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Deglobalization
Deglobalization
Deglobalization
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Deglobalization or deglobalisation is the process of diminishing interdependence and integration between certain units around the world, typically nation-states. It is widely used to describe the periods of history when economic trade and investment between countries decline. It stands in contrast to globalization, in which units become increasingly integrated over time, and generally spans the time between periods of globalization. While globalization and deglobalization are antitheses, they are not mirror images.

The term of deglobalization has derived from some of the very profound change in many developed nations, where trade as a proportion of total economic activity until the 1970s was below previous peak levels in the early 1910s. This decline reflects that their economies become less integrated with the rest of the world economies in spite of the deepening scope of economic globalization.[1] At the global level only two longer periods of deglobalization occurred, namely in the 1930s during the Great Depression and 2010s, when following the Great Trade Collapse the period of the World Trade Slowdown[2] set in.

The occurrence of deglobalization has strong proponents who have claimed the death of globalization, but is also contested by the former Director-General of the World Trade Organization Pascal Lamy[3] and leading academics such as Michael Bordo[4] who argue that it is too soon to give a good diagnosis and Mervyn Martin[5] who argues that US and UK policies are rational answers to essential temporary problems of even strong nations.

While as with globalization, deglobalization can refer to economic, trade, social, technological, cultural and political dimensions, much of the work that has been conducted in the study of deglobalization refers to the field of international economics.

Historical development of deglobalization

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The graph shows two periods of deglobalization (1930s and 2010s) and the overall trend since 1880.

Deglobalization is often a response to a financial crisis, a conflict or an economic patriotism. However past evidence shows that globalization and deglobalization often follow regular cycles. There have been two main waves of deglobalization in the trade history:

1914–1945: first wave of deglobalization

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In the late 19th and early 20th centuries, countries were affected by a sharp globalization consequently of the Industrial Revolution, advancements in transportation, and financial integration. However the economic growth and the stability of global trade were damaged by the First World War (1914-1918). After World War I, nations struggled to rebuild their economies and the Great Depression (1929–1939) worsen the global economic recession, leading to high unemployment and political instability.[6] Many countries implemented thereafter protectionist trade policies. Among the policies the Smoot-Hawley Tariff Act (1930) in the US, led to high tariffs on imports, and the Imperial Preference System in the UK, promoted trade within the British Empire. As a result countries began to prioritize their national production and economy instead of international markets, leading to a period of deglobalization.[7] World War II (1939–1945) disintegrated furthermore the global economy as international trade and financial markets became a secondary priority compared to the countries survival.

2008–Present: contemporary wave of deglobalization

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The 2008 financial crisis marked a second wave of deglobalization. In particular, during the crisis global trade and investments slowed down because of the risk faced by banks and enterprises. In addition governments began to prioritize domestic markets and industries instead of international trade while the trust in multilateral institutions, like the IMF and the WTO, fall due to financial instability.[8]

During the 2010s, multiple events affected the global trade, causing a deglobalization process. The main events include:

  • Brexit (2016): The United Kingdom voted to leave the European Union, signalling a rejection of economic integration.[9]
  • U.S.-China Trade War (2018–2020): The U.S. imposed tariffs on Chinese goods, leading to resentful measures and increasing trade restrictions.[9]
  • The COVID-19 pandemic (2020–2022) further accelerated deglobalization by exposing vulnerabilities in global supply chains.[10]

The two major phases of deglobalization are not identical twins. The two phases of deglobalization were equally triggered by a demand shock during a financial crisis. Both in the 1930s and in the 2000s the composition of trade was a second key determinant: manufacturing trade bore the brunt of the contraction. One important finding is that country experiences both during the Great Depression and Great Recession are very heterogeneous so that one-size-fits-all policies to counter negative impacts of deglobalization are inappropriate.[11] In the 1930s, democracies supported free trade, and deglobalization was driven by autocratic decisions to strengthen self-sufficiency. In the 2010s, political institutions are just as significant, but now democratic decisions such as the election of President Trump with an America First agenda[12] and Brexit drive the deglobalization process worldwide. Indeed, while the industrialised countries in the 2010s avoided the pitfalls of protectionism and deflation, they have experienced different political dynamics.

COVID-19 and deglobalization

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In early 2020, COVID-19 caused unprecedented challenges to the global trade, leading to a decline of international flows of goods and services and supply chains. Simultaneously countries began to reevaluate their dependence on foreign trade and promoting their own economies, accelerating the trend of deglobalization of global trade.[13]

Causes of deglobalization during COVID-19

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  • The disruption of global supply chains

COVID-19 differed from other epidemics as it originated in a specific location and could spread widely, seriously affecting the world economy and international trade. As many countries have strong trade links with China, both for raw materials and manufactured goods, it generated a paralysis of the supply chain. The disruption of supply chains on a global scale led to a restructuring of trade networks. In particular China expanded its production, diversified its supply sources, and prioritized domestic consumption. Meanwhile, the United States strengthened its own industries, decreased reliance on Chinese imports, and reevaluated its trade policies and agreements. Overall, nations are shifted their focus toward local production to overcome the economic difficulties caused by the pandemic.[13] However these measurements damaged the global trade and especially the economy of key manufacturing countries. Among the countries that were affected the most in their production, China and Vietnam were impacted first, but falls in production were less severe compared to countries such as Bangladesh, Mexico and Turkey. While in Vietnam the largest drop in production was of 18.3%, in Bangladesh it was of 77.6%, in Mexico it was of 75.8% and of 59% in Turkey.[14]

During the global public health crisis governments started to resort to trade protection policies, such as increasing tariffs, to protect their industries and job markets. Countries began to protect their own economies and regulate the competition between domestic industries and foreign enterprises. As a result countries have become less dependent on each other.[15] The US and China, for example, heightened tariffs on each other and tightened trade regulations, leading to a de-globalization trend in global trade.[13] Protectionism can in the short term protect national industries and respond to economic crises. However, over time, it damages the overall well-being and economic efficiency, especially for businesses.

  • Industrial advancing

The instability of the global economy caused by the pandemic led to the reorganization of global trade chains so countries could rely more on their internal supply chains. To guarantee a competitive advantage countries began to invest in new technologies and on the efficiency of their national industries. During the COVID-19 pandemic, China’s manufacturing industry experienced significant growth, particularly in medical devices and life sciences. Meanwhile, the United States tightened foreign restrictions in industries to enhance its competitiveness. These measures increased national self-sufficiency as well as restrictions in science and technology between countries that compromised scientific progress and human development.[13]

Measures of deglobalization

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Economic deglobalization can be measured utilising various indicators.These centre around the four main economic flows:[16]

Flows of goods and services

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Analysing the flow of goods and services across countries is one of the most direct ways to measure deglobalization. Economists commonly measure this comparing exports and imports to the national income (GDP) or per capita basis. This ratio reflects how much a country depends on global trade. A significant decline in trade volumes or a decreasing ratio of exports and imports  can indicate a shift toward deglobalization, as countries reduce their reliance on international markets [17]

Labor and migration flows

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The movement of people, including both immigration and emigration, is another key indicator. Net migration rates and inward or outward migration flows effects the global labour markets. Increase restrictions or changes in immigration policy can reduce the rate of migration, leading to a sign of deglobalization. A reduction in cross-border migration may signal a retreat from the global economy.[18]

Foreign direct investments

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Foreign direct investment (FDI) is an important metric to analyse global capital movement. A reduction in inward or outward investment compared to the national income translates in a decrease of global economic integration. When countries set restrictions on foreign investments they move toward a period of deglobalization, as they shift toward isolationist economic policies.[19]

Technology Flow

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Technology is considered one of the four main flows that define globalization, however it is difficult to measure deglobalization through the lack of technological flows.Technology often spreads across borders, especially through multinational corporations or digital platforms. While technology flows are connected to globalization, measuring their deglobalization is difficult. Nevertheless, trends such as protectionist tech policies and the rapid expansion of the digital economy suggest a complex setting where technological sovereignty and global integration are both present.[20]

In addition to the main economic flows, other indicators can measure the growth of deglobalization. These include:

The imposition of tariffs is one of the most direct ways to control deglobalization. In fact when countries increase tariffs on imports, it raises the cost of imported goods and reduces international trade. The rise in trade barriers is often a sign of protectionist policies that are typical in periods of deglobalization.[21]

  • Border restrictions on labour Policies restricting migration contribute to deglobalization. This is often due to economic insecurity, job competition, or political pressures. When countries reinforce border controls and labour laws the human mobility is reduced and thereafter the economy moves towards deglobalization.[22]
  • Capital controls

The imposition of capital controls, as well as limiting foreign direct investments (FDI) or outward direct investment, is consider a signal of deglobalization. Financial crises is often the main reason of capital controls as countries try to stabilize their economy by limiting the influence of foreign countries on it.[23]

