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Remodeling globalization

This move is certainly news, but it also belongs to a deep transition that’s been happening for years now—a transition away from unfettered free trade, by way of tariffs, domestic subsidies, and, increasingly, national-security policies.

From the outset of the Ronald Reagan and Margaret Thatcher era more than 40 years ago, international commerce had been shaped by greater and greater liberalization, deregulation, and globalization. The fall of communism in Central and Eastern Europe in 1989, and then China’s admission into the World Trade Organization in 2001, helped global trade reach a record high in 2007—just before the Great Recession in 2008.

But things have since started moving the other way. In 2018, referring to himself as “Tariff Man,” Donald Trump provoked a trade war between the United States and China. The United Kingdom’s departure from the European Union, meanwhile, upended Britain’s longstanding commercial ties with the continent. In 2020, the Covid-19 pandemic disrupted supply chains worldwide. And in February 2020, after Russia invaded Ukraine, nearly all European countries broke off trade relations with Moscow. Data shows that the world’s 20 wealthiest countries have dramatically increased barriers to trade, including import quotas and subsidies to domestic industries. What’s going on here?

Martin Wolf is the chief economics commentator for the Financial Times and the author of the 2023 book The Crisis of Democratic Capitalism. As Wolf sees it, the world has entered a new era—with the U.S. having decided to abandon globalized free trade and America’s economic power impelling the rest of the world to adopt the new model.

Washington’s strategy, Wolf says, is driven by a mix of economic and security concerns centered on its great-power competition with Beijing. It’s an approach that looks to move supply chains from China to friendlier countries—and to repair the damage done to U.S. industries by China’s rise and by global trade generally. This shift could lead to a decline in global growth, Wolf says—though developing countries could see gains, as they become alternative production locations to China. Still, we can’t entirely yet say how other countries will respond to the new dynamics of global trade—or, more specifically, how China will react to a system intended to damage its economic standing.

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• “The new U.S. perspective is that it’s now vulnerable in a way it wasn’t before. There’s a peer competitor—China—which is a superpower on multiple dimensions. It’s the first time Americans have confronted this kind of situation in historical memory; the Soviet Union wasn’t an economic or technological superpower, and the Europeans and Japanese were allies. This is unique.”
• “The Biden administration say it’s not about ‘decoupling’ the two countries’ economies. Which is true. They’re calling this new approach de-risking, and Treasury Secretary Janet Yellen has used the term friend-shoring. It’s a system to manage the security and economic risks associated with the rise of China. That’s what this new model is really about.”
• “The main problem will be increased hostility with China, which will have many ramifications. We can’t predict the ultimate consequences of that increased hostility. But they could be significant, because many Chinese officials now think—and have said this to me—that America is dedicated to stopping their growth. That’s an act of warfare by economic means, and that has consequences.”

That’s why we look at it the way a detective would: Everything The Signal does starts with good questions, and every answer leads us to more of them.

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Sweden’s old-new right

Also until recently, Sweden’s more traditional right-wing parties shunned the insurgent SD—which was founded in the late 1980s by members of various fascist groups, including the Waffen-SS. But over the last few years, they’ve started to work closely with it—despite the current prime minister having once promised he’d never “collaborate, converse, cooperate, or co-govern” with SD.

So, what’s behind this rapprochement between the new and old right?

Back in 2022, Sweden’s traditional right-wing parties needed SD’s support in order to keep the left out of power. So they struck a bargain, and now we’re seeing the outcome: The new right has been thoroughly integrated with the old—even on economic matters. Which is to say, SD now look like old-style Swedish conservatives, though without the old-style politesse.

Of course, Sweden is a small country; its population of 10 million is comparable to London’s or Dhaka’s. But the political merger on the country’s political right, though perhaps not of much significance globally, echoes events in capitals from Paris to Washington. As many liberals feared, SD have changed Sweden’s conservative mainstream, making it much more hawkish on immigration. Yet in turn, cooperation with the conservative mainstream seems to have changed the Sweden Democrats. True, every once in a while, one of their representatives still makes a racist statement. But it’s hard now to call them fascists and feel serious about it.

—Gustav Jönsson

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