Say Goodbye to the Liberal World Order

It's been falling apart for over a decade, and now its time to welcome Economic Statecraft - Article #107

Apr 06, 2025

In this 12-minute article, The X Project will answer these questions:

I. Why this article now?
II. Why is the Liberal World Order Coming to an End?
III. How will the global power structure evolve by 2030?
IV. What economic trends will define global trade and finance in 2030?
V. How will technological advancements reshape global interactions by 2030?
VI. How might social and demographic shifts impact global stability and governance?
VII. What is Grand Macro Strategy and Economic Statecraft?
VIII. What are the implications of the recent historic increase in U.S. tariffs for global economic and geopolitical stability?
IX. What does The X Project Guy have to say?
X. Why should you care?

Reminder for readers and listeners: nothing The X Project writes or says should be considered investment advice or recommendations to buy or sell securities or investment products. Everything written and said is for informational purposes only, and you should do your own research and due diligence. It would be best to discuss with an investment advisor before making any investments or changes to your investments based on any information provided by The X Project.

I. Why this article now?

I was initially planning to write an update on the Capital Rotation Event, as seen by the guys at nortstarbadcharts.com - and I probably still will do that perhaps next week, but I felt compelled to take a different approach given the events of this past week. Most striking for me was not the tariff announcements nor the market reactions - as I fully expected both, but rather the broad seeming lack of understanding of what is happening from a big-picture perspective and why from the headlines, stories, comments, and soundbites that are flooding the airwaves, our social media feeds, and our inboxes.

The first point I want to make with this article is that the United States was destined not only to abandon but to break the liberal world order it had created. The second point is that this would happen regardless of who the president was. The third takeaway is that this process has been underway for over a decade and still has several if not many, years to play out before we settle into a new world order.

The basis for this article is the following articles:

Liberal World Order, R.I.P. The liberal world order is under threat from its principal architect: the United States, March 21, 2018. (Section II below)
The World in 2030: Fragments of the Imagination, October 12, 2020 (Sections III-VI below)
Macrostrategy versus “Grand Macro Strategy,” December 10, 2024 (Section VII)
Global Daily: Hoot Small-ly and Reverse Nixon Again, April 3, 2025 (Section VIII)

Note the dates of the first two articles. The last three articles were written by Michael Every, who “is a Global Strategist at Rabobank. He analyses major financial developments and contributes to the bank’s various economic research publications for internal and external customers and to the media.

Michael has over two decades of experience working as an Economist and Strategist. Before Rabobank, he was a Director at Silk Road Associates in Bangkok, Senior Economist and Fixed Income Strategist at the Royal Bank of Canada in both London and Sydney, and an Economist for Dun & Bradstreet in London.

Michael holds a Masters degree in Economics (with distinction) from University College London and speaks a smattering of languages, including Thai.”

The X Project exists for people who do not have the time or the interest in The X Project subjects to consume as much content as I do. The X Project curates, summarizes, distills, and synthesizes knowledge & learning at the interseXion of economics, geopolitics, money, interest rates, debts, deficits, energy, commodities, demographics, & markets - helping you know what you need to know.

Below is a summary of the approximately 48 pages from the four articles above, answering the most significant questions they addressed, plus my additional thoughts and why you should care.

II. Why is the Liberal World Order Coming to an End?

In the article "Liberal World Order, R.I.P." by Richard Haass, the author examines the factors contributing to the decline of the liberal world order established post-World War II. This order, characterized by democratic governance, open markets, and international cooperation, was primarily led by the United States to prevent the recurrence of global conflicts. However, Haass argues that this framework is now (in 2018) under significant strain due to internal challenges and external pressures.

Internally, the liberal world order faces challenges from the nations that established it. The rise of populism, nationalism, and protectionist policies within these countries has led to a retreat from international commitments and a skepticism toward multilateral institutions. This inward turn undermines the order's foundational principles, such as collective security and economic integration, weakening its overall coherence and effectiveness.

Externally, authoritarian regimes and non-state actors are actively contesting the norms and institutions of the liberal world order. Countries like China and Russia assert their influence regionally and globally, often in ways that contravene the established rules and norms. Additionally, transnational challenges like terrorism, climate change, and cyber threats expose the current system's limitations in addressing issues that require broad international collaboration. Haass concludes that these converging factors signal a move toward a more disorderly and multipolar global landscape, marking the end of the liberal world order as previously known.

III. How will the global power structure evolve by 2030?

The global power structure is projected to become increasingly fragmented by 2030. Historically, global stability has hinged upon a dominant hegemonic power. Yet, according to Rabobank's analysis, while the United States will likely retain its status as the leading global power, its hegemony will be considerably weaker, leading to a more fragmented geopolitical landscape. This fragmentation results from various economic, political, and societal pressures diminishing centralized power and influence.