Risks of deglobalization

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Deglobalization has multifaceted risks, regarding both supply chains but also global development and safety between countries. Addressing these challenges requires coordinated global efforts to maintain economic integration and cooperation. Among the risks of deglobalization the most relevant concern:

Economic growth

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The decrease of international trade can have a negative effect on a country's long-term economic growth. This reduction in trade can particularly impact small, open economies that rely on international trade for their profits. In particular the European Central Bank states that reshoring, or rather relocating production back to a company's original country, can reduce international trade and cross-border investment, restricting the exchange of productivity gains between countries.[24]

Supply chain disruptions

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Deglobalization can lead to increased production costs and supply chain inefficiencies. RBC Wealth Management highlights that persistent protectionism, such as trade barriers and tariffs, can cause higher outcomes for companies, greater disruptions in supply chains and difficulties in obtaining certain goods.[25] Similarly, Geopolitical Futures states that limiting access to international labour markets can increase production costs, resulting in goods with higher prices and reduced availability of certain products or services.[26]

Innovation and technological advancement

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Innovation and technology can be effected by the restriction of global trade as well, leading to a slow economic growth. Open markets facilitate collaboration, investment in research and development, and the rapid spread of new technologies across borders. When countries enter a period of deglobalization, they risk isolating their innovation, making it harder to contribute to global developments in fields like artificial intelligence.[27]

Geopolitical tensions

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Reduced international cooperation can increase tensions between countries and thereafter risks of conflicts. As trade interdependence decreases, the likelihood of a country experiencing at least one war by 2035 increases, going from 0.6% in a globalized context to 3.7% in a deglobalized world.[28] However, while considering global threats such as pandemics, Chatham House observes that they cannot be contained by borders, and different responses form countries can make the effects worse.[29] Additionally, the World Trade Organization analyse how increased protectionism and trade tensions between major economies like the US and China, is a threat to the global financial stability and its economic growth.[30]

International political economy of deglobalization

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Deglobalization has also been used as a political agenda item or a term in framing the debate on a new World economic order, for example by Walden Bello in his 2005 book Deglobalization.[31] One of the prominent examples of deglobalization movement could be found in the United States of America, where the Bush and Obama administration instituted Buy American Act clause as party of massive stimulus package, which was designed to favor American-made goods over traded goods. Likewise, the EU has imposed new subsidies to protect their agricultural sectors for their own protection. These movements of deglobalization can be seen as the example of how developed nations react to the 2008 financial crisis through deglobalization movements.[32] Recently a change in the pattern of anti-globalism has been observed: anti-globalism now has a strong foothold in the Global North and among right-wing (conservative) politicians,[33] with much different attitudes in the Global South, particular among the BRICS countries.

See also

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References

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Revisions and contributorsEdit on WikipediaRead on Wikipedia

Deglobalization

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Deglobalization refers to the slowdown in the growth of international economic integration that followed the peak of globalization around 2008, characterized by decelerating expansions in trade, capital flows, and migration relative to global GDP. This trend manifests in stagnating or modestly declining metrics of cross-border activity, such as trade intensity, alongside shifts toward regional supply chains and selective decoupling between rival powers. The primary drivers include geopolitical tensions, notably U.S.-China trade frictions and the Russia-Ukraine conflict, which have prompted policies like tariffs, export controls, and friend-shoring to prioritize security and resilience over efficiency. disruptions from the further accelerated reshoring and diversification, reducing reliance on distant suppliers, while earlier events like the eroded faith in hyper-globalized systems. Empirical evidence shows U.S. imports from China dropping to 9% of total in early 2025 from 22% in 2017, with trade rerouted to allies like and nations, though aggregate global trade volumes grew 3% in the first half of 2025. Debates persist on the extent of deglobalization, with some data indicating record-high global connectedness at 25.1% in 2024 and forecasts of continued growth albeit at subdued rates of 1.6-3.2% annually through 2026, suggesting reconfiguration rather than outright . Proponents highlight benefits in mitigating vulnerabilities, yet critics warn of potential drags on and from fragmented markets, as seen in rising average trade distances and intra-regional trade shares dipping to 50.7%. Overall, deglobalization underscores a pivot toward and alliances, reshaping the geometry of global commerce amid persistent interdependence.

Definition and Concepts

Core Definition and Characteristics

![World economy openness index, 1880-2020][float-right] Deglobalization refers to the observed deceleration and partial reversal of economic interdependence among nations, characterized by slower expansion of international trade, capital flows, and labor mobility relative to global GDP growth. This process contrasts with the rapid globalization of the late 20th and early 21st centuries, where cross-border integration peaked around 2008 before plateauing. Empirical indicators include the stagnation of the global trade-to-GDP ratio, which rose from about 25% in 1970 to over 60% by 2008 but has since hovered around 50-60% amid subdued growth rates. Key characteristics encompass policy-driven , such as tariffs and subsidies promoting domestic production, alongside market responses like reconfiguration for resilience. For instance, U.S. tariffs on Chinese imports, imposed starting in 2018, reduced volumes by an estimated 10-20% in affected sectors by 2020. Deglobalization also features "friend-shoring," where firms relocate production to geopolitically aligned countries, and a shift toward regional blocs, evidenced by rising intra-regional trade shares in and post-2010. These trends reflect heightened emphasis on and vulnerability mitigation, rather than outright isolation, with global value chains contracting in scale but not collapsing. Unlike historical deglobalization episodes, such as the interwar period's sharp trade collapse, contemporary patterns show no broad reversal of integration levels, with (FDI) flows stabilizing at 1-2% of GDP globally since 2015, down from pre-2008 peaks but above 1990s averages. Sectoral variations are prominent: and pharmaceuticals exhibit decoupling due to security concerns, while commodities maintain robust . This nuanced retreat prioritizes over efficiency gains, potentially raising costs but enhancing stability, as seen in Europe's push for following Russia's 2022 invasion of .

Distinction from Globalization, Slowbalization, and Regionalization

Deglobalization differs fundamentally from globalization, which historically encompassed the expansion of international trade, capital mobility, migration, and supply chain integration from the post-World War II era through the early 2000s, peaking around 2008 with global trade-to-GDP ratios reaching approximately 61%. In contrast, deglobalization involves deliberate efforts to reverse these trends through protectionist policies, reshoring of production, and reduced reliance on distant suppliers, often motivated by national security concerns and geopolitical rivalries, such as the U.S.-China trade tensions escalating from 2018 onward. This reversal is not merely a cyclical dip but a structural shift toward self-sufficiency, evidenced by policies like the U.S. CHIPS Act of 2022, which allocated $52 billion to domestic semiconductor manufacturing to counter foreign dependencies. Slowbalization, a term coined to describe the post-2008 deceleration in indicators, captures a moderation rather than an outright contraction, with global trade growth lagging GDP expansion and global value chains shrinking modestly from their hyperglobalized peak. Empirical data indicate that while cross-border trade and investment flows slowed—trade in goods as a share of global GDP stabilizing around 50-55% since 2010—there has been no precipitous decline akin to the interwar period's 20-30% drop in openness metrics, suggesting slowbalization reflects maturation and saturation of prior integration rather than active dismantling. , however, implies more aggressive fragmentation, as seen in selective decoupling in strategic sectors like and rare earths, where U.S. restrictions on exports to reduced interdependence by an estimated 10-15% in affected categories between 2018 and 2023, exceeding the broader slowbalization trend. Regionalization, meanwhile, entails a reconfiguration of economic networks toward intra-regional blocs—such as via USMCA or through RCEP—prioritizing geographic proximity over global sprawl, which has been underway since the and intensified post-COVID with intra-regional trade shares rising by 5-10% in key areas. Unlike deglobalization's emphasis on national insulation, regionalization sustains at a sub-global scale, potentially buffering against full retreat; for instance, Europe's regional supply chain adjustments post-2022 Ukraine crisis focused on intra-EU energy ties rather than complete . This distinction highlights deglobalization's zero-sum orientation toward , whereas regionalization often builds on globalization's infrastructure, with global trade volumes still growing in absolute terms (e.g., $28.5 trillion in 2022) despite relative slowdowns.

