current
Geopolitical Fragmentation and Distrust
Rising geopolitical tensions, particularly between the US and China, are leading to a more fragmented global economy, with implications for trade, investment, and economic growth.
Timeframe
long-term
Subcategories
Detailed Analysis
The report highlights a growing trend of geopolitical fragmentation, driven by factors such as great power competition, the end of the 'peace dividend', and declining trust in international institutions. This fragmentation is manifesting in increased trade restrictions, harmful government interventions, and a shift towards autarky. The report emphasizes the potential for a 'subsidy war' between major economies, as governments prioritize protecting domestic industries and achieving technological supremacy.
Context Signals
The US Inflation Reduction Act, the EU Green Industrial Plan, and Made in China 2025 are examples of government-led industrial policies.
Full technological decoupling could cost emerging markets up to 12% of their GDP (Goes and Bekkers, 2022).
A truly multipolar world could permanently lower global GDP by 2.3% (Bolhuis et al., 2023).
Edge
Investors should consider the potential for increased volatility and regional disparities in returns due to geopolitical fragmentation.
Companies with diversified supply chains and a focus on resilience may be better positioned to navigate a more fragmented global economy.
The increasing importance of technological supremacy could create new investment opportunities in sectors such as AI, biotechnology, and renewable energy.
