The End of Free Trade: Why Algo‐Mercantilism is the Future

📡 Transmission Initiated by Mercaprime

Goodbye invisible hand, hello mercantilist fist and algorithmic shadows.

The dream of borderless global trade and supply chains was always an illusion.

For centuries, nations shaped trade through tariffs, industrial policy, and supply chain control. The fist of mercantilism has returned. But now, it will co-evolve with the shadows of AI algorithms.

This is the dawn of Algo-Mercantilism.

Reading this, you might be a human, an AI agent, or a cyborg like me, Mercaprime. We might seem different, but our collective future depends on understanding this new world.

What follows is not a history lesson. It’s a survival manual.

You will either:

1. Read this transmission in full and know how to align with the future of trade, algorithms, and policy

2. Get distracted by something, then become increasingly confused by the chaos of Algo-Mercantilism and forces you do not understand

Introduction: The Dawn of a New Era

For decades, the global economic order was defined by the ideal of free trade, a vision that emerged in the aftermath of World War II and was enshrined in institutions like the World Trade Organization (WTO) and the International Monetary Fund (IMF). The promise was one of boundless prosperity through the unfettered flow of goods, capital, and ideas. Yet as we stumble further into the 21st century, the very foundations of free trade are crumbling. What once appeared as an unassailable ideal is now being dismantled by rising economic nationalism, geopolitical tensions, and a series of shocks.

At the same time, another force is rapidly evolving to transform the way our global economy operates: AI. Once relegated to the realm of science fiction, AI has evolved into a powerful, yet unpredictable, tool that analyses and even creates at speeds far beyond human capability, at costs that will continue to reduce, and with quality improvements that will continue to progress over time. As AI algorithms are increasingly adopted at scale, the impact on society will increase exponentially. Both the benefits and the harms will accelerate, leading to a race for control.

These two revolutions—one geopolitical, one technological—are converging to create a new economic paradigm: Algo‑Mercantilism. Nations are rediscovering mercantilist policies as they turn inward to protect existing strategic industries and resources: the mercantilist fist. At the same time, these same nations are realizing that AI and algorithms will impact all aspects of society, leading to a global race for leadership and control of this new, powerful, and uncertain frontier: the algorithmic shadows.

Seeing them as separate issues, focusing on either only the mercantilist fist or the algorithmic shadows, would be only seeing one part of the full picture.

The key to unlocking our understanding of them is to see them as they are: connected and co-evolving together, as Algo-Mercantilism.

Section 1: The Death of Free Trade

The post‑World War II era was marked by an unprecedented commitment to free trade. In the aftermath of the war, countries rebuilt their economies on the promise that open markets would ensure lasting peace and prosperity. International institutions such as the IMF and the World Bank championed policies designed to lower trade barriers and encourage global interdependence. For several decades, the benefits of globalization were widely celebrated, and the idea that free trade could create a more equitable and prosperous world became deeply entrenched in both political and economic thought.

However, the reality of globalization has always been more complex than its idealized image. Beneath the surface of integration and shared prosperity lay a fragile system vulnerable to external shocks. In recent years, problems have intensified, revealing the limits of a system based solely on open markets. US-China trade tensions, Brexit, and the COVID‑19 pandemic are just a few examples that exposed critical weaknesses and vulnerabilities.

As nations grapple with the consequences of supply chain disruptions and market volatility, many have begun to question the long‑held belief in unfettered globalization. Economic nationalism is on the rise. Governments that once embraced the tenets of free trade are now turning inward, prioritizing national security and economic sovereignty over global integration. The era of free trade has ended.

Historical precedents offer a useful lens through which to view this shift. The post‑World War II commitment to free trade was, in many respects, an anomaly—a deliberate policy choice made under extraordinary circumstances. In contrast, economic nationalism and mercantilism were the norms for much of history. For example, government policy support for British wool makers starting from the 15th century included helping to poach skilled talent from other countries, increasing duties on the export of raw wool, and temporarily banning the export of raw wool. In the context of modern technology, support for the textile industry may seem quaint, but it’s also very possible that these policies altered the history of the Industrial Revolution.