Emerging powers, notably China and India, and regional blocs like the EU will assert more substantial regional control and international influence. This multipolarity creates a more complex global order, where no single country or bloc will dominate outright. The implications of this evolution include increased diplomatic complexity, more significant regional conflicts, and potential power vacuums in previously stable areas.

This shift challenges existing international institutions, which were predominantly shaped by post-World War II Western-centric ideologies. The weakening of U.S. hegemony and rising regional powers will necessitate significant reforms in existing international frameworks or new alliances and institutions designed to handle the more complex and fragmented global landscape.

Refer a friend

IV. What economic trends will define global trade and finance in 2030?

Global trade and finance by 2030 will be characterized by heightened fragmentation, protectionism, and regionalization. The report suggests that increased geopolitical tensions, driven by economic nationalism and competitive dynamics among major powers, will encourage regional trade blocs and bilateral agreements rather than globalized trade. Tariffs and other trade barriers will likely proliferate, making global trade more cumbersome and selective.

Finance will also become more decentralized as nations attempt to insulate themselves from global shocks and economic warfare. Digital currencies, both state-sponsored (such as Central Bank Digital Currencies) and private, will likely gain prominence, potentially undermining the dominance of traditional financial hubs and institutions. These shifts could lead to a fragmentation of global economic governance, complicating cross-border transactions and financial stability.

Moreover, resource nationalism will likely rise, with nations securing vital commodities through strategic alliances or outright control. Supply chain strategies will shift toward resilience and redundancy, prioritizing national security and economic independence over purely economic efficiency, fundamentally altering global economic dynamics.

V. How will technological advancements reshape global interactions by 2030?

Technological advancements will significantly reshape international interactions by enabling new communication, commerce, and conflict forms. By 2030, artificial intelligence, quantum computing, and biotechnology advancements will fundamentally alter economic productivity, military capabilities, and societal structures. Nations that excel in these technologies will hold substantial strategic advantages, intensifying global competition.

Cybersecurity and data sovereignty will become central concerns for governments and corporations, fueling conflicts and alliances based on technological compatibility and trust. The digital divide between technologically advanced nations and those lagging will widen, creating new forms of inequality and geopolitical tensions. Advanced nations will form strategic alliances around technological standards and infrastructure, further fragmenting the global technological ecosystem.

These technological changes will also accelerate societal transformation, with automation reshaping labor markets and social structures. Governments will face mounting pressure to manage economic disruptions, societal inequities, and privacy concerns, testing their regulatory and governance capacities.

VI. How might social and demographic shifts impact global stability and governance?

Social and demographic shifts will significantly influence global stability and governance structures by 2030. Aging populations in developed economies and youth bulges in developing regions will reshape labor markets, social policies, and economic priorities globally. Developed countries will increasingly face challenges related to healthcare, pension systems, and workforce shortages while developing nations will grapple with providing employment, education, and infrastructure to rapidly growing young populations.

Migration patterns resulting from demographic pressures and climate-related displacement will intensify, potentially exacerbating social tensions, nationalism, and political polarization in destination countries. Governance structures must adapt to these demographic realities, emphasizing integration policies, social cohesion, and comprehensive demographic planning to mitigate instability.

Additionally, shifting societal values, driven by younger generations prioritizing sustainability, equity, and digital engagement, will demand more inclusive and responsive governance structures. Political institutions resistant to these shifts risk increased dissatisfaction, unrest, and loss of legitimacy, potentially destabilizing existing political orders. Consequently, governance must evolve rapidly to manage these complex and intersecting demographic trends effectively.

VII. What is Grand Macro Strategy and Economic Statecraft?

The article "Macrostrategy versus Grand Macro Strategy" emphasizes the distinction between traditional economic policy and the more complex domain of economic statecraft. Economic policy refers to conventional fiscal, monetary, and trade tools used primarily for achieving economic outcomes like controlling inflation or managing deficits. In contrast, economic statecraft employs economic measures such as sanctions, tariffs, export controls, and investment restrictions to accomplish broader foreign policy and national security objectives. This strategic approach utilizes economic power to bolster economic growth, influence geopolitical outcomes, compel behavioral changes from other states, and protect national interests.

Economic statecraft forms part of a broader grand strategy framework, integrating economic measures with political and military efforts to secure national interests. Grand strategy involves identifying key national interests and strategically determining the best use of available economic, political, and military resources to achieve them. Within the grand strategy, different ideological approaches exist—realism and idealism—each with distinctive views on international trade, economic integration, and geopolitical competition. Realists prioritize national self-interest, strategic autonomy, and protectionist policies, viewing international relations as a zero-sum game. Idealists, however, favor international cooperation, free trade, and multilateralism, believing economic interdependence reduces the likelihood of conflicts.