Historical Context

First Wave: 1914–1945 (World Wars and Interwar Period)

The outbreak of World War I in 1914 marked the onset of deglobalization by severing established networks of trade, migration, and finance through widespread naval blockades, the sinking of over 5,000 Allied merchant ships by German U-boats, and the mobilization of economies for total war, which prioritized domestic production over international exchange. Global trade volumes stagnated or declined as export-oriented industries shifted to wartime needs, with the share of world trade in GDP falling from 22% in 1913 to 15% by 1929, reflecting persistent disruptions even after the armistice. Capital flows reversed as belligerents liquidated foreign assets to finance the conflict, while migration halted abruptly; pre-war annual transatlantic flows exceeding 1 million people dropped to near zero due to travel restrictions and policy shifts toward controlled borders that ended the era of unrestricted mass movement. In the interwar years, economic fragility from war debts, reparations under the 1919 , and the 1929 Wall Street Crash fueled , as nations sought to shield domestic markets amid and . The U.S. Smoot-Hawley Tariff Act, enacted on June 17, 1930, raised average ad valorem duties on dutiable imports from 40% to nearly 60%, increasing the relative price of imports by 5-6% and prompting retaliatory measures from , , and others that fragmented global markets. World trade contracted sharply, with volumes plummeting approximately 66% between 1929 and 1933, as bilateral clearing agreements and quotas supplanted multilateral exchange, reducing overall openness to 9% of GDP by 1938. Totalitarian regimes accelerated autarkic policies to insulate economies from foreign dependence, driven by ideological commitments to national self-sufficiency and preparation for expansionist wars. Nazi Germany's Four-Year Plan, launched in 1936 under , emphasized synthetic fuels, rubber, and metals to achieve Lebensraum-independent production, substituting imports with domestic controls and barter trade that bypassed global markets. Imperial Japan, facing resource scarcity after withdrawing from the gold standard in 1931, pursued autarky through military conquests, including the 1931 invasion of to secure coal, iron, and soybeans, while erecting tariffs and fostering the yen bloc to minimize reliance on Western trade. These efforts, combined with imperial preference systems like Britain's Ottawa Agreements of 1932, entrenched regional blocs over universal integration. World War II from 1939 to 1945 intensified deglobalization via comprehensive wartime economies, rationing, and Allied blockades that mirrored WWI disruptions on a larger scale, with global merchant tonnage reduced by over 30% through and aerial bombing. Post-1938, trade openness metrics hit historic lows as conquests and occupations prioritized resource extraction for the , while neutral nations like the U.S. initially insulated via the 1934 Reciprocal Trade Agreements Act before full mobilization. By 1945, the cumulative effect had dismantled the pre-1914 liberal order, setting the stage for postwar reconstruction under altered geopolitical realities.

Post-2008 Resurgence: Financial Crisis to Mid-2010s

The 2008 global financial crisis triggered a sharp contraction in international trade, with world trade volumes declining by approximately 15% from the first quarter of 2008 to the first quarter of 2009, exceeding the 12% drop in global GDP during the same period. This "Great Trade Collapse" was driven primarily by an inventory adjustment and synchronized demand shocks across major economies, rather than a sudden surge in protectionist barriers. Despite initial fears of a return to 1930s-style protectionism, empirical evidence indicates that overt trade restrictions remained limited, with import protection rising by only 1-2% of non-oil imports by the recession's end. Post-crisis recovery saw rebound in , but growth subsequently decelerated markedly, averaging 5.6% annually from to compared to 7.3% from to 2007. This slowdown in relative to GDP growth—termed "slowbalization"—reflected structural factors including weaker trade elasticities and a halt in post-World War II liberalization momentum, alongside cyclical weaknesses from subdued global demand. World Bank analysis confirms a post-2009 stagnation in metrics, with flows growing more slowly than pre-crisis trends, though not reversing entirely. Policy responses contributed to early signs of deglobalization resurgence, including increased use of non-tariff measures such as subsidies and sector-specific supports, which proliferated as governments prioritized domestic recovery. For instance, nations implemented over 1,000 restrictive measures between 2008 and 2015, often "murky" in nature like local content requirements, eroding the gains from prior trade openness. These shifts were amplified by fiscal stimuli favoring national industries, such as the U.S. American Recovery and Reinvestment Act's "Buy American" provisions, signaling a causal pivot toward amid financial instability. By the mid-2010s, public and policy sentiment began tilting against unfettered , setting the stage for further fragmentation, though outright deglobalization remained debated rather than dominant.

Acceleration from 2018 Onward: Trade Wars and Policy Shifts

The escalation of protectionist policies from 2018 marked a pivotal acceleration in deglobalization trends, primarily through the U.S.-China trade war and accompanying national policy pivots toward economic nationalism. In March 2018, the United States imposed 25% tariffs on steel and 10% on aluminum imports from most countries, including allies, under Section 232 of the Trade Expansion Act of 1962, justified on national security grounds despite limited evidence of immediate threats from allied suppliers. This was rapidly followed by Section 301 tariffs targeting China, starting with $34 billion in goods at 25% duties on July 6, 2018, expanding to $200 billion in September 2018 at 10% (later raised to 25%), and ultimately covering about $360 billion in Chinese imports by 2019. China retaliated symmetrically, imposing tariffs on $110 billion of U.S. exports by mid-2019, including agricultural products like soybeans, which reduced bilateral trade flows by an estimated 15-20% in affected sectors. By September 2018, the average U.S. tariff rate on Chinese goods had surged from a pre-2018 level of 3.1% to 12%, with tariffs affecting nearly half of U.S. imports from China. These measures disrupted global value chains, contributing to a measurable slowdown in merchandise trade growth; global trade volumes stagnated or declined in real terms from to , with the U.S.-China deficit narrowing temporarily but at the cost of higher domestic prices and reduced efficiency. The January 2020 Phase One agreement paused further escalation, committing to purchase $200 billion in additional U.S. goods over two years (a target largely unmet due to subsequent events), but left most tariffs intact, entrenching barriers covering $450 billion in annual trade flows. Policy continuity under the Biden administration reinforced this shift: by 2021-2023, over 90% of Trump-era tariffs on were retained, supplemented by October 2022 export controls restricting U.S. advanced semiconductors and equipment to Chinese firms, aimed at curbing amid concerns. U.S. tariffs on Chinese imports averaged more than 18 times pre- levels by 2023, fostering incentives for diversification away from toward "friend-shoring" partners like and . Parallel domestic policies amplified deglobalizing pressures by subsidizing reshoring and reducing reliance on foreign production. The , signed August 9, 2022, allocated $52.7 billion in grants and tax credits to bolster U.S. fabrication, explicitly prioritizing domestic over global sourcing to mitigate vulnerabilities exposed by trade frictions and prior crises. The of 2022 further embedded via $369 billion in clean energy incentives tied to North American content requirements, effectively discriminating against imports from non-U.S.-MCA partners like . Globally, these U.S. actions spurred emulation: the introduced the Carbon Border Adjustment Mechanism in 2023 (provisionally effective from 2026), imposing tariffs on carbon-intensive imports, while countries like raised average applied tariffs from 13% in 2018 to over 17% by 2022. Such shifts correlated with a post-2018 rise in global trade-restrictive measures, from 1,000 annually pre-2017 to over 2,500 by 2019 per WTO monitoring, signaling broader policy convergence toward barriers over liberalization.

Primary Drivers

Geopolitical Tensions and National Security Priorities

Geopolitical tensions, particularly between major powers, have prompted governments to elevate national security concerns above the efficiencies of global integration, fostering policies that restrict cross-border flows in strategic sectors. The U.S.- rivalry, intensified since 2018, exemplifies this shift, with the U.S. imposing tariffs on over $360 billion of Chinese imports by 2019 under Section 301 of the Trade Act, citing unfair trade practices and theft as threats to economic and military security. These measures evolved into broader export controls on advanced technologies, such as the October 2022 restrictions on semiconductor manufacturing equipment to , aimed at preventing military advancements by limiting access to U.S.-origin tools critical for AI and supercomputing. By December 2024, the U.S. Department of Commerce further tightened rules on advanced semiconductors, prohibiting their production for military applications in through enhanced licensing requirements on foreign direct product rules. In response to perceived vulnerabilities, the U.S. enacted the CHIPS and Science Act in August 2022, allocating $52.7 billion—including $39 billion in incentives for domestic manufacturing—to reshore semiconductor production and reduce reliance on Taiwan and China, which control over 90% of advanced chip fabrication as of 2023. This legislation reflects a strategic pivot toward "friend-shoring," prioritizing alliances like the U.S.-Japan-Netherlands coordination on export controls, which by 2023 expanded multilateral restrictions on chip tools to curb China's technological ascent. Such actions have fragmented global supply chains, with U.S. firms diversifying away from China; for instance, foreign direct investment into China declined by 8% in 2023 amid heightened scrutiny. The 2022 Russian invasion of Ukraine similarly accelerated deglobalization through Western sanctions, which froze $300 billion in Russian central bank assets and banned most energy imports, severing pre-war trade ties that accounted for 40% of EU gas supplies from Russia. By mid-2025, over 16,500 sanctions targeted Russian entities, reducing bilateral trade with the EU by 60% from 2021 levels and prompting energy diversification efforts like the U.S. LNG exports to Europe surging 140% in 2022. These measures, while aimed at isolating Russia economically, have spurred resource nationalism, with countries like India and China increasing purchases of discounted Russian oil—China's imports from Russia hit record highs of $240 billion in 2023—effectively rerouting flows but diminishing overall global interdependence. Broader tensions, including disputes and instability, have reinforced this trend, with governments invoking to justify subsidies and barriers in critical minerals and defense technologies. For example, the EU's 2023 seeks to onshore battery supply chains, reducing dependence on for 98% of rare earth processing, amid fears of supply disruptions from geopolitical coercion. These priorities have measurably slowed technology diffusion, as evidenced by a 20% drop in U.S. exports to from 2018 to 2023, prioritizing security over open markets despite short-term economic costs.

