The Rise of Economic Security

Economics and security are increasingly colliding. During the past five years, countries have collectively announced an average of three thousand economic restrictions per year, a nearly fourfold increase according to Global Trade Alert. This tsunami of state interventions began gaining momentum before the COVID-19 pandemic. It continues as governments grapple with a range of risks, from national security threats to competitiveness challenges, often under the banner of economic security. And it is likely to rise as tariffs, which played a minor role over the last decade, take center stage.

To be sure, the chart above measures only the frequency of interventions and not their magnitude, let alone the costs and benefits for the states pursuing them. Despite this surge in interventions, global trade has continued to grow, albeit more slowly.

What is clear, however, is that policymakers have stretched the banner of economic security to cover essentially any market failure, externality, or other risk that the government feels compelled to address. This includes traditional security risks, such as preventing adversaries from accessing sensitive technologies and increasing the supply of military components from trusted suppliers. But the concept is also being applied more broadly to address other risks that threaten citizens’ livelihoods or economic competitiveness, such as pandemics, climate change, or inadequate domestic manufacturing capacity.  

The quest for economic security helps explain how we arrived at this new normal, including many of the main events and motives that have compelled states to intervene more frequently: 

• The world’s advanced economies began taking aim at China’s unfair practices—and each other. From 2017 to 2019, members of the Group of Seven (G7)—Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States—contributed to nearly half of all economic restrictions, which include tariffs salvos between the United States and those economies during President Donald Trump’s first term, as well as an uptick in subsidies globally.  

• The COVID-19 pandemic motivated a spike in restrictions, especially export restrictions of pharmaceutical products and other essential medical equipment. By revealing supply-chain risks that had accumulated over decades, the crisis pushed policymakers to begin favoring resiliency over efficiency for supply chains viewed as critical. 

• The return of industrial policy has sent subsidies skyrocketing. Since 2020, subsidies have increased more than sixfold, as compared to the previous five years, and make up 58 percent of all interventions globally. Major advanced and emerging economies—including the United States, Brazil, Germany, India, and the United Kingdom—have also ramped up their use of localization policies.  

• Russia’s invasion of Ukraine triggered restrictions on investments and exports. Investment restrictions targeting Russia increased twenty-fold since 2022. Additionally, the United States and its partners began expanding export controls on dual-use technologies, while many emerging economies instituted export restrictions on agricultural products in response to rising food prices.  

• The power of new technologies and the problematic behavior of U.S. adversaries, especially China, have compelled the United States and its allies to expand export and investment controls, while also blocking insecure goods and services from their economies. Since 2014, seven of the top ten products targeted by U.S. export restrictions have been in the information technology sector, including semiconductor devices, integrated circuits, and data-processing machines. 

The spike in state interventions is likely to continue. Far-reaching state ambitions—such as developing strategic industries and shifting supply chains—will take years to achieve, even if interventions are wildly successful. Other objectives, such as controlling advanced technology, have no end in sight and will require additional interventions, both to protect today’s cutting-edge technologies and to prepare for tomorrow’s innovations. 

Tariffs played a relatively minor role through 2024 and are likely to figure more prominently during the next chapter of interventions. President Trump’s tariff threats, if carried through in full or part, raise the likelihood of retaliatory measures from China, the European Union, and others. And while U.S. tariffs from 2014 to 2024 peaked during the first Trump administration, Brazil, India, and other emerging economies have since accelerated their use of tariffs. 

Contributing to the risk of escalation is the lack of guardrails for economic security. Despite some progress among G7 economies, there is no agreed upon definition among them – let alone globally. There are no bounds to distinguish legitimate and illegitimate interventions. One nation’s economic security can easily appear to be another’s threat. The banner of economic security has been hoisted, even as those carrying it are still developing the map and tools to guide them forward.