Economic nationalism has been on the rise in the past few years plunging global trade. Supply chains focusing on particular powers under the guise of being liberal are unintelligent as the United States, China, the European Union, India, and Russia are all moving towards inwardness or selective alliance as opposed to adopting overall free-trading blocs. This move is indicative of more profound geoeconomic adjustments as nations struggle over national security, technological rivalry and political sovereignty.
With recent changes in policy, the U.S has re-affirmed a strong economic nationalist agenda. Tariffs on a broad spectrum of products have been presented as not only an economic policy but also a political instrument to re-shore manufacturing, safeguard and defend important industries, and even as a means to punish strategic competitors. According to analysts, such tariffs are not only a transactional tariff, but rather a larger doctrine of reciprocal trade, which penalizes states because of trade deficits or non-alignment with the US geopolitical positions.
Concurrently, such decisions threaten to destabilize the world supply chains and can result in the decreased welfare of the world as retaliation barriers increase. In Washington, economic nationalism is gradually merging with geopolitical goals that transform the trade policy into one of the most serious tools of power projection.
China is retaliating using its playbook. Beijing is not doubling its exports to the U.S. and the European Union but hastening the execution of its dual circulation policy, increasing domestic consumption and providing advanced trading relationships with the developing world, especially the Asian region, Latin America, and Russia. Such a shift is an opportunity and a need. With the Western markets becoming tighter, China gets more room in the Global South economies. As per the strategic projections, trade with BRICS and other developing partners will take an increasing proportion of the global business in China in the next decade. In the meantime, the financial decoupling of China is also underway: the creation of alternatives to dollar-oriented financial infrastructure to strengthen the sovereignty of the economy.
EU is caught in a fine balancing act. On the one hand, it attempts to protect its industries, not only in the manufacturing sector, but also in the high-tech industry, against external coercion. Conversely, not all the member states risk to reach a full-scale retaliation against U.S. tariffs, which hints at their intention to remain transatlantic strategically aligned. The Brussels is retaliating with a so-called trade bazooka of its own: a new Anti-Coercion Instrument (ACI) that should help prevent external economic intimidation of the bloc. But fragmentation is beckoning big: with excess capacity being exported to Europe, there is the danger of deflationary surpluses and industrial abandonment. This trend of economic nationalism is extending into industrial and innovation policy, which is highlighted by the EU push of so-called technological sovereignty.
The role played by India in this global restructuring is particularly interesting. As the U.S.-China conflict heightens, India has been trying to use its vantage point. Most multinationals are moving their supply chain to India. This trend is reinforced by the push of the government in its Atmanirbhar Bharat (self-reliant India) initiative that encourages the production of this industry within its borders in such areas as electronics, pharmaceuticals, and textiles.
Yet Indian economic nationalism is not necessarily protectionist: it’s an opportunity to gain strategic independence as well. The Indian trade relations are also expanding; its energy imports are more coming in Russia as exports to the U.S. and EU are also rising. In the meantime, there is an eruption of a trade crisis involving the U.S. in the year 2025 after Washington levied high tariffs to Indian goods partly due to India current energy relations with Russia. This tension indicates the way economic nationalism decades later came to meet geopolitics.
Lastly, Russia has also taken a centre stage as part of the new economic-nationalist architecture. Western sanctions have driven Moscow towards increasing the relationship with China and India not only in the political sphere but also in the economic sphere. The energy trade specifically has turned out to be an instrument of realigning. Russia is on the financial frontline to spearhead a wider move towards alternative systems to the institutions of the West: currencies, payment rails, and trade routes that are less dependent on the dollar or SWIFT. This shift of the economy is a reaction to the pressure of the West and an effective reflection of the nationalism of Russia in the strategy and not in the ideology.
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