Supply Chain Vulnerabilities Exposed by Crises (e.g., )

The , which originated in , , in late 2019 and led to global lockdowns starting in January 2020, acutely exposed the risks of over-reliance on elongated, just-in-time global s concentrated in geographically distant and politically sensitive regions. Factory shutdowns in , accounting for a significant portion of production, halted material flows and triggered cascading shortages across industries, with empirical analyses showing monthly disruptions elevating U.S. producer prices by up to 1-2% in affected sectors during 2020-2021. Small and medium-sized enterprises (SMEs) were disproportionately impacted, with approximately two-thirds reporting significant operational disruptions compared to 40% of larger firms, due to limited diversification and inventory buffers. Key vulnerabilities manifested in critical sectors such as medical supplies and semiconductors. Early 2020 export restrictions from , the dominant producer of (PPE), exacerbated global shortages, compelling countries like the U.S. to confront dependencies where over 80% of certain pharmaceuticals and active ingredients were imported, amplifying crises amid domestic production shortfalls. The shortage, intensified by pandemic-induced demand surges for electronics and factory closures in Asia, persisted from 2020 to 2023, idling automotive assembly lines worldwide—e.g., major manufacturers like and Ford curtailed output by millions of vehicles in 2021—and contributing to logistics bottlenecks that delayed deliveries by weeks to months. These events underscored causal fragilities: single-point failures in upstream suppliers propagated downstream, with staff shortages and transportation halts compounding effects, as seen in port congestions at and Long Beach handling over 40% of U.S. imports. In response, the disruptions catalyzed a reevaluation of globalization's efficiency trade-offs, accelerating deglobalization trends through enhanced emphasis on . Post-2020, firms and governments pursued reshoring and nearshoring, evidenced by a sharp uptick in the reshoring index—reversing prior patterns—and policy interventions like the U.S. of 2022, which allocated $52 billion to domestic semiconductor production to mitigate future risks. Empirical studies indicate that while full deglobalization remains limited, diversified and localized networks improved trade resilience during subsequent shocks, with companies restructuring to balance efficiency against vulnerability, as logistics and supplier concentration emerged as primary failure modes. This shift reflects a causal recognition that hyper-globalized chains, optimized for cost, amplify systemic risks under exogenous shocks, prompting measurable reductions in decisions for complex .

Economic Policies: Tariffs, Subsidies, and Reshoring Incentives

In response to supply chain disruptions and geopolitical risks, governments have implemented tariffs to raise the cost of imports, thereby encouraging domestic production over reliance on foreign . The , under the Trump administration, imposed tariffs averaging 19% on approximately $350 billion of Chinese goods between 2018 and 2019, targeting sectors like (25% tariff) and aluminum (10% tariff) to protect domestic industries and reduce trade deficits. These measures contributed to a decline in China's share of U.S. imports from 21% in 2017 to about 16% by 2022, prompting some firms to shift production away from , though they also increased U.S. consumer prices and reduced aggregate real income by an estimated $1.4 billion per month due to higher input costs passed to importers and buyers. The Biden administration retained most of these tariffs and expanded them in 2024 to include 100% duties on Chinese electric vehicles and 50% on semiconductors, aiming to counter subsidized foreign competition and bolster . Similarly, the approved provisional tariffs up to 45% on Chinese electric vehicles in October 2024 to address state subsidies distorting market competition. Subsidies have emerged as a complementary tool to offset the higher costs of domestic relative to low-wage offshore alternatives. The U.S. of 2022 allocated $52.7 billion in grants, loans, and tax credits for fabrication, research, and workforce development, explicitly prohibiting recipients from expanding advanced in to prioritize U.S.-based production. By 2024, this had spurred over $450 billion in private investments and announcements of new facilities by companies like and in states such as and . The of 2022 provided approximately $369 billion in tax incentives for clean energy , including production tax credits for U.S.-made solar panels, batteries, and components, designed to reduce dependence on Chinese imports that dominate global supply chains. These subsidies have driven a surge in domestic factory announcements, with clean energy investments exceeding $110 billion by mid-2023, though critics note potential market distortions from favoring specific technologies and industries. Reshoring incentives, often structured as tax breaks, grants, and regulatory relief, directly target firms relocating operations to home countries. In the U.S., the CHIPS Act and Inflation Reduction Act include investment tax credits covering up to 25% of qualified facility costs, alongside state-level packages like Ohio's $2 billion in incentives for Intel's semiconductor plants. The Reshoring Initiative reported over 1 million jobs announced from reshoring and foreign direct investment since 2010, with government incentives cited as the top factor in 2022 decisions, accelerating post-2020 due to pandemic vulnerabilities. Internationally, India's Production-Linked Incentive (PLI) schemes, launched in 2020 with over $26 billion across 14 sectors, offer cashback on incremental sales to attract electronics and pharmaceutical manufacturing, yielding $20.3 billion in approved investments by July 2025 and creating over 1.2 million jobs by September 2025. Such policies reflect a causal shift from cost-driven offshoring to security-focused localization, evidenced by reduced U.S. imports from China in targeted sectors, though empirical studies indicate mixed outcomes with higher short-term costs offset by long-term resilience gains in critical supply chains.

Resource Nationalism and Energy Independence Efforts

Resource nationalism refers to policies where governments, particularly in resource-endowed nations, increase state control over natural resources through measures such as export bans, higher royalties, nationalizations, or localization requirements to prioritize domestic benefits and reduce foreign influence. This trend has accelerated amid deglobalization, as countries seek to mitigate vulnerabilities exposed by geopolitical disruptions and fragilities, exemplified by the 2022 . In the energy sector, such efforts manifest as pushes for self-sufficiency in fossil fuels, renewables, and critical minerals essential for batteries and clean technologies, often involving subsidies, tariffs, or strategic stockpiling to insulate economies from import dependencies. Post-2022, Europe's initiative exemplifies energy independence drives, aiming to end reliance on Russian fossil fuels by 2027 through diversified LNG imports—primarily from the , which supplied over 50% of Europe's LNG in 2023—accelerated renewables deployment targeting 45% renewable electricity by 2030, and energy efficiency measures that reduced gas demand by 18% in 2023 compared to 2021 peaks. The , leveraging its shale boom to become a net energy exporter since 2019, has reinforced this via the 2022 , which allocates $369 billion in tax credits for domestic clean energy production, including solar, wind, and electric vehicles, to onshore supply chains and counter Chinese dominance in processing 80-90% of global rare earths and lithium. In critical minerals, has intensified, with banning raw exports since 2020 to foster domestic , capturing 40% of global supply and boosting local processing capacity to 2.5 million tons annually by 2023. , controlling 60% of processing and 85% of battery production as of 2023, imposed export restrictions on and in 2023-2024 to secure national priorities amid global demand surges for energy transition materials. Latin America's "" (, , ) has seen nationalize projects in 2023, mandating state-majority ownership, while raised royalties to 40% in 2023 for and to fund domestic goals. These actions fragment global value chains, raising costs— prices spiked 400% in 2022 due to such restrictions—but enhance by localizing value addition and reducing exposure to volatile international markets. Africa's resource nationalism surge, including Zambia's 2023 mining tax hikes and Namibia's push for 55% state equity in projects, aligns with deglobalization by prioritizing local beneficiation over foreign extraction, amid competition from and the West for and vital to EV batteries. Similarly, India's 2023 critical minerals mission targets in 30 key materials by 2030 through auctions and domestic exploration, spurred by 95% import dependence on batteries. While these policies bolster resilience—evidenced by Europe's gas import diversification reducing Russian share from 40% in 2021 to under 10% by —they risk investment deterrence and higher global prices, as seen in nickel's 250% surge post-Indonesian bans.

