The world we inhabit today bears little resemblance to the one imagined by the architects of the global economy at the end of the 20th century. Back then, the dismantling of trade barriers was celebrated as a gateway to shared prosperity.

Today, new walls are rising, not of concrete, but of tariffs, subsidies and export bans. The grand narrative of seamless globalization now sounds increasingly like a relic from a bygone era.

What we are witnessing is not a temporary disturbance, but a tectonic shift in economic governance, one powerful enough to alter the strategic orientation of nations worldwide.

What began as sharp, provocative tweets during Donald Trump’s first term in office is proving not to be a historical anomaly, but rather the ignition point of a deeper, long-simmering transformation.

To single out Trump alone, however, would be intellectually dishonest. Beneath the rhetoric of “America First” lay a profound unease over China’s rise and its perceived manipulation of the international economic system.

Beijing was accused of exploiting the openness of globalization to accumulate wealth and industrial strength, while simultaneously shielding its domestic market through bureaucratic hurdles and opaque forms of protectionism.

Today, economic nationalism has gone global, spreading across ideologies and regions alike. In Japan, figures such as Sanae Takaichi have advanced a powerful narrative of economic self-reliance in response to the country’s supply-chain vulnerabilities.

In the European Union, “strategic autonomy” has become a staple phrase in Brussels, an effort to reduce chronic dependence on China while hedging against political uncertainty in Washington.

Indonesia, too, has joined this shift. Policies promoting downstream processing of nickel and other natural resources have emerged as a new political-economic narrative of national sovereignty.

Efficiency, once the supreme principle of globalization, is now increasingly subordinated to the imperatives of security and sovereignty.

An existential dilemma

To understand economic nationalism with intellectual clarity, one must move beyond its narrow identification with conventional protectionism.

Drawing on Marvin Suesse’s “The Nationalist Dilemma (2023)”, economic nationalism can be understood as an attempt to align economic boundaries with the boundaries of national identity and sovereignty.

Suesse offers a notably humane perspective. Economic nationalism, in his view, is not a collective pathology, but a rational response to perceived international inequities. When nations feel humiliated by economic lag or threatened by the dominance of foreign capital, protectionism becomes an intuitively defensible shield.

Yet that shield conceals a deep paradox. Suesse argues that economic nationalists are trapped between two conflicting aspirations. On one hand, there is a powerful urge toward isolation to protect domestic industry. On the other, there is an equally strong ambition for rapid development and expansion.

Without access to foreign capital, technology and international cooperation, industrial catch-up becomes nearly impossible for most. This, Suesse suggests, is the dilemma confronting many developing countries today.

Indonesia, for instance, epitomizes the desire for full sovereignty over national resources, while enduring dependence on external investment and technology transfer to make that sovereignty economically meaningful.

A more technocratic yet skeptical view is offered by Jeremie Cohen-Setton, Madi Sarsenbayev and Monica de Bolle in “The New Economic Nationalism (2025).” The authors argue that the world is attempting to resurrect the state as the central economic actor, an approach long treated as taboo under liberal orthodoxy.

For them, this “new economic nationalism” is a high-risk experiment. When states intervene too deeply in markets under the banner of nationalism, the likely outcomes are not equity and resilience, but inefficiency, swelling public debt and corruption disguised as industrial policy. In this sense, economic nationalism resembles a potent drug administered in excessive doses, intended as medicine but ultimately toxic.

An even more radical and apocalyptic interpretation comes from Jamie Merchant’s “Endgame: Economic Nationalism and Global Decline (2024).” Writing from a Marxist-inflected perspective, Merchant does not see economic nationalism as a policy choice or a mere reaction to inequality.

Instead, he treats it as a symptom of global capitalism entering a phase of systemic decay. In his analysis, globalization has begun to collapse from within as the profit potential of free trade reaches saturation due to automation and the erosion of surplus value from human labor.

Economic nationalism, in this view, represents a desperate scramble by states to seize the shrinking remnants of prosperity as the global economic vessel slowly sinks into stagnation.

Zero-sum Trap

When these perspectives are confronted with contemporary geoeconomic realities, a troubling pattern emerges, one with profound implications for global stability.

Kenneth A Reinert, in “The Lure of Economic Nationalism: Beyond Zero-Sum (2024”), warns of the psychological dangers embedded in this trend. He describes economic nationalism as a seductive but destructive embrace of zero-sum thinking, the belief that one country’s gain must automatically be another’s loss.

If China builds a massive battery factory, the US sees an existential threat to its auto industry; if Indonesia bans raw mineral exports, advanced economies perceive an assault on their market access.

There is truth to the sense that the global system is under severe strain. China embodies many of the fears Reinert describes, leveraging globalization externally while pursuing fiercely nationalist industrial policies at home.

The US response, initiated under Trump and expanded under Joe Biden, reflects a growing impatience in Washington. Tariffs, technology blockades and sweeping subsidies under initiatives like the Inflation Reduction Act have followed.

The at least initially unintended casualty, however, has been the multilateral system itself. Institutions such as the World Trade Organization have been weakened, leaving the global economy increasingly adrift without mutually accepted rules.

On the ground, economic nationalism has proven to be more than a passing political slogan. In Japan, the shift toward “economic security” has led firms to relocate production out of China, even at a higher cost.

The European Union, long regarded as the world’s most faithful champion of free trade, is now arming itself with anti-coercion instruments to defend market sovereignty. These developments reinforce Merchant’s contention that the world is fragmenting into rival economic blocs marked by mutual suspicion.

The situation is further complicated by the moral justifications each country advances. Developing nations claim protectionism as a necessity to escape poverty, while advanced economies defend it as essential to preserving middle-class living standards.

This collision of narratives creates fertile ground for populist and far-right movements, which promise the illusion of absolute self-sufficiency as a path to political power.

Searching for a middle ground

Economic nationalism must be understood with sufficient clarity to grasp both sides of the ledger. There is no denying its foundational role in national survival.

As Suesse argues, it can serve as an instrument for marginalized nations to demand fairer participation in the international division of labor. For Indonesia, for instance, downstream industrialization policies, however nationalist in tone, may be the only way to escape permanent dependence on low-value raw material exports.

Yet the dangers are equally real. Economic nationalism can become an intoxicant for policymakers.

One immediate risk is systemic global inflation. Forcing domestic production at costs far above international alternatives ultimately burdens ordinary citizens. Global efficiency, once delivered by integrated supply chains, is sacrificed for a sense of security that may prove illusory.

A second danger lies in the suppression of innovation. Scientific and technological progress thrives on the free exchange of ideas across borders.

When economic nationalism extends into research and development, what is often termed techno-nationalism, the world risks splintering into incompatible technological standards. This not only slows growth but undermines collective responses to global challenges such as climate change and future pandemics, problems no nation can solve alone.

Taken together, the four perspectives offer a powerful synthesis. Suesse provides historical grounding, Cohen-Setton and his co-authors caution against bureaucratic decay, Reinert highlights the psychological perils of xenophobic economics and Merchant underscores the severity of the systemic crisis at hand.

All converge on a single conclusion: the world stands at a decisive crossroads, one that will shape the economic and political horizons of generations to come.

Ronny P Sasmita is senior analyst at the Indonesia Strategic and Economics Action Institution