"Mercantilism is back: the new version focuses not on accumulating silver or gold but national productive power - and it's thriving." - Michael Every
"The principle of comparative advantage... would be greatly modified if capital and population were perfectly mobile... the tendency of capitalists to move their funds to the most profitable employment would counteract the benefits..." - David Ricardo
"Any nation which by means of protective duties and restrictions... has raised her manufacturing power... can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade." - Friedrich List
"We should increase the dependence of international supply chains on China and establish powerful retaliatory and menacing capabilities against foreign powers that would try to cut supplies." - Xi Jinping
"If any particular manufacture was necessary, indeed, for the defence of the society, it might not always be prudent to depend upon our neighbours for the supply..." - Adam Smith
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"Let us enrich Rome by exporting our goods in abundance while guarding against the drain of our gold and silver through imports." - Cicero
Executive Summary
In "List-ing the 'Cans' of the Mercantilists", Michael Every of Rabobank's RaboResearch argues that the global economy has structurally shifted away from free trade and returned to neo-mercantilism—an economic model prioritizing the accumulation of national productive power over pure free-market efficiency.
By tracing the intellectual history of trade from ancient Rome through Adam Smith and David Ricardo, the report exposes the inherent contradictions of globalized free trade, which allowed nations like China to heavily monopolize global manufacturing.
Furthermore, it frames both covert "Merkelcantilism" (e.g., Germany's export reliance) and overt "Trumpism" as modern mercantilist reactions, warning that these ideologies will drive profound, long-term market shocks.
Investors and policymakers must accept that protectionist interventions, tariffs, and supply chain weaponization are not passing political phases, but the new geopolitical reality.
Key Takeaways
The structural end of free trade: Protectionism and state intervention are no longer temporary political disruptions; they represent a permanent ideological return to neo-mercantilism based on realist assumptions of national security.
Redefining national wealth: Modern mercantilism does not seek to hoard precious metals, but instead focuses on dominating industrial production, technological manufacturing, and broad "national power".
China's manufacturing monopoly is unprecedented: By leveraging a state-directed, export-focused mercantilist model, China has amassed an overwhelming share of global production across critical sectors like green tech and rare earths, a dominance that free trade policies cannot dismantle.
The facade of "Merkelcantilism": Countries like Germany and Japan act as free traders but covertly practice neo-mercantilism by artificially suppressing domestic demand to maintain massive, structural trade surpluses.
"Trumpism" aligns with historical mercantilism: President Donald Trump's economic policies closely mirror historical neo-mercantilist movements, advocating for direct market interventions, extensive tariffs, and domestic resource protection.
"Main Street" populist market shocks are looming: If neo-mercantilism adopts an economically illiberal stance, markets could face radical disruptions such as mandatory 30-80% cuts to US prescription drug prices or aggressive tax hikes on earners making over $2.5 million.
Detailed Summary by Topic
The Intellectual Evolution of Trade: From Proto-Mercantilism to Free Trade Caveats
Historically, economic regulation was intimately tied to national security. Ancient civilizations practiced proto-mercantilism, recognizing that unrestrained commerce could empower enemies. As global trade expanded, classical mercantilism emerged, treating global commerce as a zero-sum game focused on maintaining positive trade balances and hoarding bullion.
While Adam Smith and David Ricardo later popularized laissez-faire economics, the report notes they included massive caveats. Smith supported the protectionist Navigation Acts for defense purposes, and Ricardo admitted his theory of "comparative advantage" collapses when capital and labor are highly mobile (can move away from home).
Because capital mobility turns global supply chains into a zero-sum game, free trade has inherent logical flaws that mercantilists continually exploit.
The Rise of Neo-Mercantilism and China's Ascendancy
Neo-mercantilism developed as a rejection of British-imposed free trade, operating on the belief that developing nations would be trapped as raw material suppliers without state protection of their "infant industries". Thinkers across the US, Mexico, Germany, Japan, and China argued for tariffs, subsidies, and state-backed monopolies to build broad national power.
This model achieved spectacular success in post-WW2 Asia. China, in particular, used export-focused neo-mercantilism to dominate global green tech, EVs, drones, and maritime industries.
The author stresses that the West has no "free-trade solution" to counter an adversary that successfully captures such a massive concentration of productive capability.
The Covert Strategy of "Merkelcantilism"
Not all mercantilism relies on overt tariffs. The author introduces the concept of "Merkelcantilism"—named after former German Chancellor Angela Merkel—to describe liberal democracies that superficially champion free trade while acting as offensive neo-mercantilists.
By implementing policies that deliberately suppress domestic demand, nations like Germany (post-2000), Japan, and South Korea run massive, structural current account surpluses. This allows them to export their unemployment and capture global demand without technically violating free-trade agreements, proving that protectionism can be executed via stealthy macroeconomic imbalances.