Measurement and Empirical Indicators

Declines in Trade Volumes and Flows

Global trade openness, conventionally measured as the ratio of merchandise and services volumes to world GDP, reached a peak of approximately 61% in before entering a period of stagnation and modest decline. This shift marked the end of the era, where growth consistently outpaced GDP expansion at an elasticity exceeding 2:1 from the to mid-2000s; post-financial crisis, the elasticity converged toward 1:1, indicating reduced intensity relative to economic output. World merchandise volume contracted by 1.2% in 2023, the first annual decline since 2020, amid geopolitical disruptions and policy-induced barriers, before a projected rebound of 2.6% in 2024—rates below historical norms. Bilateral trade flows, particularly between major economies, provide stark evidence of fragmentation. U.S. imports from , which peaked at $538 billion in 2017, fell to $427 billion by 2023, a decline of over 20%, attributable in large part to escalating tariffs averaging 19.3% on Chinese goods by covering two-thirds of U.S. imports from . While some occurred to third countries like and , direct U.S.-China trade volumes have not recovered to pre-tariff levels, reflecting persistent policy resistance to reliance on adversarial suppliers. Similarly, participation has plateaued, with trade growth lagging final goods since 2011, signaling shorter supply chains and reduced cross-border flows of production inputs. These trends align with broader deglobalization indicators, including a slowdown in trade as a share of GDP to 58.5% in 2023 from 62.8% in , influenced by trade volatility and sanctions-related rerouting. Empirical analyses confirm that while absolute trade volumes continue to expand in nominal terms, the relative contribution to global has diminished, driven by measures and supply chain rather than cyclical factors alone. This decoupling is most pronounced in strategic sectors like semiconductors and rare earths, where export controls have curtailed flows independent of tariffs.

Shifts in Foreign Direct Investment and Capital Mobility

Global (FDI) flows have exhibited a marked slowdown since the late , reflecting diminished cross-border capital mobility amid heightened geopolitical risks and policy barriers. According to the Conference on Trade and Development (UNCTAD), global FDI inflows declined by 2% to $1.3 in 2023, driven by an economic slowdown, trade tensions, and geopolitical fragmentation, with the drop exceeding 10% when excluding flows through European conduit economies. This followed a 12% decline to approximately $1.3 in 2022, marking a reversal from pre-pandemic peaks and indicating stalled recovery in productive . Flows further fell 11% to $1.5 in 2024, the second consecutive annual decline, with developed economies experiencing a 22% drop due to high borrowing costs and volatility. Shifts in FDI patterns underscore deglobalization, with increased regional concentration and reconfiguration of supply chains reducing long-distance investments. announcements rose modestly in developing regions like and between 2018 and 2023, often tied to commodities, renewables, and nearshoring, while stagnated amid financing constraints. Capital flows have grown more concentrated since 2012, as measured by the Herfindahl-Hirschman Index, coinciding with escalating geopolitical tensions; for instance, China's FDI stock shifted toward Asia from 2018 to 2022, exemplifying over global dispersion. , reshoring initiatives outpaced inbound FDI by the widest margin recorded since 2010 in 2024, fueled by incentives for domestic relocation and derisking from adversarial dependencies. Concurrently, repatriation and divestments have surged globally, with higher financing costs contributing to a 47% drop in India's FDI inflows in 2023. Policy-induced restrictions have further curtailed FDI mobility, with global statutory barriers edging upward for the first time since 2018, primarily through expanded screening mechanisms. Over 40 countries, including the and members, intensified FDI reviews post-2018, targeting national security in sectors like technology and , leading to blocked or conditioned deals that fragment cross-border flows. Geopolitical dealignment correlates with reduced both FDI and portfolio investments, as firms prioritize ideological alignment and proximity, evidenced by derisking trends and nearshoring in multinational capital expenditures. Gross capital inflows globally declined from 5.8% of GDP in 2017–2019 to 4.4% in 2022–2023, or $4.5 trillion to $4.2 trillion, signaling broader retrenchment in financial integration despite resilient emerging market positions. Cross-regional investments between , , and fell 10% year-over-year in the first half of 2024, reinforcing patterns of reduced global capital circulation.

Restrictions on Labor Migration and Human Capital Flows

Global labor migration, including flows of skilled , has slowed relative to trade and capital mobility since the , reflecting heightened policy barriers and national preferences for domestic labor retention amid deglobalization trends. Data indicate a deceleration in low-skilled to major destinations, with the experiencing a post-2007 decline that stabilized the overall population of low-skilled foreign-born workers, contributing to labor shortages in service sectors. This slowdown aligns with broader empirical indicators of reduced global integration, as labor mobility failed to rebound to pre-crisis growth rates despite demographic pressures in aging economies. Policy measures have increasingly emphasized selectivity and caps on both low- and high-skilled entries, prioritizing national workers and reducing unrestricted flows. In the United States, the program for skilled workers remains capped at 65,000 annually plus 20,000 for advanced-degree holders, with post-2016 reforms under the Trump administration raising requirements and scrutinizing employer practices to favor domestic hiring, resulting in fewer approvals for certain occupations. Further tightening in 2025 introduced a $100,000 annual fee per , aimed at curbing perceived wage suppression and ensuring availability of U.S. talent. Similarly, the post-Brexit adopted a points-based system in 2021, ending EU free movement and raising skilled worker salary thresholds from £26,200 to £38,700 by 2024, alongside bans on most dependants for care workers, which reduced intra-EU labor inflows by over 90% from peak levels. In the , responses to the 2015 and subsequent security concerns led to fortified external borders and national quotas, with countries like and reversing open-door policies through stricter asylum-labor permit transitions and deportation expansions by 2024. , while expanding economic migration to 60% of inflows by 2026, imposed a temporary resident cap reducing the stream from 30% to 20% for low-wage roles amid strains, signaling controlled rather than liberalized flows. These restrictions, often justified by labor market protection and fiscal sustainability, have elevated barriers to mobility, with -wide temporary labor permits rebounding to 2.4 million in 2023 but under heightened selectivity for skills and origins, limiting the pace of global knowledge diffusion. border closures further exemplified this trend, slashing temporary entries by up to 50% in 2020 before partial recovery, underscoring vulnerabilities in reliance on cross-border talent.
Country/RegionKey RestrictionImplementation YearImpact on Flows
H-1B visa cap and $100,000 fee2025Reduced high-skilled entries; prioritizes U.S. workers
United KingdomRaised skilled worker threshold; dependant bans2021–202490%+ drop in EU labor migration post-Brexit
Low-wage temporary cap at 20%2024–2027Limits non-skilled inflows despite overall growth
EU (e.g., )Stricter permit transitions and deportations2024Curbs low-skilled and humanitarian-to-labor shifts
Such measures reflect causal priorities of and economic , empirically correlating with deglobalization by insulating domestic pools from international competition, though they risk exacerbating skill shortages in tech and care sectors.

Slowing of Technology and Knowledge Transfer

Policies restricting the export of sensitive technologies, such as advanced and dual-use items, have intensified since 2018, particularly in response to U.S.- strategic competition, thereby impeding the diffusion of cutting-edge knowledge across borders. The U.S. Department of Commerce's (BIS) implemented export controls on October 7, 2022, targeting advanced computing integrated circuits and semiconductor manufacturing equipment, which prohibited shipments to certain Chinese entities and required licenses for others, effectively halting the transfer of embedded technological expertise to accelerate 's capabilities in and military applications. These measures, expanded in subsequent rules through 2024, have reduced global technology spillovers by isolating supply chains, with U.S. firms like reporting curtailed sales of high-performance GPUs to , limiting knowledge flows via product integration and . International collaborations have shown signs of bilateral contraction amid deglobalization pressures, with U.S.- co-authorship in scientific publications declining sharply post-2018 due to visa restrictions, prohibitions, and entity listings that deter joint projects. For instance, spillovers from multinational enterprises to Chinese firms, previously a key channel for , have diminished under decoupling, as evidenced by reduced citations from U.S. sources in Chinese applications following export curbs. Globally, reshoring initiatives and investment screening regimes, such as the EU's Foreign Subsidies Regulation effective from July 2023, further constrain cross-border R&D partnerships by prioritizing domestic retention of , contributing to slower diffusion of through personnel mobility. Empirical metrics underscore this trend: an analysis estimates that full technological decoupling between major economies could diminish knowledge spillovers, leading to productivity losses equivalent to 1-5% of GDP in affected hubs, with high-tech sectors experiencing amplified effects from severed licensing and joint ventures. In semiconductors, post-2022 controls have slowed China's access to technology, stalling diffusion from Dutch firm ASML and U.S. suppliers, while global value chains in tech have fragmented, reducing overall efficiency in innovation propagation. Restrictions on talent flows, including tightened U.S. scrutiny and a 15-20% drop in Chinese student enrollments in STEM fields from 2019 peaks through 2023, further hinder transfer, as engineers and researchers face barriers to cross-border exchanges essential for applied advancements. These indicators reflect a causal shift from open to guarded , where imperatives override the efficiencies of unfettered knowledge sharing.

