyond President Trump’s announcement, trade ideas and practices have undergone profound transformations during the last few decades. This comes out in the resurgence of protectionist measures to limit international trade, such as tariffs, quotas (limits on the number of goods that can be imported), or subsidies (government support for local industries) that challenge long-standing ideals of market openness. Following the end of the Cold War, the West championed trade liberalization as a pathway to universal prosperity. Today, that consensus has fractured. The widespread use of tariffs to address trade imbalances and protect national industries has made a dramatic comeback.
Tariffs are not only a tool to achieve domestic economic goals. They have become weapons of international political and security strategy, signaling a break from free-trade ideas and practices that once defined the post-WWII liberal order. Paradoxically, so-called developing countries, which long warned and criticized the unequal outcomes of trade liberalization, now find their perspectives acknowledged by the powers that previously dismissed their concerns. As economists Martin Guzmán and Joseph Stiglitz (2024) point out, “the powerful try to modify the rules when they no longer serve them, while they still have enough power to influence them.” The new U.S. tariff regime makes this dynamic explicit, with punitive measures not aimed at reforming trade, but to recalibrate global power hierarchies.
The new tariff regime in the US intensifies the ongoing rivalry between the U.S. and China and paves the way for trade war where unilateral punitive tariffs, export controls, and retaliatory measures turn economic interdependence into a coercive tool. Moreover, Trump’s arbitrary use of tariffs extended to neighboring countries such as Mexico and Canada and allies in the European Union. These actions contribute to the targeted weakening of multilateral institutions, first and foremost of the World Trade Organization (WTO). Once a pillar of free trade led by principles and rules that all member countries agreed to follow, the WTO now mirrors the U.S.’s broader withdrawal from rule-based multilateral governance. The Trump administration has taken to unilaterally impose tariffs on other countries, ignoring previously established multilateral and bilateral trade agreements, and deals with trade disputes outside the WTO’s Dispute Settlement Mechanism, thus undermining the organization’s authority and legitimacy and demonstrating to the world a survival-of-the-fittest approach.
Rather than being grounded in a sound economic analysis, the new U.S. tariffs were calculated using an obscure formula that equates trade deficits to foreign protectionism. As a result, countries such as Bangladesh or South Africa face increased tariffs due to structural imbalances. Same as Madagascar or the curious case of the Heard and McDonald Islands in the Antarctic where no people live and hence no trade actually takes place. These decisions do not reflect a coherent industrial strategy but an erratic effort to project power, reinforce nationalistic sentiment, and dismantle global norms.
For “developing” and emerging economies, the proliferation of protectionism presents challenges and opportunities. On the one hand, heightened protectionism among major powers can fracture supply chains, prompting smaller countries to reassess their reliance on traditional trade partners and explore alternatives. On the other hand, with industrial policies and geoeconomic strategies in the United States, such as the Inflation Reduction Act (2022), the CHIPS and Science Act (2022), the Steel and Aluminum Tariffs (2025) and the European Union´s EU Carbon Border Adjustment Mechanism (2023) and the Artificial Intelligence Gigafactories Initiative (2025) now enjoying renewed legitimacy, governments in the Global South can potentially leverage targeted subsidies or investments in traditional and new sectors, such as green technology and data services, to bolster their competitiveness. Yet, a critical question remains: will these countries seize the moment to alter traditional power imbalances, or will traditional disparities persist?
Protectionism signals more than a policy shift—it demands a reimagining of global trade. The new U.S. tariff regime underscores this shift with unprecedented clarity. The collapse of trust in multilateral rules, the erosion of predictable trade relations, and the embrace of zero-sum logic are not marginal adjustments. Politically and diplomatically, these policies deepen an already existing fallout. Will this lead to a fairer, multipolar economic order or an era of permanent fragmentation? Key allies are now reassessing their relations with Washington. Several governments will impose retaliatory tariffs against the United States, while others seek closer ties with China and regional trade blocs.
The overhaul of the free trade regime illustrates the profound transformations that are taking place. Certainties of the past are no longer given. Global power shifts, the rise of the Anthropocene, the acceleration of technological advancements, and the increased importance of identity politics demand a radical rethinking of the academic field of Global Political Economy, or GPE, in order to understand the economic, social and political consequences of these reconfigurations. In our book, Global Political Economy: Problems in a Transforming International Order, we explore how these transformations undermine traditional assumptions, prompt new conflicts, and invite innovative solutions for old and emerging global political economy problems in the 21st century. It is therefore essential to rethink GPE, ensuring it remains relevant and responsive in a rapidly evolving landscape marked by increased interconnections among peoples, issues and regions.
Understanding these developments requires connecting today’s headlines to long-term structural transformations in GPE – precisely the approach we develop in our book through fresh insights, critical analysis, and the tools to navigate today’s volatile global economy.
References
Guzman, M., & Stiglitz, J. E. (2024). Post-neoliberal globalization: international trade rules for global prosperity. Oxford Review of Economic Policy, 40(2), 282-306. doi:10.1093/oxrep/grae022