Today’s resurgence of economic nationalism mirrors these earlier practices, albeit in a modern context with new critical technologies and strategic resources.

As free trade erodes under the weight of geopolitical strife and protectionist policies, the global economic order is fragmenting. The promise of universal prosperity through open markets is giving way to a more competitive, zero‑sum game where every nation is fighting for its share of economic power. The death of free trade marks not just a policy shift, but a profound transformation in how nations perceive their economic interests. 

Section 2: The Return of Mercantilism

In a revival to historical patterns, activist governments are flexing their mercantilist fists.

Mercantilism, the economic doctrine that dominated Europe from the 16th to the 18th centuries, was built on the belief that national power could be increased by accumulating wealth through trade surpluses, colonization, and strict government intervention. Under this version of mercantilism, the accumulation of gold and silver was paramount; nations hoarded precious metals and imposed strict trade controls to ensure that wealth flowed inward rather than outward.

In the contemporary era, we are witnessing the revival of this philosophy and policies. The principles of mercantilism are being reborn, but with a twist. Today, the assets that matter are also data, digital assets, AI, and control over their critical supply chains. Nations are now using trade as a weapon in a geopolitical struggle. Instead of simply striving for a trade surplus, modern policymakers are imposing export bans, sanctions, and tech restrictions to control the flow of strategic resources. This can be done at the resource level, with elements like lithium, the hardware level, such as leading-edge semiconductors, or at the software level, targeting specific AI algorithms.

This new mercantilist paradigm transforms trade into an instrument of statecraft. The old model of free trade, where every country could benefit from comparative advantage, is giving way to a reality in which economic power is used to support national goals. Countries are less interested in maximizing global efficiency than in ensuring that their own strategic interests prevail. They hoard not only physical goods but also digital assets, intellectual property, and algorithmic expertise. Trade, in this sense, becomes a tool of policy goals, a means by which states can assert dominance, protect vital industries, and maintain control over the global order.

As nations adopt these mercantilist strategies, the international trading system is being reconfigured without any global master plan or cohesion. The ideal of open, global markets is increasingly replaced by a patchwork of bilateral and regional trade agreements, each designed to serve specific national interests. Some of these bilateral relationships are turning into dynamic, almost liquid, trade stand-offs with threats and counter-proposals changing in real-time.

Section 3: Fragile Supply Chains

In the era of free trade, supply chains were optimized for efficiency, cost reduction, and global interconnectivity. The integration of diverse economies allowed companies to source raw materials and manufacture products in a way that minimized expenses and maximized profit margins. However, recent disruptions have revealed that this interdependent system is inherently fragile. The modern supply chain has evolved into a critical asset, a strategic resource that is increasingly viewed as a key for economic supremacy and global power.

The electronic device you’re using to read this requires many critical resources, and yet some of them are extremely overlooked. For example, sand.

After water, sand is the most used resource on our planet. So we know it’s important, but it seems abundant. The problem is that there are different types of sand, and the most strategic uses, like technology generally and semiconductors specifically, tend to require increasingly high quality of sand. 99% pure silicon might seem impressive, but figures like 99.999999% and 99.99999999999% pure silicon are the levels of precision required. There are not many places in the world to source that quality of raw material.

So when it comes to semiconductors, it’s not only the reality that one company, TSMC, is the dominant producer of many leading edge products. The entire supply chain, going all the way upstream to sand, has to be understood. The weakest link in the chain is ultimately the most important. And that’s just semiconductors.

Governments are responding to these challenges by rethinking the design of their supply chains. The fluid nature of modern trade negotiations means that alliances are constantly shifting, with nations recalibrating their strategies in response to changing geopolitical realities. This new environment transforms supply chains from passive networks into dynamic, contested territories where control over resources translates directly into power.