Trumpism as Modern Economic Statecraft
The report places "Trumpism" firmly within the historical neo-mercantilist tradition, noting its rhetoric aligns perfectly with the grievances of past developing nations claiming to be exploited by free-trade hegemons. Depending on whether "Trumpism" evolves into an economically liberal or illiberal framework, the market impacts could be severe.
If it leans into illiberal populism, the administration might deploy extreme statecraft tools beyond just tariffs. Examples include massive drug price controls and heavy taxes on the wealthy, policies intended to bolster "Main Street" domestic self-reliance at the direct expense of "Wall Street" corporate globalization.
Data & Figures
Data Point
Value
Context
China's Share of Global Manufacturing (2000)
6%
Baseline measurement before the aggressive scale-up of its mercantilist model.
China's Current Share of Global Manufacturing (2025)
35%
Current level of industrial dominance noted in report.
China's Projected Share of Global Manufacturing (2030)
45%
Projected result of sustained state-led industrialization.
Proposed US Drug Price Cuts
30-80%
Trump's May 12 executive order linking US drug costs to the lowest global prices.
Proposed Wealth Tax Threshold
$2.5 million
The income threshold for supported populist tax rate increases.
Tariff Pause Duration
90 days
The temporary pause of US/Chinese tariffs announced on May 12, 2025.
Stories & Anecdotes
The "30 dolls" Anecdote: To illustrate the localist, anti-import mindset of neo-mercantilism, the report references a recent suggestion by Trump that an American girl "doesn't need 30 dolls, just 3-4... she doesn't need 250 pencils, just 5". This anecdote captures the ideological shift toward domestic self-restraint regarding imports, mirroring historical "buy local" campaigns.
The UK vs. France Imperial Rivalry: The author notes that the only time a major free-trade economy successfully defeated a neo-mercantilist power was the laissez-faire UK over mercantilist France during the 18th and 19th centuries. However, this was an exception driven by imperial military dominance, serving as a warning to modern free-traders.
Xi Jinping's 2021 Supply Chain Declaration: Xi Jinping explicitly stated in 2021 that China must increase international reliance on its supply chains to establish "powerful retaliatory and menacing capabilities". This shift proves China views manufacturing as a weaponized tool of geopolitical statecraft.
References & Recommendations
Books & Texts:
"The Wealth of Nations", Adam Smith (1776) - Referenced to show even the founding text of free trade supported protectionist acts when national defense was involved.
"On the Principles of Political Economy and Taxation" (1817), David Ricardo - Referenced for the theory of "comparative advantage" and its admitted failure under perfect capital mobility.
"Guanzi" - 5th Century BCE Chinese text emphasizing state regulation of commerce to enrich the state.
"Arthashastra" - 4th Century BCE Indian treatise on statecraft advising kings to prevent foreign merchants from draining wealth.
"England's Treasure by Foreign Trade", Thomas Mun (1664) - Advocated selling more to strangers than consumed to prevent diminishing national treasure.
People Referenced:
Friedrich List, German/US Economist - Argued established powers use free trade to "kick away the ladder" from developing nations.
Alexander Hamilton, US Founding Father - Believed national independence was tied to internal manufacturing.
Angela Merkel, Former German Chancellor - The namesake for "Merkelcantilism", representing nations that utilize suppressed domestic demand to capture export share.
Antonio Serra - Italian mercantilist who argued for restricting foreign goods to preserve wealth.
Jean-Baptiste Colbert - French minister who pushed for tariffs and state-backed companies.
Lucas Alaman, Henry Carey, Mathew Carey, Wakayama, Li Hongzhang, Yu Kil-chun, Mahadev Ranade, Gustav Schmoller, Gebrehiwot Baykadagn, Sun Yat-sen, Mihail Manoilescu - Global neo-mercantilist thinkers from Mexico, USA, Japan, China, Korea, India, Germany, Ethiopia, and Romania.
Tools/Platforms/Products:
Macrobond - Financial data platform used for modeling structural current account surpluses.
Speakers & Credentials
Michael Every, Global Strategist, RaboResearch (Rabobank) - Expert strategist specializing in global economics and the intersection of historical geopolitical trends with modern market strategy.
Actionable Next Steps
1. De-risk from Chinese Supply Chains: Actively audit and onshore critical inputs (especially in green tech, EVs, and rare earths) before retaliatory mercantilist levers are pulled.
2. Hedge Against "Main Street" Populist Policies: Prepare for sudden margin compression in sectors targeted by price controls, particularly the pharmaceutical industry (due to the proposed 30-80% cuts).
3. Monitor "Merkelcantilist" European Nations: Watch for vulnerabilities in export-dependent economies like Germany; in a world of rising tariffs, their reliance on global demand via suppressed domestic demand is a critical risk.
4. Reallocate Capital for an Era of Industrial Policy: Pivot portfolios away from multinationals reliant on frictionless trade toward domestic industrial, defense, and manufacturing sectors that benefit from state subsidies and tariffs.
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