Promise and perils of protectionism

As US tariffs continue to cast a shadow over global economic growth, the Trump administration maintains that these tariffs are necessary to protect American industry and national security. What we are witnessing is a renewed and insightful deliberation on protectionism – a rather complex phenomenon in the broader matrix of global trade. 

Barely would scholars and experts in global trade and exchange differ on the implications of these tariffs in today’s hyper-connected world. The foundational question then is – if this significant shift were to bring about serious negative consequences, why did the US pursue it? The importance of this question can hardly be overstated but before we take it up, let us briefly look at what is protectionism.

What is protectionism?

Protectionism can be understood as a policy framework aimed at supporting and protecting domestic industries by restricting the operations of international trade. It is usually carried out through tariffs, import quotas, and subsidies. Protectionism is antithetical to the principles of free trade policy – which allows for minimal interference in the flow of goods and services across borders and treats foreign and domestic products without distinction. 

If we look at the genesis of protectionism and its formative phase, we find that its advocates subscribed to left-wing politics. In contrast, those associated with right-wing ideologies ardently spoke in favour of free trade. Protectionism was endorsed as a shield to safeguard modest domestic economies and ordinary local firms from the overwhelming power of transnational market forces or players. It was particularly significant in addressing the tendency of developed countries to treat underdeveloped or developing nations as their dumping grounds for surplus goods.

Protectionism these days is no longer restricted to the Left. Interestingly, it has found ardent supporters among politically conservative factions that publicly endorse right-wing politics. A pertinent example is Donald Trump, who represents the conservative political forces and aspirations of American society.

Rise in anti-migrant sentiment 

Once we have a conceptual understanding of protectionism, a question arises – why is it gaining a wider currency across the globe? The answer lies in comprehending the foundational ways in which economy and politics are linked with each other.

Globalisation paved the way for an interconnected and interdependent world. As cross-border movement and mobility went up and boundaries (though not all) began to blur, societies became more diverse and heterogeneous. However, the rapid pace of economic and cultural shifts couldn’t match the ability of native populations to accommodate and adjust with new people and cultures.  

Moreover, in many developed countries, there emerged a perception that migrants from poor nations were providing services at a lower rate, thereby turning the job space disadvantageous to natives. This belief led to new variants of racism and xenophobia in different parts of the first world. As anti-migrant sentiment in the local populace became louder and more brazen, political leaders (though thankfully not all) of these nations seized the opportunity and rallied around protectionism.

Populist politics 

Now going back to the question raised earlier – why would a country like the US impose a sweeping range of tariffs despite knowing their economic downsides? Answering this question requires us to look into the significant role of populism and populist politics.

An increasing number of nations are seeking recourse to the narrative of ‘reclaiming past glory or greatness’. It often suggests that the said nation was doing exceptionally well at one point (not so long ago).  But the influx of immigrants put enough pressure on the nation that it had to go the extra miles in accommodating those outsiders, which eroded its cultural identity – its glory almost over.  

Such politically motivated and agenda-driven depiction of national decline paves the way for slogans like “Make America Great Again” (MAGA) – a slogan that was central to Trump’s presidential campaigns in both 2016 and 2024. Although the slogan is criticised for being racist, ableist (discrimination against people with disabilities), and against inclusion and diversity, its populist appeal merits serious attention. While the economic consequences of tariffs may be real, their utility in cementing a particular political imagination is far too crucial to be ignored.

The rise of conservative and populist politics in most of the developed nations is a matter of grave concern. The resurgence of ‘far-right, white-supremacist’ political parties is posing new challenges to the realm of human relations – undermining spaces where strangers once met one another in ways that were rich with novelty, empathy and hope. But a growing trust deficit is slowing down the forward march of genuine cosmopolitanism – what might be called an organic globality. 

We seem to have left behind the age of rules – even though it applies unevenly across the world – and have entered into an era marked by pervasive arbitrariness, dictated by narrow and short-term populist sentiments. These troubling developments are also informed by a wave of hyper-emotionalism that often drives the populace passionate and zealous in irrational ways. The post-truth condition is a sign of this pathological takeover, which turns significant sections of a nation indifferent to facts, and disconnected to real truths that shape national life.

How to navigate protectionism fallouts

The emotionally charged population often refuses to entertain well-established arguments against protectionism. Even when faced with economic losses, their reasoning rarely urges them to look into its fundamental limitations. Think of Brexit, where the British population mostly voted on emotional grounds. 

Protectionism limits the global production and consumption of goods and services and heightens the risk of trade wars. The tariffs announced by the US – and the resulting trade war – is a case in point. We know that in the broader context of global trade and exchange, not everyone is equal. Similarly, protectionism too does not guard everyone alike. The losses incurred by consumers rarely match the gains of select producers or industries.  

Therefore, the way forward can be found via cultivating a nuanced understanding of the political-economic interface. Unless populist politics is checked in its tracks, it will almost be impossible to do anything significant about ill-informed and narrow protectionist policies. 

The idea of global trade, at least on paper, was premised on a level-playing field. However, in practice, not all nations experienced free trade equally – some benefitted massively while others either failed to gain or, worse, suffered deeply. With the world already marked by deep inequalities, protectionist policies informed by short-term agendas will only make matters much worse. 

Hence, there is an urgent need to rally around free trade for all as against free trade for oneself. Only then we will move towards what economist Jagdish Bhagwati calls “cosmopolitan efficiency” – a globally inclusive model – as opposed to the self-serving logic of “national efficiency”.

And if protectionism is to be carried out to protect small domestic firms from being overwhelmed by powerful global players, it needs to be ensured that it doesn’t get monopolised by a handful of native corporations. The national interest cannot be reduced to the interests of a few firms.

Post Read Questions

What is protectionism? How is it opposed to globalisation?

Analyse factors that contributed to the resurgence of protectionist policies in recent times?

How do you think India can navigate the protectionist measures and safeguard its economic interests?

Is a rules-based global trade order becoming obsolete in the face of rising economic nationalism?

What role should global institutions (like the WTO) play when powerful economies engage in protectionism?

(Irfanullah Farooqi is an Assistant Professor at IIM, Kozhikode.)

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