Chapter 7: Economic Security: Current Situation, Outlook, and Recommendations
The Trump administration and economic security: shaking up international relations
In a world where foreign policy and national security logic profoundly shapes the global economy, the reconstruction of economic systems based not only on economic rationality but also on safety and resilience has emerged as the top priority in economic security.
Amid these developments, strengthening supply chains remains a key pillar for the US government. Measures aimed at restructuring supply chains through tariff measures, along with Al promotion and technology control strategies outlined in the AI Action Plan, also serve to bolster supply chain resilience and revitalize domestic manufacturing (onshoring). Nonetheless, US economic security policies have become increasingly difficult for outsiders to comprehend due to policies and statements presented by Trump administration officials. In particular, the administration's unilateralist stance and emphasis on bilateral negotiations have raised questions about traditional forms of international cooperation. The US government has shown it is willing to risk friction with key economic security partners by, for instance, imposing strengthened tariff measures even on allies and friendly nations,. Moreover, the US no longer seeks to conceal its intention of turning away from traditional international frameworks. Administration officials have expressed reluctance toward the Wassenaar Arrangement and the EU-US Trade and Technology Council (TTC) established in 2021, launching Pax Silica in December 2025 in a shift toward building plurilateral frameworks that differ from traditional ones1.
From a similar perspective, the Chinese government is intensifying its efforts to enhance its own economic and technological capabilities. A key focus here is reducing China's dependence on other economies while increasing other countries' dependence on the Chinese economy. The aim is to enhance the effectiveness of coercive measures using economic power against other nations while limiting pressure from them. China's strengths in the international supply chain lie in areas such as raw material extraction and refining, and the Chinese government has also begun protecting and weaponizing these sectors. Its successive announcements in 2025 of tighter export controls on rare earths and other critical materials prompted concessions from the US government, among them a temporary suspension of its planned tariff escalation against China. Still, China has not yet achieved full control over whole supply chains in advanced industries, so improving self-sufficiency in these sectors remains a key objective.
The Trump administration's next three years and economic security
Amid ongoing shifts in the international power balance, competition between the US and China over this equilibrium is expected to persist. The realms of security and economics will become increasingly inseparable, and enhancing economic power will remain the cornerstone of economic security for all nations. Cutting-edge fields such as AI, quantum computing, and biotechnology as well as traditional sectors such as steel and shipbuilding will be increasingly valued as technological foundations underpinning economic strength (industrial competitiveness). Economic security measures will likely be pursued as foreign policy and national security considerations increasingly permeate the international economy due to US-China competition and uncertainty grows.
With its attention drawn by the 2026 midterm elections and the 2028 presidential election, the Trump administration has not committed entirely to a hardline stance toward China. The Trump administration views a strong US economy as crucial for Republican electoral victories. Given the deep economic interdependence between the US and China and the practical impossibility of complete decoupling, the administration's apparent concessions on tariff issues and the twists and turns surrounding controls on exports of Al semiconductors to China reflect the US government's hesitation regarding potential economic and technological exchange and cooperation with China.
The Trump administration will remain in office for another three years so the US government's unilateral approach emphasizing bilateral negotiations will also endure, requiring traditional forms of international cooperation to adapt. Nevertheless, the competition between the US and China to determine the international power balance in the field of economic security is bound to continue. Indeed, the US government has not deviated from its policy of hindering the advancement of China's cutting-edge semiconductor manufacturing capabilities. While acknowledging the underlying structural competition in international politics, it is crucial to understand the implications of the specific measures taken by each government and respond to them flexibly.
Recommendations
- To drive economic strength through technological prowess, efforts are needed to channel the fruits of cutting-edge technological development into society-wide technological advancement. Alongside promoting innovation, priority should be placed on nurturing engineering talent to ensure widespread application and dissemination of these achievements across society at large. Such a commitment must extend beyond a few outstanding research institutions and universities to a broad spectrum of educational institutions, including technical colleges and technical high schools.
- As foreign policy and national security logic increasingly shapes the international economic landscape, threats are emerging that transcend mere "weaponization of the economy", e.g., "supply chain poisoning", where backdoors, explosives or other extraneous additions are introduced into products through globally extended supply chains. To counter such threats, it is not enough to eliminate single points of failure (SPOF) in individual supply chains; an economic order must be built based on technology ecosystems and economic infrastructure grounded in principles of safety and reliability. This economic order should aim to establish economies characterized not only by economic rationality and profitability, but also by resilience and robustness. To enable businesses and citizens to conduct economic activities aligned with these principles and norms, governments must establish legal frameworks, take political initiatives, and undertake efforts to gain broad public consensus to ensure that these measures are substantive.
- Flexible reconfiguration of partners and alliances is key to preparing for the uncertainties brought about by fluid international relations. Japan should flexibly promote international cooperation to transform its economic and technological strengths into advantages while limiting its vulnerabilities. For example, Japan should take concrete steps to pursue the early warning mechanism for supply chains agreed upon with the US and the ROK, while creating similar frameworks with partners in the Indo-Pacific region and Europe. Japan should also pursue a number of multi-layered approaches, among them being the creation of mechanisms that allow partners to share scarce materials among themselves when crises arise that cause supply chain disruptions.
(December 12, 2025)
- Pax Silica is a US-led international initiative aimed at building secure, resilient, and innovation-driven supply chains for foundational technologies underpinning the Al era: semiconductors, high-performance computing, silicon, critical minerals, etc. Its founding members include the US, Japan, the ROK, the Netherlands, the United Kingdom, Israel, Australia, Singapore, and the UAE (launched in December 2025).