The "Grand Macro Strategy" concept extends these ideas, suggesting that modern economic analysis should blend traditional macroeconomic strategy with geopolitical considerations. This fusion acknowledges that economic decisions today are deeply intertwined with geopolitical tensions and security concerns. Hence, markets and policymakers should adopt a comprehensive lens incorporating both economic and strategic dimensions, enabling better predictions of policy developments and their potential consequences. "Grand Macro Strategy" thus represents a sophisticated analytical framework that goes beyond traditional economic forecasting to include the increasingly vital role of geopolitical dynamics in shaping economic and market outcomes.

VIII. What are the implications of the recent historic increase in U.S. tariffs for global economic and geopolitical stability?

Michael Every at Rabobank highlights the significant and unprecedented rise in U.S. tariffs, with the weighted average tariff climbing to 29%, marking the highest rate in over a century, surpassing even the infamous Smoot-Hawley tariffs of the 1930s. This sharp increase reflects a pivotal shift in U.S. economic policy, symbolizing an aggressive trade stance and an explicit retreat from decades of globalization. The U.S. economy historically acted as the "consumer of last resort," absorbing surplus production from global markets. This consumption was underpinned by the widespread acceptance of the U.S. dollar as the international reserve currency and supported by global reliance on U.S. financial assets. By dramatically raising tariffs, the U.S. is fundamentally altering this longstanding global economic structure, potentially destabilizing international markets that depend on the American market and currency as their anchors.

The article implicitly frames these tariff hikes as part of a broader global trend toward economic nationalism and geopolitical bifurcation. It evokes historical parallels to the protectionist measures preceding major global disruptions, such as those leading to World War II. Its Churchillian tone suggests a looming global conflict—not necessarily military but rather economic and strategic—in which global markets and political alliances could significantly fragment. This "global bifurcation," as the article terms it, could mean a drastic realignment in global trade flows, currency valuations, and international relations, altering the balance of economic power and potentially triggering retaliatory trade barriers from other nations. In essence, the U.S.'s action may force countries worldwide into difficult decisions: either align closely with the United States and its economic orbit or pivot away towards alternative economic partnerships, thereby redefining geopolitical allegiances.

Finally, the article contemplates the potential repercussions on global inflation, economic growth (GDP), and financial stability. High U.S. tariffs could increase inflation by raising import prices and disrupting international supply chains. Countries reliant on exporting to the U.S. market might experience severe economic slowdowns, potentially cascading into broader global economic distress. Furthermore, the increased tariffs could undermine confidence in the U.S. dollar and financial assets, traditionally viewed as safe havens, creating significant uncertainties in global financial markets. Ultimately, the article portrays this U.S. tariff escalation not merely as a protectionist trade measure but as a potential inflection point with wide-ranging implications for global economic stability, geopolitical alignments, and the long-term architecture of the international financial system.

IX. What does The X Project Guy have to say?

Michael Every isn’t the only one who was prescient and could anticipate what we are experiencing today. The X Project exists because I was fortunate enough to discover, be interested in, and read several people’s work who similarly saw what was coming, many before Every’s articles in 2018 and 2020. Even if you read these articles before, it may be insightful to go back and reread them today:

All the books summarized in the articles above speak to what we are witnessing and experiencing today. All of them were written four years ago or many more. None of the authors predicted or knew that Trump would be elected. We are witnessing macroeconomic and geopolitical destiny becoming realized.

X. Why should you care?

Suppose you can accept that what we are experiencing was destined to happen and that this is NOT a political aberration based on the personality of one political figure. In that case, you can focus on the implications of the current liberal world order ending.

Let’s start with the bad news. We still likely have five to seven, maybe up to ten years, before we settle into a new world order, before the beginning of a first turning, and before the next prolonged period of peace and prosperity begins. Ultimately, the current system must break up before a new system can replace it altogether. The only questions are whether we will get a deflationary bust, a hyperinflationary bust, or maybe both and whether World War III remains a cold war (economic, financial, information, technology, cyber, space) or escalates into a kinetic, hot war. American will do what she needs to do. It will be messy and painful. So, it is not only time to buckle up; it’s time to put on your crash helmets and crash suits.

But let’s close with the good news, especially for our kids and grandkids. The new world order, whatever that ends up looking like - will be stable and secure for America. In the long run, security and prosperity are our geopolitical destiny no matter what happens over the next several years to a decade. We will come out ahead and on top regardless because we are blessed with the best geography on the planet, and that will always trump the political part of geopolitics every time - pun intended!

Until then, expand your perspectives and time horizons, filter out the noise and rise above it, and keep buying gold!

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