Trade as geopolitics
Trade flows capture changes in the geopolitical context: global economic fragmentation continues to sharpen, driven by geopolitical rivalry
Economic relations are increasingly contingent on the geopolitical environment. Indeed, changes in patterns of cross-border trade and investment flows are the ‘revealed preference’ of geopolitical alignment, often capturing the impact of geopolitical rivalry more accurately than diplomatic statements.
The post-Cold War regime of relative geopolitical calm supported intense globalisation and a process of deep US/China economic integration through strengthened trade and investment flows. This is now changing, with growing strategic competition between China, the US, and others. Previous notes have discussed the growing evidence of global economic fragmentation driven by geopolitical rivalry.
Globalisation is not ending: trade, capital, knowledge, and people flows, remain robust. But a new model of globalisation is emerging: trade and investment flows are being increasingly shaped by geopolitical alignment. This note considers five notable developments in trade flows to provide a pers…