Economic nationalism has re-emerged as a defining force in the contemporary global political economy, reshaping trade regimes, industrial policy, and the relationship between states and markets. Once regarded as a relic of protectionist eras, it has returned in new forms under conditions of intensified globalisation, strategic competition, and domestic political backlash against inequality. From tariffs and industrial subsidies to reshoring strategies and supply-chain security policies, governments are increasingly prioritising national economic resilience over unfettered global integration. This shift reflects not merely ideological change, but deeper structural tensions within the architecture of global capitalism.
At its core, economic nationalism refers to the prioritisation of domestic economic interests jobs, industries, and strategic sectors, over international efficiency or comparative advantage. Historically, it has been associated with mercantilist doctrines and protectionist trade regimes. However, in the contemporary context, it is better understood as a strategic recalibration of state-market relations in response to global interdependence. Rather than rejecting globalisation outright, modern economic nationalism seeks to manage and selectively reverse it in ways that enhance national autonomy and geopolitical leverage.
The resurgence of economic nationalism can be traced to several interconnected developments. First, the uneven distributional effects of globalisation have generated significant political discontent in advanced economies. While global trade and investment have contributed to aggregate growth, the gains have been unevenly distributed, with deindustrialised regions and lower-skilled workers experiencing stagnating wages and job losses. This has fuelled populist political movements that frame globalisation as a zero-sum process that disadvantages domestic populations.
Second, the 2008 global financial crisis fundamentally undermined confidence in neoliberal models of deregulated markets and self-correcting financial systems. The crisis exposed deep vulnerabilities in highly integrated global financial networks, leading to widespread state intervention and a renewed recognition of the importance of regulatory oversight. In the aftermath, many governments began to reconsider the assumption that market liberalisation would automatically deliver stability and prosperity.
Third, rising geopolitical tensions, particularly between the United States and China, have reinforced the strategic dimension of economic policy. Economic interdependence is increasingly viewed not as a guarantee of peace, but as a potential source of vulnerability. Supply chains, semiconductor production, and critical infrastructure have become sites of geopolitical competition, where states seek to reduce dependency on rival powers. This has led to policies aimed at “de-risking” or “decoupling” key sectors of the global economy.
One of the most visible expressions of contemporary economic nationalism is the resurgence of industrial policy. Governments across the world are actively subsidising strategic industries such as renewable energy, semiconductors, and advanced manufacturing. The United States’ CHIPS and Science Act and the European Union’s Green Deal Industrial Plan are emblematic of this shift. These policies reflect a belief that markets alone are insufficient to ensure national competitiveness in critical sectors, particularly where scale, innovation, and strategic coordination are required.
However, economic nationalism also introduces significant tensions into the global political economy. One key concern is the risk of fragmentation in the international trading system. Institutions such as the World Trade Organization were designed to promote open markets and constrain unilateral protectionist measures. Yet the increasing use of subsidies, export controls, and tariffs challenges the normative and legal foundations of this system. As states prioritise domestic resilience, the coherence of global trade governance is weakening.
Another tension lies in the potential for inefficiency and retaliation. Classical economic theory suggests that protectionist measures distort resource allocation and reduce aggregate welfare by insulating domestic industries from global competition. While strategic protection may yield short-term political and industrial benefits, it can also provoke retaliatory measures from trading partners, leading to trade disputes and reduced global efficiency. The US–China trade tensions illustrate how economic nationalism can escalate into broader economic conflict with global consequences.
Yet, it would be overly simplistic to interpret economic nationalism as purely regressive. In certain contexts, it may function as a corrective mechanism to the excesses of hyper-globalisation. Dani Rodrik’s “political trilemma of the world economy” argues that democracy, national sovereignty, and deep economic integration cannot all be simultaneously maximised. From this perspective, economic nationalism represents an attempt to restore democratic control over economic policy in the face of global constraints that limit domestic policy autonomy.
Furthermore, economic nationalism can serve legitimate developmental objectives. Historically, many successful late-industrialising economies, including South Korea, Japan, and Taiwan used selective protectionism and state-led industrial strategies to build competitive industries. These cases demonstrate that strategic state intervention can, under certain conditions, foster innovation and structural transformation. The contemporary revival of industrial policy in both advanced and emerging economies reflects a renewed interest in these developmental experiences.
Nevertheless, the effectiveness of economic nationalism depends heavily on institutional capacity and policy design. Poorly implemented protectionist policies can entrench inefficiency, encourage rent-seeking, and reduce innovation. Conversely, well-targeted industrial strategies require strong bureaucratic institutions capable of coordinating investments, evaluating performance, and withdrawing support from underperforming sectors. Without such capabilities, economic nationalism risks becoming a vehicle for political patronage rather than economic development.
The environmental dimension of economic nationalism further complicates its assessment. Climate change has introduced new imperatives for state intervention in markets, particularly in accelerating the transition to low-carbon economies. Green industrial policies often involve subsidies, carbon tariffs, and regulatory frameworks that prioritise domestic clean-energy industries. While these measures may be framed in national terms, they also contribute to global public goods. However, if implemented competitively rather than cooperatively, they may generate tensions between states competing for leadership in green technologies.
Financial markets also play a critical role in shaping the trajectory of economic nationalism. Global capital flows can both constrain and enable national policy autonomy. While governments may pursue nationalist economic policies, their ability to do so is often mediated by investor confidence, exchange rate stability, and access to international finance. This creates a structural tension between national economic priorities and global financial integration. In this context, economic nationalism does not eliminate global interdependence but rather reconfigures it.
In conclusion, economic nationalism represents a significant transformation in the global political economy rather than a simple reversal of globalisation. It reflects deep-seated tensions between efficiency and resilience, integration and sovereignty, and global markets and domestic democracy. While it offers potential benefits in terms of industrial strategy, economic security, and democratic accountability, it also carries risks of fragmentation, inefficiency, and geopolitical conflict. The challenge for policymakers is not to choose between globalisation and nationalism, but to design hybrid frameworks that balance openness with strategic autonomy. The future of the global political economy will likely be defined not by the triumph of either globalism or nationalism, but by their uneasy and evolving coexistence.