Potential Benefits

Improved National Economic Resilience and Supply Chain Security

Deglobalization efforts, including reshoring and supply chain diversification, aim to enhance national economic resilience by reducing dependence on distant, geopolitically vulnerable suppliers. This shift mitigates risks from disruptions such as pandemics or conflicts, as evidenced by the crisis, which caused shortages in critical goods like semiconductors and pharmaceuticals due to concentrated production in . By localizing production, nations can shorten lead times and improve responsiveness to shocks, thereby bolstering overall . The ' CHIPS and Science Act of 2022 exemplifies this approach, appropriating $52.7 billion through fiscal year 2027 to incentivize domestic semiconductor manufacturing and address supply chain vulnerabilities exposed by events like the 2020-2021 chip shortage. The legislation has spurred investments, including new facilities by companies like in and expansions by , projected to increase U.S. advanced chip production capacity from near-zero in 2022 to 20% of global share by 2030. These developments reduce reliance on foreign suppliers, particularly in regions prone to trade restrictions or export controls, enhancing against adversarial disruptions. Empirical studies indicate that reshoring correlates with improved , as firms experience lower propagation of shocks through localized networks. For instance, post-pandemic analyses show that companies pursuing nearshoring or onshoring report enhanced and risk mitigation, with indirect suppliers playing a key role in buffering disruptions. Market reactions to reshoring announcements further underscore confidence in resilience gains, particularly under conditions of volatility or geopolitical tension. Such strategies, while increasing short-term costs, foster long-term economic fortitude by prioritizing self-sufficiency over efficiency-driven .

Protection of Domestic Jobs and Industries

Protectionist policies within deglobalization, including tariffs and subsidies, seek to shield domestic industries from import competition, thereby preserving or expanding employment in sectors like that have experienced . By raising the cost of foreign goods, tariffs incentivize local production, potentially retaining jobs that might otherwise migrate to lower-wage countries. Subsidies and incentives further encourage reshoring, where firms relocate operations domestically to mitigate risks exposed by events like the . Proponents argue these measures counteract the job displacement effects of , where has led to net employment declines in advanced economies, such as the U.S. losing over 5 million jobs between 2000 and 2010 due to China’s WTO accession. In the U.S. steel industry, the 2018 Section 232 tariffs on steel imports, imposing up to 25% duties, resulted in modest gains, creating approximately 3,400 jobs—a 2.4% increase—and boosting worker compensation, with average steelworker earnings reaching $117,200 annually by 2022. These tariffs increased domestic steel production and profitability for protected mills, countering prior import surges that had idled capacity and threatened layoffs. Similarly, the 2009 tariffs on Chinese tires preserved around 1,200 U.S. jobs in that sector by reducing import volumes by 36% in the first year, demonstrating short-term efficacy in averting plant closures. Reshoring incentives have amplified job creation in high-tech . The 2022 , allocating $52.7 billion for semiconductor production, is estimated to generate 14,900 to 20,860 direct jobs in fabrication and supporting industries, alongside broader workforce development to fill skill gaps. From 2020 to 2025, reshoring initiatives announced over 350,000 positions, including 244,000 in 2024 alone, driven by policies addressing vulnerabilities like the 2020-2022 chip shortages that halted U.S. auto production and idled workers. These gains have concentrated in states like , ranking third for reshored jobs in early 2025, fostering regional industrial revival. While such protections concentrate benefits in targeted industries, empirical analyses indicate they can sustain strategic amid deglobalization trends, though downstream sectors may face higher input costs leading to reallocations elsewhere. Overall, these policies have demonstrably bolstered payrolls in vulnerable areas, aligning with causal mechanisms where reduced penetration directly correlates with higher local output and hiring.

Enhanced Strategic Autonomy and Reduced Dependency on Adversaries

Deglobalization policies have enabled nations to bolster by diminishing vulnerabilities to from adversarial states through diversified or domestic sourcing of critical resources. This shift prioritizes resilience against supply disruptions, as evidenced by targeted investments in key sectors where prior global integration exposed dependencies on rivals. For instance, the ' implementation of export controls on advanced semiconductors to , starting in October 2022 and expanded in subsequent years, has aimed to curb technology transfers that could enhance Beijing's military capabilities while incentivizing onshore production. A primary example is the U.S. of August 2022, which allocates $52 billion in subsidies and incentives to expand domestic manufacturing capacity, explicitly addressing risks from overreliance on and , which together dominate over 90% of advanced chip production as of 2024. This responds to geopolitical tensions, including potential disruptions in the , by fostering "" to allies like and , thereby reducing exposure to adversarial leverage in supply chains essential for defense and civilian technologies. Empirical progress includes commitments from firms like and to build U.S. fabs, projected to increase national output share from 12% in 2022 to 28% by 2032, enhancing deterrence by ensuring sustained access to critical components amid conflicts. In , Russia's invasion of on February 24, 2022, accelerated deglobalization in energy, prompting the EU's plan in May 2022 to eliminate dependence on Russian fossil fuels by 2027 through diversification to LNG imports from the U.S. and , energy efficiency measures, and renewable acceleration. This reduced EU Russian gas imports from 40% of total supply in 2021 to under 8% by late 2023, mitigating weaponization risks as curtailed flows to exert political pressure. The strategy underscores causal realism: prior integration via pipelines enabled leverage, whereas diversified sourcing—evidenced by a 55% drop in Russian pipeline gas by end-2022—restores decision-making independence, though at higher short-term costs. India's initiative, launched in May 2020 and reinforced amid global supply shocks, promotes in defense, electronics, and pharmaceuticals to counter dependencies on China, which supplied 60% of active pharmaceutical ingredients pre-COVID. By September 2025, Prime Minister emphasized foreign reliance as India's "main enemy," linking it to deglobalization trends and advocating domestic production to safeguard sovereignty. Outcomes include a 20% rise in indigenous defense exports from 2020 to 2024, reducing reliance from 70% to under 60%, thereby insulating against tensions and . In defense sectors, deglobalization rehabilitates Western industrial bases by curtailing to potentially adversarial suppliers, as outlined in frameworks emphasizing capacity to deter threats through assured production. This includes EU efforts for raw materials via partnerships like the 2021 Ukraine agreement, expanded post-2022 to secure critical minerals away from Russian or Chinese dominance, fostering credible deterrence signals to adversaries. Overall, these measures empirically enhance by replacing vulnerability with redundancy, though success hinges on sustained investment amid economic trade-offs.

Potential Costs and Risks

Impacts on Global Economic Growth and Efficiency

Deglobalization undermines global economic growth by curtailing the gains from international specialization and trade, which enable countries to allocate resources according to comparative advantages, thereby expanding total output beyond what autarky or regional blocs permit. Empirical analyses of historical and contemporary trade restrictions confirm that barriers to cross-border flows distort resource allocation, elevate production costs, and diminish overall productivity; for instance, protectionist policies have been shown to reduce labor efficiency by approximately 0.9 percentage points over extended periods through wasteful misallocation away from optimal uses. In panel data regressions spanning 1970–2019 across multiple countries, increases in trade deglobalization—measured by indices of tariff escalations and non-tariff barriers—exhibit a statistically significant negative association with GDP growth rates, with social deglobalization (e.g., reduced migration and cultural exchanges) similarly impeding expansion, while financial deglobalization shows neutral or context-dependent effects. Quantitative estimates underscore these losses: geo-economic fragmentation, as manifested in policy-driven trade decoupling, is projected to subtract 1.2% from global GDP under baseline scenarios, rising to 1.5% when incorporating broader investment and technology restrictions, based on models incorporating recent hikes and sanctions. More severe deglobalization trajectories, including full bilateral decouplings like U.S.-, could entail up to 7% reductions in global output in pessimistic forecasts that account for relocations and spillovers. Specific cases, such as a hypothetical 25% on all U.S.-China , are estimated to erode U.S. GDP by $190 billion annually by 2025, with ripple effects amplifying global slowdowns through disrupted flows and heightened uncertainty. simulations further indicate that technological decoupling in key sectors could inflict 8–12% GDP hits on affected economies, primarily via curtailed knowledge diffusion and R&D collaboration. Efficiency suffers as deglobalization fragments hyper-specialized supply chains, forcing firms to onshore or nearshore production at higher marginal costs and lower scale economies; for example, empirical firm-level studies of post-2018 U.S. reveal persistent reallocations that elevate input prices by 1% per 10% increment, eroding competitive edges without commensurate domestic capacity gains. While some analyses highlight resilience in aggregate global flows amid shocks, policy-induced reversals—evident in declining export-to-GDP ratios since the mid-2010s—nonetheless correlate with subdued growth, as resources shift from export-oriented sectors to protected industries with inferior . These dynamics suggest that deglobalization's net effect on is contractionary, prioritizing short-term security over long-run Pareto improvements, though academic sources assessing such trends may understate costs due to institutional preferences for multilateral frameworks.

