Market liberalism is dead — we need a new NATO for trade

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2 days ago

For eight decades the West, especially European nations, treated markets as neutral arenas governed by rules—not power. That era is over. The global economy is now shaped by rivalry, coercion, and control. Trade is no longer just trade in a rules-based order, it has become part of geopolitical strategy. And this isn't a temporary disruption.
As IMF chief Kristalina Georgieva has warned, the world is fragmenting into competing blocs. The old vision of globalisation has collapsed. What seemed to be a natural setup to many in Europe was, in fact, a historical anomaly: a system built upon an American-led world order power, enforced through institutions like NATO and the Bretton Woods system. That scaffolding is now shaking.
The rules-based global market we took for granted is giving way to a world of weaponised interdependence. To navigate it, the West needs a new kind of alliance: a NATO for trade.
The end of the 80-year economic illusion
After World War II, the US and its allies built an economic system designed to prevent a return to the destabilising chaos of the 1930s. Institutions like the IMF, World Bank, and GATT were established to underpin global capitalism under American leadership. Security was provided by US military power, codified in NATO. Trade flourished. So did Europe, whose post-war recovery and integration were underwritten by American guarantees.
When the Cold War ended, the illusion that global capitalism could operate independently of geopolitics deepened. By the 1990s, many believed the market was self-regulating and inherently peace-promoting.
Today, with the return of great power competition, that illusion has shattered. Economic liberalism no longer aligns with geopolitical reality.
We are entering a war economy mindset—one where national security trumps price efficiency. This shift has been accelerated by two shocks: Russia's invasion of Ukraine and China's economic rise.
For example, Europe's dependence on cheap Russian gas left it exposed when Russia weaponised its flows in 2022. Germany, in particular, had bet on market logic rather than geopolitical risk. A 2021 assessment even declared Nord Stream 2 safe just months prior. The result: an energy crisis and a mad scramble for LNG.
Far away, while the West clung to free-market orthodoxy, China has spent decades building a war-ready economy. Under the 'Made in China 2025' and 'Military-Civil Fusion' initiatives, it identified key sectors and moved to dominate them, including rare earths, batteries, solar and AI. Today, China produces over 75% of lithium-ion batteries and nearly all the world's gallium. It controls the supply chains for the energy transition—and increasingly, the components of military power.
Crucially, China is not afraid to use this market dominance for political ends. In 2010, it cut exports to Japan over a dispute. And its green tech dominance creates dependence in Europe and beyond. Recently, China imposed controls on gallium and germanium, crucial for semiconductor development worldwide.
In response to this shift, U.S. National Security Adviser Jake Sullivan has openly argued for a more strategic form of capitalism, rejecting 'oversimplified' free-market models. Trade is no longer neutral. What matters is not just cost, but control.
80-year illusion over, a new paradigm emerges
In summary, we are entering a new, first truly geopolitical-economic paradigm in eight decades.
The comfortable post-Cold War interlude — when markets seemed paramount and history had supposedly ended — has given way to a more raw and Hobbesian environment.
But unlike the 1930s, the West is not destitute or defenceless; we are wealthy and belatedly awakening to the challenge. We must now leverage our strengths in a clear-eyed way.
The task is to update the institutions and mindsets of the 20th-century liberal order to meet the 21st-century's more fraught reality.
If we succeed, geoeconomics need not lead to catastrophe, but it will require us to subordinate commerce to strategy — intentionally and intelligently — just as our forebears did in the 1940s when they built the system that delivered peace and prosperity for so long.
The EU-US trade agreement highlights this shift
The inequity of the recent EU-US trade deal, which saw the bloc swallow 15% tariffs, is a perfect example of this shift. It also demonstrates that Europe's decades-long dependence on the US has become a strategic vulnerability.
This episode reinforces the need for Europe and others to structurally diversify our trade relationships and value chains in a world of escalating economic coercion. It must drive us to deepen partnerships beyond the transatlantic axis, without relying too heavily on China.
This is not the 1930s. Europe remains a wealthy, democratic, and stable region. But post-war generations have no memory of systemic disruption. We assumed liberalism was permanent. We believed 'it's the economy, stupid.' Now we're learning that strategic power, not market price, determines outcomes.
Defence is another case in point. Until recently, most NATO members underspent on their militaries. By 2021, only six met the 2% GDP target. That changed quickly after 2022. But defence industries were caught flat-footed. A plan to send 1 million shells to Ukraine revealed that the EU's manufacturing capacity fell far short. For decades, Europe optimised for efficiency, not endurance.
The same applies to trade. Germany's model of Wandel durch Handel—change through trade—is being rethought. Berlin is now screening Chinese investments and reducing dependence on authoritarian suppliers. Across Europe, strategic autonomy is the new watchword. But the mindset shift is only beginning.
A NATO for trade: the strategic task ahead
Market liberalism assumed that trade would bring peace. But today, trade is a tool of leverage. The new mantra must be resilience—including building domestic capacity, even if it's more expensive. This is not a temporary adjustment. It is the new normal.
And this new era demands new institutions. Just as NATO was built to defend shared security, the West now needs a strategic alliance to defend shared economic sovereignty—a NATO for trade—including nations like Japan, South Korea and Australia.
Economic security must become a shared goal, not just a national one. The US has already taken steps, with domestic investments in chips and clean tech, and bans on key tech exports to China. Now, the EU is following suit, with the Chips Act and Critical Raw Materials Act. These are necessary but insufficient measures. We must build an economic coalition of the willing, now.
That means shared investments, aligned trade rules, and collective protection of critical supply chains. It means accepting higher costs to safeguard long-term freedom. Cheap goods are not cheap if they make us dependent on hostile powers and geopolitical power games.
The task is not to retreat from global trade, but to rebuild it on strategic terms. The free market cannot defend itself. Like peace, it must be protected through alliances.
Economic liberalism's end, strategy's return
Market liberalism is dead. It died when we stopped believing trade was just about price. It died when supply chains became battlegrounds. And it died when autocracies weaponised interdependence while democracies hesitated.
If we want to preserve prosperity, we must be willing to defend it—not just with tanks, but with treaties, tariffs, and trusted partners.
A NATO for trade is not a metaphor. It is the next necessary institution in a world where commerce is no longer safe from politics. If the West can build it, the collapse of market liberalism need not mean decline; it can be the start of a more resilient and secure economic order.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
This story was originally featured on Fortune.com
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