THE MERCANTILE TURN

The Mercantile Turn: How Modern Mercantilism Will Reshape Global Power and Trade in the Next Decade

Submitted to: Forecasting the Future: A Modern Economics Challenge by The Bridgewater and Global Citizen.

July 2025.

Rrsearch Paper by : Kayode Adekoya - Economist |Forecaster | AI Safety Advocate 

[email protected].

Executive Summary

We are living through the end of an era — the long wave of globalization that defined the post-Cold War world is giving way to something new: Modern Mercantilism.

This shift is marked by governments taking an assertive role in shaping trade, industrial strategy, and national competitiveness. It is driven by three converging forces:

1. Geopolitical fragmentation

2. Technological bifurcation

3. Economic security imperatives

In this new system, trade is no longer just about efficiency ,it is about power. States are reasserting control over supply chains, directing capital flows, and subsidizing strategic industries.

Our Core Forecast

By 2030, the global economy will be shaped more by strategic alliances, technological sovereignty, and national industrial policy than by market openness. The winners will be nations with robust state capacity, energy resilience, and adaptive industrial strategy. The losers will be those dependent on fragile global supply chains or overly exposed to geopolitical tensions.

1. Introduction: The Return of Mercantilism in a Fragmented World

We are entering a new era of economics, one that reimagines statecraft not just through diplomacy or defense, but through industrial leverage and economic self-reliance.

What Bridgewater calls Modern Mercantilism is a return to an old logic: governments using economic tools to project national power. But unlike traditional mercantilism, which focused narrowly on gold reserves and trade surpluses, this modern form is about:

Technological control

Strategic energy access

Resilient domestic production

Currency and capital maneuvering

The world is no longer flat. It's fragmented, contested, and being reshaped not by trade liberalization but by state ambition.

2. From Globalization to Mercantilism: The Global Economic Shift

The 1990s through the 2010s were defined by the acceleration of globalization:

Expansion of supply chains

Global reduction in tariffs

International institutions mediating disputes

But shocks like the 2008 financial crisis, COVID-19, and the Russia-Ukraine war, followed by U.S.-China tech decoupling, exposed deep fragilities.

Key Characteristics of the Shift:

Drivers:

Geopolitical tension: U.S.-China rivalry shapes new tech alliances.

Technological race: AI, semiconductors, and quantum are weaponized.

Climate policy: Green energy becomes a national security issue.

3. Winners & Losers of Modern Mercantilism

🌎 North America

🇺🇸 United States — Winner

Industrial revival via CHIPS Act, IRA, and green subsidies

Energy independence and tech dominance

Strategic realignment with Mexico, India, and Vietnam

Risks: Polarization, fiscal overextension, labor mismatch

🌍 Europe

🇪🇺 European Union — Relative Loser

Fragmented policy response

Weak energy resilience post-Russia

Slower tech investment, aging population

Bright Spots: France & Nordics due to diversified energy & innovation

🌏 Asia

🇨🇳 China — Declining Power

Hit by U.S. sanctions on chips and AI

Demographic decline and capital flight

Overcapacity and debt in key sectors

🇮🇳 India — Rising Winner

Demographic advantage and supply chain relocation hub

Strong state-led incentives (PLI schemes)

U.S.-aligned trade and defense diplomacy

🌍 Middle East

🇸🇦 Gulf States — Winners

Strategic investment of oil revenue into tech/logistics

Positioning as neutral brokers with both West and East

Retaining energy leverage despite green push

🌍 Africa

🌍 Sub-Saharan Africa — At Risk

Resource-rich but institutionally weak

Vulnerable to being left out of strategic trade blocs

Opportunity in battery minerals, but coordination lacking

🌎 Latin America

🇧🇷 Brazil — Mixed

Gains from agriculture and green minerals

Loses from protectionism, weak infrastructure

✅ Summary Table.

4. Sectoral Impacts of Modern Mercantilism

4.1 Global Trade

Trade flows re-routed along strategic alliances

Tariffs and export controls rise

Efficiency sacrificed for resilience

4.2 Technology

Tech war defines global power

AI, chips, and 5G infrastructure weaponized

Standards fragmentation: GDPR vs. China’s digital rules

4.3 Energy & Climate

Green energy = new arms race

Battery minerals under export controls

Gulf retains leverage but faces transition pressure

4.4 Supply Chains

Shift from “just-in-time” to “just-in-case”

Reshoring and friend-shoring accelerate

ASEAN and India gain; single-source risks fade

5. Policy Implications

Global Institutions

WTO and IMF sidelined

Rise of regional blocs and plurilateralism

Urgent need for digital trade and climate reform mechanisms

Developing Countries

Winners: those integrating into trusted supply chains

Losers: those isolated or over-reliant on commodities

Need sovereign industrial policy and alliance-building

Multinationals

Must localize to retain market access

Navigate fragmented standards and rising compliance costs

Global neutrality no longer viable

National Governments

Invest in strategic sectors (AI, chips, energy, rare earths)

Rethink trade, currency, and capital controls

Coordinate tech, energy, and education policy for sovereignty

6. Conclusion : Forecasting the Mercantilist Future

By 2030, the global economy will no longer be flat it will be strategic, segmented, and resilience-first.

The power will lie not with those who trade the most but those who control what matters most. Nations that align industrial capacity, diplomatic alliances, and digital sovereignty will lead. Others may find themselves excluded, vulnerable, or strategically irrelevant.

Analytical Appendix

Forecast Logic

Global institutions weaken

Trade becomes politicized

Tech and energy become strategic

Then:

Countries adopt protectionism

Strategic blocs replace free markets

Power is redistributed based on resilience

Source Synthesis (Paraphrased)

1.IMF (2025): Industrial policy and fiscal spending are shaping growth

• https://www.imf.org/en/Blogs/Articles/2025/04/22/the-glothe-global-economy-enters-a-new-era 

2.World Bank: Fragmenting trade and decoupling hurting small economies

• https://thedocs.worldbank.org/en/doc/8bf0b62ec6bcb886d97295ad930059e9-0050012025/original/GEP-June-2025.pdf 

3.Bridgewater: Mercantilism replaces globalization as dominant model

4.OECD/WEF: Sovereign strategies crucial for tech, energy, and productivity

• .https://reports.weforum.org/docs/WEF_Global_Economic_Futures_Productivity_in_2030_2025.pdf 

5.Oxford Economics: ASEAN, India, and GCC positioned for upside

6.PwC/JPM/Goldman: Global economy still growing, but volatility rising

• https://www.jpmorgan.com/insights/global-research/outlook/market-outlook
• https://www.goldmansachs.com/insights/articles/the-global-economy-is-forecast-to-grow-solidly-in-