Inflationary Pressures and Higher Consumer Costs

Deglobalization, by curtailing and prompting reshoring or nearshoring of production, elevates input costs for businesses, which are often transmitted to through higher prices, contributing to inflationary pressures. Tariffs and trade barriers, common tools in deglobalization strategies, directly raise the price of imported ; for instance, during the 2018-2019 U.S.- trade war, U.S. import tariffs led to a statistically significant increase in consumer prices, with estimates indicating an of 0.1 to 0.2 points to core PCE inflation. Empirical analysis of over 350,000 tracked by revealed that import prices were approximately 5 percent higher under tariffs, while domestic prices also exceeded trends, suggesting pass-through effects beyond direct imports. Reshoring production to domestic facilities or nearshoring to proximate countries mitigates some risks but incurs higher labor and operational costs compared to low-wage offshore locations, exacerbating increases. In the U.S., the 2018-2019 tariffs equated to an average increase of nearly $1,300 per in 2025 projections, as businesses absorbed initial costs but ultimately passed most burdens to consumers via elevated retail prices. A study confirmed that U.S. consumers bore the brunt of these tariffs through higher prices on imported goods, with limited evidence of foreign exporters fully absorbing the levies. Protectionist measures fragment global s, reducing efficiencies from specialization and scale, which historically suppressed ; reversing this integration thus risks persistently higher consumer costs, as seen in reduced access to competitively priced foreign inputs. These dynamics have manifested in specific sectors, such as and , where tariff-induced price hikes during the U.S.- trade conflict raised costs for items like washing machines by up to 12 percent. Nearshoring trends, accelerated by geopolitical tensions, have similarly driven up logistics and production expenses, with firms facing from domestic wage premiums and absent in prior offshore arrangements. While proponents argue that long-term domestic investment could offset some rises, short- to medium-term evidence indicates net inflationary impacts, diminishing consumer without corresponding wage gains in many cases.

Challenges to Innovation and Long-Term Productivity

Deglobalization restricts the cross-border diffusion of and , which empirical studies identify as a key driver of through spillovers from , , and multinational operations. These spillovers lower the costs of by enabling firms to access foreign ideas, reducing duplication of R&D efforts, and fostering incremental improvements via imported intermediates and capital goods. Reversing such integration, as observed in rising barriers since 2018, fragments global R&D networks and diminishes these benefits, potentially slowing the pace of technological advancement. Restrictions on labor mobility exacerbate these challenges by limiting access to global human capital, particularly skilled migrants who contribute disproportionately to patenting and in host countries. Data from periods of heightened immigration controls show reduced inflows of high-skilled workers correlating with lower outputs, as domestic talent pools alone cannot match the diversity and scale of international collaboration. For instance, international co-authorship in scientific papers and joint filings, which surged with , have plateaued or declined amid policy shifts toward border closures, constraining idea recombination essential for breakthrough innovations. Trade and export controls further impede R&D by raising costs and isolating firms from global supply chains critical for prototyping and scaling technologies. Empirical analyses of U.S.- technology export restrictions implemented from onward demonstrate that affected firms experience significant reductions in R&D expenditures—up to 1.14 percentage points in investment ratios—and patent filings, as barriers disrupt access to specialized inputs and collaborative ecosystems. Similarly, tariff escalations during the same period altered high-tech strategies, prompting firms to relocate R&D domestically at higher costs or forgo international partnerships, thereby eroding efficiency gains from in . Over the long term, these dynamics threaten growth by capping (TFP) improvements, which historically derived from global knowledge accumulation rather than isolated national efforts. Cross-country regressions link openness to trade and FDI with higher TFP, implying that deglobalization's fragmentation could widen technological gaps between nations and suppress aggregate output per worker. While some argue can mitigate losses through targeted subsidies, evidence from sanctioned economies indicates persistent deficits absent international linkages, underscoring the causal role of global integration in sustaining productivity trajectories.

Geopolitical and Societal Ramifications

Rise of Nationalism and Erosion of Multilateral Institutions

The resurgence of nationalist movements since the mid-2010s has been closely intertwined with deglobalization trends, as voters in advanced economies expressed discontent with the perceived erosion of national sovereignty and economic security under global integration frameworks. In the , the June 23, 2016, referendum resulted in a 51.9% vote to leave the , driven by campaigns emphasizing control over borders, laws, and policies amid concerns over and job . This event marked an early signal of broader populist shifts, with similar sentiments fueling the election of protectionist-leaning governments across Europe and North America, prioritizing domestic industries over multilateral commitments. In the United States, the 2016 presidential victory of amplified "America First" rhetoric, leading to withdrawal from the in January 2017 and imposition of tariffs on steel and aluminum imports starting in March 2018, explicitly framing as detrimental to American workers. These nationalist surges have manifested in policy actions that favor bilateral deals and self-reliance over supranational rules, contributing to deglobalization by reducing reliance on interconnected supply chains. In , populist parties such as Germany's (AfD), which gained 10.3% in the 2017 federal election, and France's have advocated for protectionist measures, including opposition to EU free-trade agreements and calls for "economic patriotism." Italy's coalition government formed in June 2018 under the Five Star Movement and League party threatened to block EU fiscal rules and pursued renegotiated trade terms, exemplifying how rising populism correlates with barriers to intra-EU and global commerce. In , India's "" (Self-Reliant India) initiative, launched in May 2020 amid border tensions with , imposed import restrictions and production-linked incentives to bolster domestic , reflecting a nationalist pivot away from export-led models. Such policies stem from empirical grievances, including job losses—U.S. trade deficits with reached $419 billion in 2018—prompting causal prioritization of national economic resilience over efficiency gains from open markets. Parallel to this nationalism, multilateral institutions have faced institutional erosion, as member states increasingly bypass or undermine shared governance to pursue unilateral interests. The World Trade Organization (WTO) has been particularly debilitated; the U.S. blocked appointments to its Appellate Body since 2017, rendering it non-functional by December 2019 due to insufficient judges, a move justified by criticisms of judicial overreach favoring developing nations like China. The U.S.-China trade war exacerbated this, with U.S. tariffs on $380 billion of Chinese goods by 2019 and retaliatory measures leading to trade diversion but minimal WTO adjudication, as disputes piled up without resolution mechanisms. By April 2025, escalating tariffs—averaging 57.6% on Chinese exports to the U.S.—further sidelined WTO norms, with projections of up to 80% bilateral trade contraction if tensions persist. Brexit amplified strains on European multilateralism, diminishing the EU's cohesion and global leverage. The UK's departure, formalized on January 31, 2020, severed participation in the EU's , leading to downgraded security cooperation and fragmented transatlantic ties, as evidenced by the UK's exclusion from routine EU defense consultations post-referendum. This has weakened the EU's ability to project unified multilateral influence, with populist governments in and vetoing joint initiatives, such as EU-China investment deals in 2021, prioritizing national vetoes over . Overall, these developments reflect a causal shift where nationalist priorities—rooted in domestic political economies—undermine multilateral efficacy, fostering fragmented regional blocs over universal rules, though data gaps persist on long-term geopolitical stability.

Shifts in Power Dynamics and Regional Blocs

Deglobalization has accelerated the fragmentation of global trade into distinct regional blocs, as nations prioritize and proximity over universal integration. Analysis of flows since 2016 reveals a reorganization into geopolitical alignments, with the US-led bloc encompassing , , and parts of , contrasted by a China-centric sphere including much of and parts of and . This shift, driven by US-China tensions, has not collapsed overall trade volumes but redirected them along alliance lines, reducing cross-bloc interdependence by an estimated 10-15% in sensitive sectors like and critical minerals as of 2024. The proliferation of regional trade agreements (RTAs) exemplifies this trend, with over 350 such pacts in force by 2023—up from 50 in 1990—now accounting for approximately 60% of global merchandise trade. Initiatives like the (RCEP), effective since 2022 and encompassing 30% of global GDP, have deepened intra-Asian ties while excluding major involvement, enhancing China's regional leverage. Similarly, the US-Mexico-Canada Agreement (USMCA), renegotiated in 2020, imposes stricter to favor North American production, reflecting a strategic pivot toward bloc-internal supply chains amid deglobalizing pressures. These arrangements empower middle powers, such as through its quadrilateral ties with the , , and , to negotiate from positions of relative strength without full multilateral concessions. Parallel to bloc formation, the (WTO) has experienced institutional erosion, with its paralyzed since 2019 due to unresolved blockade on judge appointments, rendering ineffective for over 50 cases by 2025. This vacuum has spurred a surge in bilateral and plurilateral deals—over 100 notified to the WTO since 2018—bypassing Round stalemates and allowing great powers to embed security clauses, as seen in the -led launched in 2022. Such dynamics tilt power toward states capable of forging exclusive alliances, diminishing the influence of smaller economies reliant on neutral global rules and fostering a multipolar order where raw geopolitical weight increasingly dictates trade access. Empirical assessments indicate these shifts concentrate economic influence in a handful of blocs rather than diffusing it evenly, with the US-China tech decoupling alone projected to shave 0.2-1% off global GDP annually through 2030 by segmenting innovation ecosystems. BRICS expansion in 2024, incorporating , , , and the UAE, signals parallel efforts at de-dollarization and alternative financing, potentially carving out a third bloc challenging Western dominance in commodities trade. Yet, causal analysis underscores that these realignments stem from verifiable security imperatives—such as US export controls on semiconductors since 2022—rather than ideological retreat, preserving aggregate trade efficiency within blocs while elevating bloc leaders' bargaining power over peripherals.