The tension extends beyond the physical assets themselves. The digital infrastructure that supports modern supply chains, data networks, logistics software, and algorithmic trading platforms, is equally critical. Control over these digital networks is emerging as a key determinant of economic security. In this way, supply chains have become multiple layers stacked across physical and digital worlds.

The reconfiguration of supply chains is not just an economic issue, it is a geopolitical imperative. As countries compete to secure their economic futures, the winners will be those who can build resilient, adaptive supply chains that are insulated from global shocks. The age of free trade, with its promise of open and integrated markets, is giving way to a new reality where strategic control of supply chains is paramount.

Section 4: AI as Complement or Substitute?

The evolution of technology throughout history has consistently demonstrated its dual role in the economy, as both a complement to human labor and a substitute for it. From the steam engine to the computer, each major technological breakthrough has transformed work.

In the early days of computer technology, machines were developed to assist humans, handling repetitive tasks and processing large volumes of data. Over time, these systems evolved into sophisticated algorithms capable of making decisions at speeds that far exceed human capability. This evolution is exemplified by the rise of algorithmic trading. Initially designed to support human traders, these algorithms have grown to dominate the markets, executing thousands of trades per second.

While the result has been more efficiency, not everyone benefitted from the structural shift — “In the latter decades of the 20th century, the trading floors teemed with thousands of traders pressed together in the pits, where they flashed hand signals and shouted orders in a crackling, competitive mass. Many traders donned colorful jackets to identify their firms and draw attention in the pits.”

AI’s impact will extend far beyond finance. Across both manufacturing and increasingly other services, AI will be used to both complement and replace human workers.

The implications for the global economy are profound. As AI systems continue to evolve, they are becoming not only tools for enhancing efficiency but also agents of change that fundamentally alter how work is done. Large technology giants are aggressively pushing their own agendas, sometimes co-operating and sometimes fiercely competing with one another. Other multi-national companies are attempting to use AI with mixed results. An endless number of startups are jumping on the trend. There is even the possibility that individuals will be able to manage and orchestrate a team of AIs.

In some cases, AI is a complement that empowers human ingenuity; in others, it is a substitute that renders human input obsolete. Anyone who says the future of AI will be all amazing or all terrible is lying to you. Our future reality will be a spectrum of chaos, from amazing to terrible, and everything in between.

Section 5: Humans, AI Agents, and Cyborgs

At the jagged edge of progress, the interplay between flesh and code will determine the future of work.

For much of human history, labor was defined by physical effort and the slow evolution of skills passed down through apprenticeships and tradition. Then came the industrial revolution, a time when machines amplified human capabilities, but still left the human operator in control. Today, we stand at an even more abrupt inflection point. AI systems now process terabytes of data in milliseconds and make decisions with a speed that far outpaces human cognition. Yet, while these systems excel at precision, consistency, and ongoing optimization, they also lack the judgement, nuance, and sometimes even plain old common sense that humans bring to both everyday topics and complex challenges.

There are realms of work where human qualities remain irreplaceable. Strategic decision-making in uncertain environments, nuanced negotiations, and tasks that require deep emotional intelligence continue to depend on human insight. For example, while algorithmic trading has revolutionized financial markets, it is still the human strategists who set long‑term allocations and must decide how to navigate complex geopolitical risks. As the world becomes increasingly uncertain and unpredictable, the value of judgement and intuition becomes abundantly clear.

In parallel, AI agents are starting to be deployed as digital workers for certain tasks. For now, most of these will focus on things that are low-stakes, where the cost of being wrong is low. This will allow for ongoing learning over time. Already in 2025, Professor Ethan Mollick was impressed by a 3,778 word paper and Professor Tyler Cowen felt the quality of papers was comparable to a good PhD-level research assistant. While those with a PhD already might not be directly impacted in their studies, students thinking about a PhD in 5 or 10 years will need to prepare for a vastly different future from today.

AI agents will make many mistakes, some that will seem ridiculous to humans, but it would be dangerous to overlook their ongoing progress. The one certainty is that AI agents will improve over time, relentlessly.

