Are We Entering a New Age of Economic Nationalism?

Content:

·       What is Economic Nationalism?

·       Deglobalisation

·       What is Economic Warfare?

·       Current Industrial policies

·       US – China Decoupling

What is Economic Nationalism?

The Economic ideology according to which a nation should prioritise its own economic interests over global standards and demands to protect its domestic industries, jobs and resources is called Economic Nationalism.

·       It aims to protect domestic industries by measures such as tariffs, quotas, and subsides which shield domestic markets from foreign competition.

·       It aims to reduce dependence on global supply chains and imports to strengthen domestic production of essential goods like food, energy and technology.

·       It aims to strengthen national security by safeguarding strategic sectors like defence, semiconductors and energy from foreign influence.

Deglobalisation

Deglobalisation is a direct result of Economic Nationalism, it represents the phenomenon of nations reducing economic interdependences among each other. It happens when nations choose to withdraw from global trade and investment to focus more domestic priorities and national self-reliance.

·       Deglobalization means a retreat from globalization, marked by declining cross-border flows of goods, capital, and people.

·       It focuses on prioritising national sovereignty, local solutions, and border controls rather than global institutions and free movement

History of Economic Nationalism and Deglobalisation

In early 1930’s the world was plunged into an economic crisis after the New York Stock Exchange saw massive declines. This Economic Crisis came to be known as The Great Depression. The Great Depression saw nations using protectionist measures to “protect” their economies, one such example of protectionist policies was the Smoot - Hawley Tariffs Act of 1930. The Smoot – Hawley Tariffs Act of 1930 affected over 20,000 goods and led to similar retaliatory tariffs being imposed by the affected nations. Due to such policies international lending and investment dried up as banks started to fail. This led to the Gold Standard getting abandoned by The United Kingdom and many countries which effectively severed international cooperation. Such conditions led to nations prioritising their own domestic industries and promoting concepts of self – reliance, import substitution and economic nationalism. This cycle of inward turns ended due to the Second World War. To prevent such catastrophes, institutions such as the IMF, The World Bank, and GATT were formed.

What is Economic Warfare?                                                       

Economic warfare (sometimes called economic war) is a strategy where states or groups use economic tools instead of direct military force to harm or pressure adversaries. The goal of economic warfare is to disrupt supply chains, deny access to resources and erode the economic strength of the enemy state.

·       Sanctions: These are targeted polices aimed at restricting a nations trade, finance and economic capabilities, these policies often isolate the targeted nation without engaging in direct military conflict. Examples of Sanctions include, US and EU sanctions against Iran and Russia.

·       Trade Embargoes: These are complete bans imposed by nations against other nations. They aim to completely cut off imports and exports with the targeted nation, in order to cripple the enemy’s economy. Examples of Trade Embargoes include, US oil embargo against Japan in the Second World War, which eventually led to Japan bombing Pearl Harbour.

·       Currency Manipulation:             It involves manipulating foreign exchange markets to devalue you own currency to gain an edge over other nations in terms of exports. It is done by central banks of countries who buy foreign currencies and flood markets with their own currencies. Best example of currency manipulation is, China deliberately keeping its Yen weak through reserves, this gives China a significant edge over others in terms of exports.

·       Tariffs: These are policies which impose restrictions on imported good from other countries causing the prices of imported good to rise, leading to a fall in demand of foreign goods, these are done to hurt the exports of other countries while strengthening your own domestic industries. Examples include current US tariffs on China and India.

Current Policies

There has been a major shift in geopolitics since the re- election of the President of the US, Donald Trump. His policies have caused major upheavals in global finance, due to which the current world scenario is a bit more complex than it had been 2 years ago.

In early 2025, the United States decided to reinstate its Tariffs against Chinese good. China which had to sustain the repercussions of tariffs decided to respond by retaliatory tariffs. As the US indicates to a gradual withdrawal from European affairs, the EU desperately tries to protect its internal industries. By mid – 2025, the US decides to deepen its trade relation with Mexico and Canada under the USMCA. Economic Nationalism starts to rise in commodity driven nations like Saudi Arabia, Brazil and Nigeria, which start to benefit from the situations arising due to tariffs. The United States starts to encourage its companies to shift supply chains away from China to other friendly countries of the US like Vietnam, Mexico and India. In summary, the current geopolitical climate is filled with uncertainty due China’s continued bitterness and resilience and the US’s indications about drifting away from traditional alliances.

US – China Decoupling

US – China Decoupling refers to the gradual unwinding of economic and technological ties between US and China. This decoupling started after the 2018 trade war, when Washington imposed tariffs on Chinese products, causing China to respond with retaliatory tariffs against the USA. Tensions rose again in 2025, as Washington escalated tariffs and tightened export control on key sectors like semi – conductors, rare earths and pharmaceuticals. Despite these measures, China’s trade surplus hit a record $1.2 Trillion in 2025, due to increased trade towards South Asia and Europe. In November 2025, Trump and Xi Jinping struck a deal in South Korea. In November 2025, Trump and Xi Jinping struck a deal in South Korea, where China agreed to halt fentanyl precursor exports, lift restrictions on rare earths, and open markets to U.S. soybeans, though tensions persisted. Most analysts note the complete decoupling may be impossible like during the Cold War, when USA and USSR had effectively ended reliance on each other. The reason that it is not possible now is due to major interdependence between USA and China in almost every major sector.