Trump’s return to the White House will have seismic effects on the global political economy. These won’t be limited to one-off shocks like those associated with his threatened 25% tariff increase. A more lasting legacy will be the broad-based repoliticization of the global economy: a move away from decades of attempts by policymakers to depoliticize policy.
All economic policies have political consequences. They represent different governments’ values and beliefs—about the kind of society that we want to build and about how to get there. Economic policies also have political costs: they sometimes cause significant pain, and they always produce winners and losers.
Governments try to find a way of managing those political costs. Under Trump, we are likely to see a significant change in how they do so.
Since the 1900s, the dominant political logic of economic governance—embraced by both centre-left and centre-right—has been depoliticization. Depoliticizing economic policy means putting decisions in the hands of arms-length, rule-based technocratic agencies.
In monetary policy, this has involved a global move to the principle of central bank independence and rule-based policies like inflation targeting. Trade policy, although harder to depoliticize, also moved towards rule-based agreements and multilateralism, embodied in the creation of the WTO.
Depoliticized economic policy also meant that governments refrained from engaging in certain kinds of policies (or at least that they were more discreet about it). Overt industrial policy was taboo from the 1990s until recently on the principle that it was too political for governments to get into the business of “picking winners.”
Underlying these different policies was a common logic: let’s keep the state’s role to a minimum and avoid having politicians (and democratic publics) involved in economic decision making wherever possible. Various economic theories were deployed to justify this suspicion of governments, including the time-inconsistency hypothesis which argued that democracies tend to be inflationary because governments will promise low inflation but once they get close to an election will tend to pursue inflationary policies, like pumping up spending, to get re-elected.
Of course, the term “depoliticization” is misleading: it’s still very much a political strategy—just one that is less visible. Its big political pay-off is that it allows governments to insulate themselves from political backlash when policies hurt certain constituencies by shifting responsibility to external rules, agencies and agreements.
Given that depoliticization often involves reducing democratic control over economic policy and insulating decision-makers from the consequences of their actions, repoliticizing economic policy isn’t necessarily a bad thing. It can be positive if it means that governments recognize that economic policies have political consequences and start to take responsibility for them.
In the years after the 2008 global financial crisis, we have already begun to see the western consensus on economic depoliticization coming under pressure. In their most recent policy reviews, central banks in Canada, the United States and Europe all recognized that monetary policy has distributive consequences. In trade circles the Doha round of negotiations stalled and eventually died in 2015, while countries started moving back to bilateral relations long before that. We’ve also seen the return of industrial policy in the last few years in the context of the call to “reshore” global value chains and jump start investment to address the climate crisis.
The United States has played a key role in many of these repoliticizing initiatives—and not just during the first Trump administration. President Biden actively pursued industrial policy to address climate change and rebuild American manufacturing capacity through the IRA, while the shift away from trade multilateralism began under George W. Bush and Obama.
Under the first Trump administration, we saw further repoliticizing of trade policy with this penchant for tariffs and provoking trade wars. We also saw some attempts to repoliticize monetary policy when Trump called on Fed Chairman, Jerome Powell, to reduce interest rates. Yet he also appointed Powell to that position rather than choosing someone inclined to curry favour with him.
It seems clear that we can expect a lot more overt repoliticization under the second Trump administration, including much higher tariffs and trade wars as a starting point. Given that these policies are likely to be inflationary, it is also very likely that Trump will end up in conflict with the Fed once again—and this time, he may follow the trend of his other recent appointments and appoint a flatterer rather than an independent voice when Powell’s term ends in 2026.
The current Trump “bump” in the stock market is unlikely to survive the massive economic costs of widespread tariffs, the deportation of a large percentage of the low-wage labour force and the gutting of the federal civil service by appointees chosen largely for their willingness to do what it takes to retain the President’s favour.
The resulting slump won’t be pretty. The combination of high inflation and low growth that seems likely will be economically traumatizing—and politically damaging.
This brings me to my final, most worrying question: how will Trump handle the politics of this kind of economic misery?
If the advantage of depoliticizing economic policy is that politicians can deflect blame when things go wrong, then the disadvantage of repoliticizing it is that when a government is visibly pursuing policies that produce economic pain, then they will also likely take the blame.
Of course, Trump is unlikely to accept responsibility for the costs of his mistakes. So what will he do? History offers us many examples of politicians who relied on willful ignorance as one key strategy when things went bad on them and simply denied that they had made a mistake.
I fear that strategic ignorance and denial will not be enough for this Administration, however. Instead, we’re likely to see a return to more extreme tactics: gaslighting, outright lying and, above all, scapegoating—finding someone else to take the blame. After all, it’s worked quite well so far, as Trump and his enablers have blamed immigrants, other countries, working women—basically anyone except themselves—for their own failed ideas.
Where do we go from here? In the dark times ahead, we shouldn’t necessarily try to return to an era of depoliticization. While technocratic strategies may be appropriate in some contexts, they aren’t a cure-all—and they lead too easily to government’s avoiding responsibility for their actions.
Instead, we need to hold those responsible for both economic successes and failures to account. And we need to ask ourselves a crucial question: if economics is always political then what form of politics do we want to build together to create a fairer and more inclusive economy?
