The Decline of Economic Globalisation
Navigating the new risks and opportunities
The recent announcement of the new tariff regime by the Trump administration in Washington this week is just the latest development in a broader trend that has been shaping the global economy for over a decade. It signals a shift away from the age of abundance—a time when free trade and comparative advantage were the guiding principles of economic thinking. While there is a growing global trend of economic nationalism, for better or worse, it’s evident that the benefits of the global specialisation in the production of goods and services no longer carry the same weight in policy-making as they once did.
Tariffs, which essentially function as an import tax, often lead to higher prices for consumers, potentially driving inflation and reducing demand. However, proponents argue that, when done right, they can also protect domestic industries, encourage buying locally, reshoring, and enhance economic security. In the American case, more Americans will need to buy American-made products. However, it is not yet clear what the ultimate policy objective is in putting up a protectionist wall. Revenue from tariffs can only be raised if American consumers continue to buy imported goods. If there is local demand for more products made in America, that means more jobs in local manufacturing, but less tariff revenue will be collected. So, the Trump administration cannot achieve both. Moreover, retaliatory tariffs by trading partners will mean less demand for American products abroad.
Time will tell what their overall impact will be. No doubt, a key determining factor will be how businesses, consumers, and trading partners respond. While a prolonged trade war could introduce economic uncertainties, its effects should be expected to be uneven, benefiting some industries while posing challenges for others.
A Fragmenting Global Economy
The global economy has been undergoing a seismic shift in recent times, which now seems to be picking up speed. Since the 2008 financial crisis, the once-unstoppable force of economic globalisation—defined by open markets, interconnected supply chains, and U.S.-led multilateralism—has been faltering. In its place, a fragmented landscape of competing regional blocs and spheres of influence is emerging, driven by geopolitical rivalry, nationalist policymaking, and a re-evaluation of globalisation’s costs. While globalisation more broadly continues to persist—cross-border flows of data, culture, and technology continue—the economic pillar of globalisation is eroding because of the change in political and economic ideas of key policymakers, particularly in Washington, D.C. Such a turn of events could have profound implications for international stability.
The United States, the world’s biggest economy and the key architect of the post-Cold War liberal order, now prioritises economic self-reliance with a return to America First-type policies. The turn from liberalism to protectionism is a recurring economic trend in U.S. history. The more recent economic nationalist measures, such as Trump’s significant global tariffs on imported goods, Biden’s subsidies for domestic industries under the Inflation Reduction Act, and ongoing skepticism toward international institutions like the WTO, have incentivised both allies and adversaries to pursue regional alternatives. This marks a departure from past economic liberalisation, it also reflects a broader global trend of states recalibrating their economic strategies in response to shifting geopolitical realities.
An economically strong United States remains a significant asset for the democratic capitalist world, provided it continues to want to lead and protect that world. However, recent developments suggest a shift toward a more hemispheric sphere of influence. The 19th-century concept of American Manifest Destiny—the belief that the U.S. was destined to expand across North America—has resurfaced in President Trump’s rhetoric, particularly during his inauguration speech. In his public statements, he has expressed a desire to extend U.S. influence, proposing ideas such as annexing Greenland and reasserting control over the Panama Canal, among others. While these ideas have not been formalised into policy, and their seriousness remains uncertain, they reflect a broader shift in U.S. strategic thinking. These proposals signal a reimagined approach to how the U.S. engages with the world, especially in its relationships with neighbouring countries and strategic allies.
China, which has become the world’s second-largest economy, is forging its own sphere of influence through the Belt and Road Initiative and its pursuit of dominance in critical technologies. It continues to reinforce its longstanding objective of reunification with Taiwan, an issue that remains a key flashpoint in global geopolitics. Meanwhile, the EU, an economic powerhouse, increasingly champions “strategic autonomy” through trade agreements, regulatory measures, localised defense initiatives, and long-term enlargement plans. Russia, though not an economic leader, leverages its energy politics and military interventions, as seen in Ukraine, to shape regional power dynamics. This underscores how the emerging world order is being shaped not just by economic policy but by a broader fusion of political, military, and technological forces.
Threats and Opportunities
This shift in the global economic environment presents both opportunities and risks for states, businesses, professionals, and investors. As economic globalisation fragments into competing spheres of influence, companies that adapt to reshoring, regional trade blocs, and strategic industries—such as AI, semiconductors, and clean energy—will thrive. Demand for expertise in political risk, supply chain management, and digital globalisation also looks set to grow. However, rising protectionism, trade wars, and geopolitical uncertainty will increase costs, disrupt careers in export-dependent sectors, and heighten market volatility. Workers will have to adapt to increased automation and industrial shifts, while investors face a more complex, multi-currency financial landscape, which will likely mean that smarter diversification and risk management strategies will become paramount. As I have argued before, globalization is not dead; it is just transforming. It will reward those who can navigate both protectionism and ongoing technological interconnectivity.
This restructuring in the international political system is not uniform. Some nations have found opportunity in the new fluidity and have carved out an à la carte approach to foreign policy and trade. Nations in the Global South, such as India and Indonesia, are increasingly hedging between rival blocs, leveraging their non-alignment status to secure investment and support from competing powers. Meanwhile, digital globalisation continues to thrive: Cross-border data flows now dwarf trade in goods, and AI collaboration increasingly transcends many geopolitical divides, as the diverse attendance of political leaders at the recent AI Summit in Paris confirms. Yet these connective threats coexist uneasily with protectionism, suggesting a paradoxical era of what is termed “slowbalisation”—where globalisation stagnates economically but evolves technologically as businesses increasingly undergo digital transformation.
Emerging Power Dynamics
The international order now faces a critical juncture. The old model of unchallenged economic globalisation is giving way to a more fragmented landscape. The key question now is whether states can navigate this shift through pragmatic cooperation or whether deepening divisions will entrench a zero-sum approach—an issue that will shape 21st-century power dynamics. In time, trade data will confirm if the decline in economic globalisation becomes a long-term trend or if what we are witnessing today is a cyclical recalibration by Washington to strengthen economic defences and reduce debt before seeking to re-negociate a new era of free trade and comparative advantage where it will hope to have a stronger hand and lead again.