eading a report by the United Nations Conference on Trade and Development, I was fascinated to learn that global trade reached an all-time high in 2024. The figures were impressive: at $33 trillion, the year’s aggregate represented a growth of nearly 3.7 percent ($1.2 trillion). This transported me back to my A-level economics classes nine years ago, where I had first wrestled with the concepts of free trade and economic liberation.

Our teacher, a fierce advocate for globalisation, had passionately explained the virtues of reducing tariffs and embracing openness, often challenging us to envision a world without such barriers. Yet, in 2025, such optimistic visions seem distant.

Global fragmentation and protectionism are gaining momentum, threatening to reverse decades of trade integration. So why are some countries reverting to protectionism, and what lasting impact will this trend have on consumer choices and prices?

Not too long ago, President Trump of the United States sent ripples through the global economy by announcing substantial tariffs on numerous countries that export goods to the United States. At first glance, it appeared to be an attempt to address trade imbalances, but the implications of such measure extend much further.

According to the Yale Budget Lab, this policy will elevate US tariffs to their highest levels since 1909. There is a universal 10 percent tariff baseline for most nations, regardless of diplomatic or trade relations. Several countries will face significantly higher tariffs on their exports to American markets. Beijing has responded with retaliatory tariffs on US goods, further straining the complex relationship between the world’s two largest economies.

Tariffs are taxes imposed on imports. These have a trickle-down effect on consumers, who ultimately pay more for the goods. Historical evidence shows that the tax burden rarely falls on foreign producers. Instead, it is domestic vendors and consumers who bear the financial weight of such policies. Why do governments still rely on these economic barriers?

The answer lies in two old economic ideas: protectionism and mercantilism. Protectionism advocates putting up trade barriers to shield local industries from outside competition. Mercantilism, which dominated Western economic thinking from the 16th to 18th Centuries, viewed global trade as a finite pie where your gain was my loss. This mindset gave birth to powerful trading companies like the East India Company, as several nations - including Britain, France, and Spain - saw their colonies as territories, existing primarily for their benefit.

The colonised regions had no choice but to sell their raw materials to their colonisers and buy finished goods exclusively from them.

However, the world didn’t stay in that arrangement. From the early 1800s until World War I broke out, more countries opened their markets and lowered trade barriers. After the war disrupted everything, trade picked up again briefly in the 1920s before the Great Depression sent it crashing down. The 1950s marked a real turning point.

Most countries started to realise that they did better when working together, not in isolation. This started decades of growing trade connections, creating the global marketplace we know today. The $33 trillion trade in 2024 shows how far we’ve come from the old “your gain is my loss” thinking.

Policymakers face the complex task of balancing open market benefits with measures that address the disruptions international competition brings to vulnerable communities. Openness to trade is the ideal way forward. 

Among the economic ideologies that shaped this evolution, neoclassical theory stands out for its strong support of free trade. At its foundation is David Ricardo’s theory of comparative advantage, a concept of unprecedented importance in economic thinking.

Ricardo argued that free trade was beneficial because it allowed various nations to specialise in production that required fewer input factors. His theory centred on opportunity costs, encouraging countries to produce goods they could most efficiently while trading for others.

Neoclassical theorists later enhanced Ricardo’s framework by introducing the concept of increasing marginal costs, further strengthening the argument for specialisation and open markets. These ideas helped evolve international trade relations from competition to cooperation, creating potential benefits for all participating economies.

Ricardo’s theory works beautifully in an open trading system. However when there are significant tariffs barriers some countries can’t afford many of the imports. They’re forced to shift resources towards making products they’re not particularly good at producing. Over time, this doesn’t just hurt their consumers. It also affects their export industries, as they drift away from their specialised expertise.

The Heckscher-Ohlin theory helps explain why this matters. Normally, countries export things made from resources they have plenty of, and import products requiring materials they lack. But throw up trade barriers and this efficient system starts to malfunction. Nations end up making more things less efficiently, gradually losing the productivity advantages that specialised trade had created in the first place.

The benefits of specialisation remain compelling despite these challenges. When countries focus on what they do best, efficiency improves throughout the global economy. International trade encourages this specialisation, directing resources towards industries where nations excel. Consumers thus gain access to more diverse products at better prices than closed economies could ever provide.

President Trump has argued that his new policy will strengthen American manufacturing and protect jobs. However, protectionism shields domestic industries only by making imports more expensive than local goods. Many traditional sectors face declining competitiveness or shrinking market share as consumer preferences evolve. When workers have specialised skills, transitioning to new industries becomes exceptionally difficult, making protectionist policies politically appealing.

Both approaches offer unique advantages. Protectionism provides temporary shelter for vulnerable industries; free trade drives innovation and greater shared prosperity. Evidence suggests that openness to trade delivers greater long-term benefits through specialisation, economic growth and improved living standards. Policymakers face the complex task of balancing open market benefits with measures that address the disruptions international competition brings to vulnerable communities. Considering the historical data, openness to trade is the ideal way forward as it increases global wealth and ensures better resource utilisation. The tariff wars are unnecessary and a stop-gap solution at best.

The writer, a UCL and LUMS alumnus, works in the policy sector and is a co-founder of HamSukhan, a community-based learning platform