When the free market, isn't
The market sets the price. Or does it?
As children, we’re fed a series of white lies and untruths: Carrots help you see in the dark. Cracking your knuckles leads to arthritis. Watching too much TV will turn your eyes square.
As adults, we’re told a different set of fibs: Politicians have our best interests at heart. Trickle-down economics works. Hard work always pays off. And then there is, perhaps, the greatest falsehood of them all: The market sets the price.
We are taught that in a capitalist free-market economy, prices for goods and services are determined solely by the invisible hand of supply and demand. That sacred phrase “the market sets the price” is etched into every economics textbook, every political speech, and every justification for soaring prices or stagnant wages.
But that idea, like Santa Claus watching who’s naughty or nice, falls apart under scrutiny.
Let’s take a step back. Back to a time when trade was local. When deals were done face-to-face. When the “market” consisted of a handful of sellers and buyers in neighbouring villages.
Back then, the market really did set the price. Sellers had limited options. You sold your goods in your village or maybe one nearby. Buyers weighed their choices: pay a bit more for the better-quality item right now, or travel farther and wait longer for a cheaper or inferior product. It was simple. Transparent. Direct.
It’s tempting to think global trade is just a more complex version of that. That we’re still governed by those same principles, only with shipping containers instead of horse carts. But that’s not the case.
Let’s consider the humble excavator.
If you live and work in the US, you’ve got several top-tier domestic brands to choose from: Caterpillar, CASE, John Deere, Link-Belt. But what if you’re after something cheaper, something more niche, or just something different? What if you’re happy to wait a little longer for delivery and spare parts?
You might look eastward; maybe to China. To manufacturers like Sany, XCMG, Sunward, Shantui; a host of companies producing machines that often come in at a fraction of the cost.
Here’s where the lie is exposed.
The machine you want rolls off the Chinese production line significantly cheaper than its US equivalent. The reason it is cheaper is for another day. But by the time it makes landfall in America, it’s suddenly more expensive. Why? Tariffs. Duties. Punitive levies. Red tape. All imposed not by the market, but by men and women in suits; or in Donald Trump’s case, a red hat.
Depending on which side of the bed Trump got out of that morning, or whether Bruce Springsteen said something mean about him the night before, your shiny new excavator might face a 45%, 75%, 145%, or even 200% price hike.
Let’s go back to our medieval village. This is the equivalent of a guard at the town gate ripping off your price tag and slapping on a much higher one, just because the item came from the next valley over. Or imagine strolling through Walmart, basket in hand, shopping carefully within your budget. Just before checkout, a spray-tanned man in a red hat declares your groceries now cost 60% more. No reason. No warning. Just a knee-jerk reaction to a less than positive news item.
And who pays that difference? Not the manufacturer. Not the exporting country. It’s you. The buyer. The contractor. The small business owner.
The market set the price. Then the powers that be changed it. And now you’re footing the bill.
And let’s be clear. This isn’t just an American phenomenon.
The UK is playing the same game, albeit with slightly more decorum and predictability. While British tariffs are more restrained and applied through regulatory frameworks rather than temper tantrums, they’re still protectionist tools dressed in the robes of economic fairness.
Consider the case of the UK’s tariffs on Chinese excavators. Following complaints from JCB about “dumping” (selling at unfairly low prices), the UK Trade Remedies Authority proposed anti-dumping duties of up to 83.5% on imports of Chinese excavators between 11 and 80 tonnes.
Some Chinese manufacturers cooperated with the investigation and saw their rates adjusted: 33.03% for Sany, 59% for Liugong, 56.24% for XCMG and Sunward. Still significant. Still market-warping.
Let me be clear: I like JCB. I admire them enormously. I’ve been visiting them for more than three decades. They’ve treated me and fellow journalists well. I grew up during the “Buy British” era when everything - from lamb chops to Vauxhalls - sported a Union Jack.
But there’s a fine line between levelling the playing field and putting a fence around your own pitch.
And besides, this isn’t the 1970s. Today’s buyers are wired into the global marketplace. We source what we want from wherever we can find it - Croydon, Croatia, Cancun or Chengdu. Allegiance isn’t to a flag, but to function. Performance. Value.
In today’s world, business patriotism is a luxury most can’t afford.
Let’s say you run a plant hire business. Your fleet is mostly JCB backhoes and telehandlers, but your excavators are from LiuGong. You’ve visited JCB’s HQ; you fly the flag; you consider yourself a fan-boy. But now, thanks to a complaint from the very brand you’ve supported for years, your preferred excavators are 56% more expensive.
Still feeling patriotic?
Tariffs are supposed to protect domestic industries from unfair competition. And yes, there’s a place for that when foreign companies exploit labour or environmental loopholes. But in many cases, it’s not about fairness. It’s about fear. Fear of competition. Fear of losing control.
And that fear doesn’t just reshape prices. It reshapes behaviour. When the “market” is manipulated from the top, the rules change at the bottom. The whole notion of free-market choice becomes an illusion wrapped in a flag and sold with a tax.
Meanwhile, consumers - ordinary people trying to run businesses, build things, create jobs - are squeezed in the name of economic nationalism. They’re told to wave the flag with one hand while they sign inflated invoices with the other.
And all the while, the myth persists. The market sets the price.
No. Power sets the price. Policy sets the price. Fear sets the price. The market? The market just takes what it's given.
And maybe that’s the real white lie they tell us as adults. Not that the market sets the price. But that we ever had a say in the first place.
We’re just villagers, standing in a town square, watching guards at the gate swap price tags on goods we didn’t make, can’t control, but still have to buy.
And we’re told to smile while we do it. Because that’s capitalism. That’s patriotism. That’s the “free” market.
But maybe it’s time we stop pretending this game is fair. Or free. Or even ours to play.
Because the truth is, the price isn’t set by the market. It’s set by whoever benefits most from making us believe that it is.