The global economy that twentieth-century architects imagined—open borders, declining tariffs, and steady integration—now seems to be unravelling. Where liberalization once promised shared gains, governments are erecting new barriers: tariffs, subsidies, export bans and investment screens. These moves are not a short-term interruption but a structural reorientation of economic policymaking that prioritizes security and sovereignty over maximum efficiency.
The symbolic starting point for this shift may have been the blunt rhetoric and rules of the Trump presidency, but the trend cannot be reduced to one administration. Underlying the change is a broader disquiet about China’s rapid rise and the sense that openness has been exploited to build industrial power while sheltering domestic sectors behind opaque regulations. In response, economic nationalism has spread across political and geographic lines.
Countries are rethinking dependence. In Japan, political figures call for greater self-reliance after supply-chain shocks. In Europe, the language of “strategic autonomy” aims to reduce vulnerability to geopolitical rivals while also preparing for uncertain U.S. policy. Indonesia has tightened controls on raw-commodity exports to promote domestic processing and capture more value. Across these cases, the logic of efficiency gives way to a preference for control and resilience.
To interpret this shift we need several lenses. One view sees economic nationalism as a coherent, if fraught, strategy for aligning state boundaries with economic life. When nations perceive unfairness—being left behind, or subject to predatory investment—they may adopt protectionist measures as a defensive, rational response. But that response contains an internal contradiction: modern development typically depends on foreign capital, technology and access to markets. Closing off or restricting those inflows can stifle catch-up growth and trap countries in low-value activities.
A more technocratic critique warns that reviving the state as the principal economic actor risks costly side effects. Active industrial policy and heavy intervention can breed inefficiency, inflate public debt and open opportunities for rent-seeking and corruption—problems sometimes masked by nationalist rhetoric. What is sold as strategic protection can become a fiscal and governance burden.
A more systemic diagnosis reads economic nationalism as an expression of global capitalism straining under structural pressures. Automation, falling returns in some sectors and declining margins from free trade may be pushing states to claw back advantages rather than cooperate. From this angle, competition for shrinking gains fuels a scramble that intensifies rivalry and fragmentation.
All these dynamics encourage zero-sum thinking: one country’s success is framed as another’s loss. That mindset underpins tariffs, export controls, subsidies and technology decoupling—policies exemplified by measures such as the U.S. Inflation Reduction Act and a growing array of trade and investment restrictions. Multilateral institutions that once mediated disputes and set common rules now seem weakened, accelerating fragmentation into competing blocs.
On the ground the consequences are visible. Firms shift production away from some partners at higher cost to meet security requirements. The EU deploys tools to guard against economic coercion. Developing countries defend protectionism as necessary for industrialization, while advanced economies justify it as preserving middle-class jobs. These conflicting narratives bolster populist politics and promises of self-sufficiency that are often more aspirational than attainable.
A practical middle path requires realism. Economic nationalism can be a legitimate tool for addressing unfairness and building domestic capacity—Indonesia’s push to process minerals domestically is an example of seeking higher-value activity rather than perpetual commodity dependence. Yet policymakers must weigh the trade-offs: forcing expensive domestic production can raise consumer costs, stoke inflation and slow innovation. Techno-nationalism—cutting academic and industrial ties in the name of security—risks fragmenting standards and obstructing collaboration on shared threats like pandemics and climate change.
In short, economic nationalism is double-edged. It can correct imbalances and empower nations, but it can also deepen inefficiency, invite corruption, encourage zero-sum geopolitics and slow global progress. The path the world chooses now will shape political and economic life for decades.
Ronny P Sasmita is senior analyst at the Indonesia Strategic and Economics Action Institution