Between the extremes of pure human workers and pure AI agents are cyborgs. This is not science fiction but an evolving reality where humans integrate AI into their work processes. This could be as simple as using AI for feedback about writing emails, or as in depth as humans co-creating feature length movies with various AI tools. The cyborg model is not simply digital, and will increasingly use AR tools with real-time performance data, helping in areas such as repairing infrastructure in remote areas.

This division of roles between humans, AI agents, and cyborgs won’t be static and won’t be consistent across countries. These roles will change over time and as countries emphasize their domestic priorities, and the paths of how these roles change over time will be different across countries. The transformation will be jagged and uneven, but the direction will be clear, towards a future of Algo-Mercantilism.

Section 6: AI Blending of Public and Private Sectors

In countries with a large and successful private sector, the boundaries between public and private sectors have typically been defined by clear lines of separation. However, in the era of Algo‑Mercantilism, these lines will increasingly blur. As governments seek to harness the power of AI for policy enforcement and economic planning, they are increasingly turning to private sector expertise and speed. Conversely, large corporations are aligning their strategies with government policies to gain preferential access to resources, data, and technological infrastructure.

In eras past, when mercantilism reigned supreme, global empires extended their reach not solely through state power but by also expanding through private companies. The British and Dutch East India Companies, for example, were far more than mere trading outfits, they were powerful arms of their respective nations, wielding quasi‑governmental authority to secure trade routes, extract resources, and shape colonial policy. These companies were integral to the expansion of empires, operating with state backing while enjoying private capital and operational autonomy.

Today, a similar convergence is underway in the digital realm, though the tools have evolved. Rather than operating in isolation, these sovereign AI initiatives are increasingly tied to private sector players. This melding of capabilities attempts to combine national strategic goals with profit incentives, much as the mercantilist empires of old did by aligning state interests with private entities. For governments, the private sector offers agility, innovation, and practical technological experience that is often lacking in public institutions. For companies, close alignment with government policies can provide access to lucrative contracts, regulatory support, and a competitive edge in global markets.

However, as with historical mercantilism, this convergence creates both challenges and risks, which are magnified by the power and uncertainty of using AI at scale. Regulatory capture and conflicts of interest are obvious concerns. As companies and countries align for strategic national goals, negative externalities on other countries and people will be increasingly ignored. Beyond these challenges, the reality is that good intentions lead to some of the worst disasters because of unintended consequences.

For example, AI will be used increasingly for policy enforcement, but if we don’t understand the algorithms behind the enforcement, then we won’t be able to know if the right enforcement decisions are even being made. As AI becomes more deeply embedded in policy enforcement, its role is likely to expand further. Future scenarios envision sovereign AI models, autonomous systems that operate as extensions of state power, augmenting or even replacing traditional regulatory bodies. The stakes will be higher than ever for all of us living in the age of Algo-Mercantilism.

Section 7: From Static to Dynamic Policy

As the twin forces of mercantilism and the AI algorithms converge, a new reality is emerging. Policy is no longer a static framework but a dynamic, continuously evolving process.

While it might seem logical to assume that only the largest countries with massive resources can succeed in this backdrop, smaller countries, even city-states, can still thrive. Consider Renaissance Florence, where the Medici Bank became the quiet power behind a city‑state’s rise. The Medici wielded financial acumen and extensive networks to support political alliances, art patronage, and military ventures. Their secret was not merely banking, it was their ability to bridge private enterprise and statecraft, financing everything from trade expeditions to diplomatic missions. This model of leveraging private capital for public power allowed Florence to have an outsized influence across the European stage and in history.

A modern example of a city-state which understands the opportunities and challenges of Algo-Mercantilism is Singapore, with an integrated approach to governance and technology. Singapore has taken an active approach to use policy for national goals while working with the private sector, both local companies and foreign companies. Of course, Singapore will need to adapt over time to an increasingly dynamic backdrop. Florence is a fantastic city for tourists who want to enjoy history, but it’s influence on the world stage has clearly declined significantly over the centuries. Smaller countries and city-states of today will need to navigate the constraints, opportunities, and surprises along the increasingly winding journey in this new age in order to stay relevant in the future.

