The Trade–Security Loop: How Economic Ties and Defense Alliances Co‐Evolve

Abstract

ABSTRACT The relationship between international trade and security cooperation has re‐emerged as a central concern in global political economy, international relations, and international business scholarship. While research examines the effects of trade on peace and the economic consequences of security alliances, existing work remains theoretically fragmented and largely static, offering limited insight into how trade and security jointly evolve over time. This article develops a co‐evolutionary framework: the Trade–Security Loop, to explain the reciprocal and dynamic interaction between economic interdependence and defense alliances. Integrating insights from economic interdependence theory, institutional and alliance theories, geo‐economics, and international business research, the framework theorizes how trade interdependence shapes security cooperation, how alliances restructure trade patterns, and how these processes generate self‐reinforcing feedback mechanisms. We advance six propositions specifying the conditions under which the trade–security loop produces virtuous cycles of integration or vicious cycles of fragmentation. In particular, we identify strategic sector sensitivity, power asymmetry, and institutional compatibility as critical boundary conditions that moderate the strength and direction of trade–security feedback effects. By reconceptualizing trade and security as mutually endogenous systems, this article refines existing theories of economic interdependence and alliances, and provides a theoretically integrated foundation for understanding alliance‐based trade governance.