Social and Inequality Effects: Domestic Gains vs. Global Disparities

In developed economies pursuing deglobalization through tariffs and reshoring, empirical analyses indicate short-term gains in and wages for workers in import-competing sectors. For instance, protectionist measures have been found to increase the employment ratio while reducing the skill premium, thereby compressing wage inequality domestically by benefiting lower-skilled labor. Reshoring initiatives, driven by factors like rising foreign wages and vulnerabilities, elevate domestic labor demand and , particularly in , though firms often offset higher costs via . These effects stem from reduced pressures, which previously displaced jobs and widened income gaps in regions like the U.S. , where contributed to stagnant wages for non-college-educated workers. However, such domestic protections impose regressive costs on consumers via higher prices, disproportionately burdening lower-income households and potentially offsetting inequality reductions. World Bank assessments of tariff hikes highlight their adverse distributional impacts, as they raise the cost of imported essentials, exacerbating within-country risks even as targeted sectors gain. In the U.S.-China trade war, for example, import led to net job losses in exposed industries after accounting for retaliatory measures and input cost increases, underscoring that gains are sector-specific and short-lived without broader policy support. Globally, deglobalization widens disparities by curtailing export-led growth in developing nations, reversing poverty declines achieved through integration since 1980. shows accelerated poor-country GDP growth, reduced the number of people in by over 1 billion, and modestly lowered between-country inequality, with export booms lifting incomes in places like , , and . Deglobalization threatens this convergence, as emerging economies face shrinking markets and foreign , heightening and income stagnation; for instance, India's gains in employment and from openness contrast with potential U.S. benefits, highlighting zero-sum dynamics. Reduced trade openness thus risks entrenching global divides, with advanced nations' resilience coming at the expense of slower development in the Global South, where billions rely on export sectors for .

Debates, Controversies, and Evidence

Pro-Deglobalization Perspectives: Sovereignty and Realism

Pro-deglobalization perspectives grounded in realist emphasize that states operate in an anarchic system where and power preservation demand , viewing deep as a rather than a stabilizer. Realist scholars argue that fosters competition by enabling adversaries to weaponize dependencies, such as through supply disruptions or export controls, rather than promoting peace via mutual gains. This view posits deglobalization as essential for reclaiming , allowing governments to insulate critical sectors from external coercion and align economic policies with geopolitical imperatives, unencumbered by supranational rules or that prioritize over resilience. A core argument centers on reducing reliance on adversarial suppliers for strategic goods, exemplified by U.S. efforts to address vulnerabilities. The of August 2022 provided $52.7 billion in incentives to expand domestic fabrication capacity, motivated by the concentration of advanced chip production in —producing over 90% of leading-edge nodes—and risks of Chinese blockade or invasion disrupting global supplies. Proponents contend this reshoring enhances by restoring control over technologies vital to military superiority and economic , countering how eroded U.S. autonomy since the 1990s. Similarly, China's control of approximately 70% of rare earth mining and 90% of processing capacity exposes Western defense industries to cutoff risks, as demonstrated by Beijing's 2010 export restrictions amid territorial disputes, prompting calls for diversified sourcing to safeguard national interests. The illustrated these realist concerns empirically, with global fractures causing shortages of pharmaceuticals—where the U.S. sourced 80% of active ingredients from abroad, including —and personal protective equipment, revealing how just-in-time amplified disruptions from factory shutdowns in . Advocates argue such events underscore the causal link between interdependence and diminished , as states faced involuntary reliance on foreign production during crises, constraining policy responses like bans or stockpiling. Deglobalization measures, including tariffs and subsidies for onshoring, are thus framed as realist correctives that prioritize causal resilience—fortifying domestic capabilities against foreseeable geopolitical shocks—over liberal assumptions of perpetual . In defense sectors, deglobalization rehabilitates industrial sovereignty by shortening and securing supply chains, as seen in 2024 Western strategies to rebuild capacities eroded by post-Cold War . Realists maintain that this approach aligns with great-power competition, where states like and exploit Western vulnerabilities—evident in energy weaponization during the 2022 Ukraine invasion—to advance relative gains, rendering unchecked a net security liability. By fostering "friend-shoring" to allies and reducing exposure to rivals, deglobalization enables sovereign actors to pursue independent strategies, mitigating the tragedy of interdependence where economic ties amplify rather than dampen conflict incentives.

Anti-Deglobalization Critiques: Liberalism and Efficiency Arguments

Economic liberals contend that deglobalization undermines the foundational principles of , which facilitate efficient through and specialization across nations. By imposing barriers such as tariffs and subsidies for domestic production, deglobalization distorts market signals, compelling firms to prioritize geopolitical resilience over cost minimization, thereby eroding the gains from international division of labor. This perspective, rooted in classical liberal theory, posits that open markets expand economic liberty and prosperity by allowing producers to focus on areas of relative strength, as evidenced by post-World War II trade liberalization correlating with accelerated global GDP growth rates averaging 4.1% annually from 1950 to 2000. Empirical analyses reinforce efficiency concerns, demonstrating that deglobalization trends since around 2015—manifest in slowing -to-GDP ratios and policy-induced reconfigurations—have already imposed measurable costs. For instance, reallocating production away from low-cost suppliers, as seen in U.S.- frictions, elevates input prices and diminishes ; preliminary estimates suggest such disruptions could reduce aggregate efficiency by forcing suboptimal domestic or "friend-shored" sourcing. During the , global networks paradoxically enhanced resilience, with U.S. imports of critical goods like face masks surging via diversified suppliers, underscoring how fragmentation hampers adaptive capacity rather than bolstering it. Protectionist measures, such as the European Union's Net Zero Industry Act promoting local production, risk inflating costs for technologies like solar panels, previously imported efficiently from , thereby constraining scalability and deployment. Critics further argue that deglobalization imperils long-term growth and by curtailing cross-border flows of capital, people, and ideas. studies across countries indicate that reductions in openness exert a negative effect on , with coefficients showing statistically significant declines in GDP linked to trade barriers. Small, export-dependent economies suffer disproportionately, as diminished access to global markets limits their development trajectories, while larger economies face slower aggregate expansion from foregone scale economies. suffers from severed collaborations, particularly between high-R&D nations like the U.S. and , where reduced researcher interactions could stifle technological progress in fields reliant on international knowledge spillovers. Overall, these efficiency losses compound, potentially mirroring the pre-1914 era's protectionist spiral, which preceded until liberalized revived growth. ![Openness of the world economy 1880-2020][float-right] Global trade volumes have exhibited resilience amid disruptions, with merchandise trade growth slowing to 2.5% in 2024 and projected at 3.3% for 2025, while services expanded more robustly by 4.7% in exports during Q2 2025. However, as a of global GDP, a key measure of openness, peaked near 61% in before declining to around 52% by 2019, stabilizing post-COVID without returning to prior highs, indicating a plateau rather than . Foreign direct investment (FDI) inflows have decoupled from GDP growth since the 2000s, with a 48% drop from 2007 peaks by 2020, though multinational corporations maintain extensive global subsidiaries, challenging narratives of wholesale retreat. Empirical studies reveal mixed signals on deglobalization's extent: trade and capital flows slowed post-2008 , with also decelerating, yet overall international flows have not broadly contracted relative to pre-shock levels, as evidenced by resilient supply chains during the . Geopolitical tensions, including U.S.- decoupling, have prompted reconfiguration toward "friend-shoring," reducing bilateral dependencies but sustaining aggregate volumes. World merchandise is forecasted to dip 0.2% in 2025 before rebounding, reflecting policy uncertainties like tariffs rather than structural collapse. Data gaps hinder precise assessment, particularly in services trade, where bilateral flows remain underreported despite comprising growing shares of global exchanges; new databases like IMF's Bilateral Trade in Services aim to address this but cover limited periods. FDI statistics are distorted by "conduit" investments routed through tax havens, obscuring true and real-economy production shifts. Reshoring and nearshoring trends lack comprehensive quantification, as firm-level data on adjustments is fragmented, and indices like FDI globalization often overlook subsidiary depth. Intangible assets and digital trade further evade traditional metrics, potentially understating ongoing in non-physical domains. Counterarguments emphasize continuity over reversal: services trade has quietly risen amid merchandise slowdowns, with global flows proving durable against shocks like and Ukraine-related disruptions. ECB analysis finds scant evidence of outright deglobalization, attributing slowdowns to countervailing forces like technological specialization rather than policy-driven isolation. Critics of deglobalization narratives argue that observed shifts reflect recalibration—e.g., bilateral deals proliferating despite tariffs—rather than diminished , with empirical resilience in multinational operations undermining claims of systemic retreat. World Bank reviews concur that supply chains endured pandemic stresses, suggesting deglobalization risks are overstated absent deeper structural breaks.

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