Bid 1990s Fare Well

The trade wars have clearly affected the global economy. Firms, households, and governments are asking important questions about how the new tariffs will influence jobs, growth, and profits, as well as how best to respond. These are obviously relevant concerns, yet any strategy cannot rest solely on short-term effects or on the belief that everything will return to normal once Trump leaves the White House, says Fredrik NG Andersson. He argues that we are at the beginning of something larger, a new world order with new rules, opportunities, and challenges.

What is happening today is not just about a single person and his conviction that tariffs are a panacea for boosting the American economy. Trade barriers have been spreading across the global economy for quite some time. Even under the Biden administration, tariffs were raised and regulations introduced to strengthen the domestic economy. The EU has also engaged in its own trade wars with other countries, although these measures are often presented as being about issues other than trade.

Trump is putting his mark on the development but is part of something much bigger," says Fredrik NG Andersson, adding that history can help us understand what it means, but only if we choose the right historical comparison.

It is common to compare the current situation with the trade wars of the 1930s. Fredrik NG Andersson, however, does not see this as the most accurate parallel. Then, tariffs were a response to the Great Depression and introduced in an economy already in free fall, which is far from the case today. A closer comparison, he argues, is Great Britain at the turn of the 20th century.

During early industrialization, Britain was the world's leading economic superpower and a strong advocate of free trade. By the late 1800s, however, its position was increasingly challenged by rapidly growing industrial nations such as the United States and Germany. A debate then emerged that closely resembles the one in the US today: that other countries were reaping the benefits of free trade at Britain's expense. Demands for tariffs to protect jobs and incomes grew louder-much as they do in the US now.

A central figure in this debate was Joseph Chamberlain, a politician who in several ways resembled Donald Trump. Like Trump, he came from the upper echelons of society yet portrayed himself as a champion of the workers. In both cases, the focus was less on detailed economic calculations and more on a political vision where trade policy symbolized national strength and self-determination. One key difference, however, is that Chamberlain's ideas were not put into practice until the Depression of the 1930s, despite having been widely debated decades earlier.

In the 21st century, the US faces growing competition from countries such as China, which has become a central player in the global economy. Much like Britain a hundred years ago, many in the US now see China as a threat to its position as a superpower. This helps explain why the Biden administration did, in effect, continue Trump's earlier policy of restricting China's access to technology and trade in order to protect US national interests.

Periods of free trade and globalization usually arise when the dominant economy feels secure in its superior position. Once that economic and political self-image is challenged and new competitors begin to claim influence, the willingness to keep markets open declines. A new phase then begins, where trade policy becomes a tool to assert power and safeguard national interests, explains Fredrik NG Andersson.

What Does This New World Order Mean?

The globalized economy of the 1990s emerged in a world where the US had won the Cold War and stood as the undisputed superpower. Today, we live in a far more competitive environment. On top of this comes a sweeping technological shift, most notably in artificial intelligence, where the rivalry between the US and China is growing ever more intense.

We can only speculate about what this new world will look like. Some contours are already visible: less globalization, a stronger focus on national rather than global interests, and politics reasserting its influence over markets to determine how economies develop. Exactly how this will shape the future is difficult to judge at this early stage. Yet, according to Fredrik NG Andersson, it would be a mistake to believe that the election of a new American president could bring a return to the way things once were.

We often imagine the future through the rearview mirror. History, as the British example shows, offers valuable lessons, yet the belief that the ideas and structures of the 1990s were universal and can simply be restored is unrealistic. Those ideas belonged to that era and were suited to the conditions of that particular time. Eras that have ended have never returned, they have always given way to something new, shaped by the economic, technological, social, and political forces of their time, Andersson explains.

How Should We Meet This New World?

Fredrik NG Andersson believes that we all have a role in shaping developments, yet small countries like Sweden have limited influence over the global direction. Unfortunately, the EU, which in many ways has fallen behind technologically, is no longer a decisive global player. Instead, it also mostly responds to events and tries to adapt to new conditions rather than setting them. On a more positive note, Sweden is well placed to handle the transition. The economy is relatively flexible, technological development is fairly advanced, and we are less dependent on the US than many other countries. Unlike several European economies, Sweden has also managed its public finances well and has the tools to face the future now taking shape.

Instead of looking back at the 1990s, we should focus on the future and the opportunities it creates.
Who knows, perhaps the future will be better than the past, concludes Fredrik NG Andersson.