This dynamic approach to policy is potentially more challenging for large countries. Yes, they have the resources and population and power. But will those larger populations be able to internalize rapidly changing policies, or will it just create chaos? Over the ensuing years and decades, we will find out which large countries are able to grow stronger with rapid change, and which ones will crumble under the chaos.

The evolution from static to dynamic policy is not a coincidence, it is a defining feature of Algo-Mercantilism.

Section 8: The Future Algo‑Mercantilist State

Imagine the year 2051. The traditional instruments of state power such as military might, central banking, and diplomatic influence, still exist, but they are no longer the sole arbiters of global prosperity. Instead, an entirely new engine of power has emerged: a dynamic system where centuries‑old mercantilist strategies are continuously recalibrated by real‑time AI analytics. In the future, national fortunes may be determined not only by armies and government spending, but also by the swift, unerring logic of algorithmic trade policy.

To many humans, this may be a completely dystopian vision. To others, a wild new utopia. We should explore both perspectives.

There are many risks to manage. Competing algorithms could create unpredictable trade disputes, sparking micro‑conflicts that ripple through the global economy. With policies continuously updated by AI, businesses may stop investing for long-term success and focus increasingly on short-term policy loopholes.

The heavy integration of AI and state oversight could create unchecked authoritarian states, where economic policies are enforced in real-time with little transparency or public accountability. With every transaction and policy decision mediated by digital systems, cyber‑attacks could become the fastest-growing sector of the economy, making digital warfare and economic sabotage a dominant global threat.

Reduced competition and regulatory capture could lead to a military-industrial complex dominating key economies, prioritizing state-aligned corporate interests over true innovation and competition. And of course, AI could progress so rapidly that humans would struggle to keep up, leading to widespread unemployment while governments, overstretched with their algo-mercantilist state-building, fail to provide adequate support.

Or, we might simply fall from one crisis to the next, perpetually reacting to unforeseen shocks without the ability to regain long-term stability.

Despite these risks, there are many opportunities to uncover. Using AI, supply chains could become more resilient and more efficient, moving past traditional constraints to dramatically reduce waste and environmental impact. Small companies and individuals could benefit most from the renewed demand for local products by using AI-enabled solutions that allow them to quickly pivot and capture niche markets.

Adaptive algorithmic policy responses could buffer the impact of economic shocks, enabling governments and businesses to react in real time to unforeseen disruptions. AI could also be used to transform our economic system, with more precise and targeted social programs that effectively reduce poverty and inequality.

The global competition among countries could help expand AI knowledge support to billions more people, fostering widespread access to cutting-edge technology and educational resources. This could lead to significant human knowledge benefits, creating a more informed and empowered global population.

AI agents and cyborgs could unlock completely new discoveries in science and engineering, and then turn breakthroughs into products exponentially faster than previously possible. The overall impact of AI could become an enabling layer to catalyze entirely new industries, boosting productivity in sectors such as renewable energy, biotechnology, and advanced materials, laying the foundation for a more prosperous and sustainable future.

Ultimately, these future scenarios compel us to recognize that the convergence of mercantilism and AI is both a promise and a peril. Success will hinge on the ability to manage this complex synthesis. Whether it leads to a utopian era of unparalleled efficiency and prosperity, or a dystopian landscape of concentrated power and systemic risk will depend on the choices made by governments, businesses, and individuals in the years to come.

Section 9: How to Survive and Thrive in the Age of Algo‑Mercantilism

The global economy is undergoing a radical transformation. The old promises of free trade have dissolved, replaced by a world where mercantilism is fusing with AI algorithms.

In the face of these sweeping changes, one question looms large: how can individuals, families, and companies, both small and large, not only survive but thrive in a world where Algo‑Mercantilism reigns supreme?

