When Free Trade Becomes a Trap: How Global Imbalances Are Fueling Conflict and Instability
by Samirul Ariff Othman | May 31, 2025
Without structural fairness, globalization amplifies inequality, fractures societies, and paves the way for economic and political wars.
For decades, free trade was sold as a win-win propositionâa rising tide that would lift all boats. In reality, it lifted some yachts while leaving countless dinghies stranded. Free trade has never been the same as fair trade. In fact, it has often been a systematic form of unfairness, allowing nations to exploit their competitive advantages over others, deepening structural imbalances at every level. Itâs a seductive idea on paperâopen markets, invisible hands, everyone competing, everyone winningâbut in practice, itâs often a brutal sorting mechanism. The strong scale up, the weak specialize or fall behind.
Mercantilism, the dominant economic theory from the 16th to the 18th century, operated on this brutal logic openly. Nations pursued wealth and power by maximizing exports, minimizing imports, and hoarding precious metals, treating global trade as a zero-sum game where one nationâs gain was anotherâs loss. Mercantilist states used heavy government interventionâtariffs, monopolies, subsidies, and colonial conquestâto ensure their industries thrived at the expense of others. In theory, free trade later emerged as a sharp contrast, promising mutual gains through open markets and comparative advantage. But history reveals that major powers only champion free trade when it suits their dominance, reverting to mercantilist behaviors the moment that dominance is threatened.
Britain offers a classic example. After the Repeal of the Corn Laws in 1846, it became the worldâs great advocate of free trade, profiting enormously as the leading industrial and financial power. But when Germany and the United States rose as industrial rivals, undercutting British strength, panic set in. Movements like the Fair Trade League emerged, and leaders such as Joseph Chamberlain pushed for âimperial preferenceâ to protect domestic industries through special tariffs within the British Empire. Although Britain did not immediately abandon free trade, it gradually shifted towards preferential trading blocs, subsidies for strategic sectors, and ultimately even tariffs during the Great Depression. Free trade was championed when Britain was winning; mercantilism returned when it was losing.
Today, the United States retraces this pattern. After World War II, it championed free trade, architecting GATT and the WTO to spread open markets globally because it stood atop the industrial and technological world. But with Chinaâs meteoric rise, Americaâs own deindustrialization, and the erosion of U.S. manufacturing, America has pivoted sharply towards tariffs, âBuy Americanâ policies, industrial subsidies, and an âAmerica Firstâ approach to trade. Like Britain before it, the U.S. still talks of âfair trade,â but what it often demands is strategic advantage under the banner of fairness.
China, too, embraced free trade opportunistically, leveraging WTO membership to accelerate its manufacturing dominance. Big economiesâwhether America, China, or historically Britainâthrive under free trade because they can tilt the playing field, exploiting their scale, capital, and technological advantage. Meanwhile, smaller economies like Malaysia, Indonesia, and Vietnam are slotted into narrow economic lanes: manufacturing electronics, exporting palm oil, shipping raw materialsâlocked into rigid roles that make them vulnerable to global shocks and external dependencies.
Even within nations, the effects of unmanaged free trade have been destabilizing. Americaâs Rust Belt collapsed. Rural towns emptied out. Europe fractured: Germany amassed surpluses while Greece descended into debt and austerity. ASEAN countries experienced the same. Singapore soared ahead while Cambodia and Laos lagged, and Malaysia and Thailand struggled with widening internal disparities. Free trade, left unmanaged, did not create balance. It amplified inequalities at every levelâlocal, national, regional, and globalâweaponizing economic disparities and turning them into political grievances.
The theoretical elegance of free tradeâcomparative advantage, efficiency, shared prosperityâcollapses without structural safeguards. Instead of leveling the field, free trade has operated as a giant amplifier, exaggerating preexisting inequalities and vulnerabilities. The unstable architecture it createdâdeepening imbalances â social and political instability â trade wars and conflictâis now breaking apart before our eyes. The U.S.-China trade war, Brexit, the resurgence of nationalism and anti-globalization movements across Europe and Asiaâthese are not random accidents but inevitable consequences of decades of unmanaged globalization.
Philosophers like Ibn Khaldun, Machiavelli, Hobbes, and Clausewitz would not be surprised. Human affairs are an endless struggle for advantage. Trade wars are simply politics by other means, and conflict is the natural endpoint when fairness is absent. Ending free trade alone does not automatically bring fairness; it merely shifts the battlefield to more direct forms of economic and political confrontation.
The limitations of global institutions like the WTO, CPTPP, and BRICS reveal this stark reality. Remove America from the equation and the structural problems would still persist. Because the core issue lies not simply in who participates, but in how the system is inherently structured to magnify advantages and vulnerabilities.
For ASEAN nations, the future looks equally precarious. Carved into hyper-specialized economic roles, they face internal divisions and deepening inequalities that threaten regional cohesion. Regional integration will remain fragile unless proactive steps are taken to correct imbalancesâthrough redistribution, sectoral protections, rural development, and new mechanisms for cooperation and solidarity.
In short: free trade without fairness is a high-speed highway to fragmentation. Unless we consciously build a new architecture rooted in balance, inclusivity, and resilience, the world will continue hurtling through cycles of liberalization, polarization, resentment, and conflict. Again and again.
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Economist Samirul Ariff Othman is an adjunct lecturer at Universiti Teknologi Petronas, international relations analyst and a senior consultant with Global Asia Consulting. The views in this OpEd piece are entirely his own.
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