A new era of power politics and economic nationalism

For the last 20 years, global economic thinking has been shaped by neoliberalism – a framework based on free trade, deregulation, globalisation and financial liberalisation.

It was an era defined by the belief that economic efficiency, market-driven solutions and international cooperation were the keys to prosperity. But, today, this world is being torn apart by the Trump administration in the US. A new paradigm is emerging – one built not on cooperation but on competition, power and economic nationalism.

For years, the dominant economic model was built on the assumption that free trade would benefit all. The idea was that if countries specialised in what they do best, global productivity would increase and rising wealth would lift everyone. This belief justified the outsourcing of manufacturing to China, the rise of multinational corporations and the increasing role of financial markets in economic policy.

But, today, this logic is being replaced by a mercantilist and hegemonic approach. Governments are no longer treating trade as an economic question alone but as a matter of national power and security. The Trump administration’s economic policies provide the clearest example of this shift. Tariffs are no longer seen as distortions to be avoided but as tools of leverage. Economic interdependence is not a benefit but a risk.

Take the Trump administration’s Mar-a-Lago Accord, a proposed financial strategy that aims to weaken the dollar while keeping it dominant as the world’s reserve currency. The logic behind this is clear: America’s economic power is built on the strength of its financial system and it must use every tool available – trade policy, military alliances and financial incentives – to maintain that dominance.

This marks a radical departure from the economic policies of previous US admi­nistrations, which were focused on stability and consensus-building. Instead, the new paradigm is about uncertainty, volatility and constant negotiation. Those who fail to recognise this shift will be outmanoeuvred.

While the US and China have fully embraced economic nationalism, the European Union remains caught in a vision of internationalism. For decades, the EU has prioritised multilateralism, diplomacy and regulatory frameworks over raw economic and strategic power.

This approach worked in a world where global trade was stable and the US provided security guarantees. But many believe that world is gone. If the EU fails to adapt, it risks becoming the biggest loser in the new global order.

The US is abandoning free trade and embracing economic confrontation. Whether under Trump or a different administration, America is weaponising tariffs, controlling supply chains and forcing allies to align with its strategic interests.

The US is abandoning free trade and embracing economic confrontation

China is using economic expansion to secure global influence. Through initiatives like the Belt and Road Initiative (BRI) and state-controlled corporations, China is creating dependencies on its economy while reducing its reliance on the West.

The EU risks being stuck in the middle. If Europe does not develop its own economic sovereignty, it will be forced to choose between aligning with America’s aggressive nationalism or becoming increasingly depen­dent on Chinese supply chains and investment.

The EU is recognising more that internationalism is being replaced by nationalism. European leaders can no longer assume that globalisation will protect their economies. Instead, the EU must take control of its own destiny by developing strategic independence in key industries. Europe must rebuild its manufacturing base, secure its own energy supply chains and invest heavily in AI and defence technology.

It should also become less dependent on the US and China. The EU must stop relying on American security guarantees and Chinese industrial production. Instead, it should strengthen intra-European trade and defence cooperation. Adopting a more aggressive trade policy, Europe should use tariffs and trade agreements strategically, just as the US and China do, to protect European industries and ensure leverage in global markets.

In addition, I believe that there must be a rethinking of its regulatory framework. Instead of burdening European businesses with excessive bureaucracy, the EU should support innovation and competitiveness in strategic industries.

If the EU fails to make these changes fast, it will lose its economic and political relevance in the coming decades. The future belongs to those who recognise that power and execution, not ideology, will determine economic success in the decades to come.

This moment is as significant as the end of Keynesianism in the 1980s or the collapse of the Soviet Union in the 1990s. The world economy is being fundamentally restructured and the institutions that defined the last few decades – the WTO, global financial markets, multinational corporations – will either adapt or become irrelevant.

For the EU, this is a decisive moment. It must choose between adapting to the new nationalist world order or remaining trapped in a system that no longer exists. For individuals, businesses and policymakers, the key lesson is simple: adapt or be left behind. This is not just a temporary shift but a permanent transformation of how the global economy operates.

The future belongs to those who understand power, leverage and strategy – not just numbers and efficiency. The rules of the game have changed. The question is: Will the EU change fast and determinedly enough with these new rules of the game?

Stefan Gauci Scicluna is a finance and management specialist.