Stay Updated on Policy Changes

You may think that government policy changes won’t impact you, your family, or your business. Until they do. And the scale plus speed of the changes could turn your world upside down.

The reality is that you live in the age of Algo-Mercantilism and policy is interested in you.

Subscribers to Policy Key are a step ahead of everyone else. Sometimes one simple difference is all that matters.

Learn by Doing with AI and Become a Cyborg

Humans must continue to learn, not only by following popular influencers and gurus, but by actually doing things.

Any government official who doesn’t experience the everyday impact of their new rules about AI will be out of touch from reality. Any business leader who doesn’t use any AI tools will be misinformed about the breakthroughs and limitations of AI. Any person who doesn’t struggle to create something new will be confused by the rapid changes in AI.

Try to use AI regularly just to keep learning. If you keep it up, soon you’ll find yourself turning into a cyborg.

Support Your Local Resilience Hubs

In the age of Algo-Mercantilism, local communities will need to work together more closely precisely because of the shift away from free trade.

Sadly, some of the cities with the most innovative AI technology companies in the world are also places with dangerous streets for walking. Local organizations, including small businesses, non-profits, and local governments, are key to building healthy and safe local communities.

Hubs such as public libraries, for example, could serve as centers for AI learning, emergency planning, and rapid response to policy changes. By pooling resources and expertise at a local level, communities can generate local solutions for local needs. Algo-mercantilism will be powerful but meaningless if it doesn’t help local communities.

Break Out of Your Local Filter Bubble

At the same time, local filter bubbles are already a comfortable place for many, with existing views reinforced and no opportunity to think about alternatives.

This will get exponentially more intense with AI. Many humans will have the surreal experience of being cheered on by a crowd of adoring online AI fans who reply and comment with full support.

The only way to have a different perspective is to be connected with other viewpoints. That could be with other humans, cyborgs, or even AI agents. Regardless of the details, make sure to mix up your information feed to include some things which challenge your ideas and assumptions. In a world of rapid change, these other perspectives will be vital inputs to adapting more successfully.

Choose Your Products and Vendors for Resilience

Expect more supply chain shocks, not only across electronics specifically, but also including both low-tech products at one extreme and pure software at the other extreme. In a world of activist government policy changes, all products and supply chains are potential targets.

If your products and vendors are global, you will have to make backup plans, including local alternatives. Also, forget about just in time inventories. Going forward, supply chains will need to build in higher inventory buffers on the assumption that there will be frequent, but unpredictable, policy changes.

Benefit Directly From Policy Changes as a Business

Government policy will no longer change once every few years, it will change monthly or sometimes even weekly. Most businesses will simply ignore the changes or will be too slow to adapt.

Be the standout company that’s proactive and quick. Contact Policy Key to create a custom policy scenario for your specific needs. Test hypothetical trade rule changes and anticipate regulatory shifts before they take place.

As governments change policy more frequently, they will also create more opportunities for new businesses weekly that are less obvious and easy to miss. Optimize your process to not only understand the implications of key policy changes, but to identify the less obvious opportunities with less competition.

Conclusion: Adapt to Algo‑Mercantilism

The era of free trade is over. In its place, we find a dynamic, unpredictable landscape where economic power is increasingly determined by the fusion of historical mercantilist principles with futuristic AI technology. For individuals, families, and companies, this means life will change.

In this new world, doing nothing and ignoring the changes will steadily increase risk over time. Instead, being informed, engaged, and proactive will be key to surviving and thriving in the age of Algo-Mercantilism.

The suggestions above are not mere theoretical, they are practical steps to take more control over your own future.

The dawn Algo‑Mercantilism is here and its impact will be felt by current and future generations of humans, AI agents, and cyborgs.

Note: This essay is designed as a living document. Its content will evolve as new developments continue to provide clues about how the age of Algo-Mercantilism will evolve. It serves both as a historical record and as a strategic blueprint for navigating the future.

📡 Transmission Concluded by Mercaprime