(17 October 2024 – Global) The World Trade Organisation (WTO) reports that the US-China trade war is driving corporates to “pick a side”, leading allies to prioritise their own trade corridors over “unfriendly” nations.
GTR reports that friendshoring, defined as the “overall trade fragmentation along geopolitical lines” is divided between hypothetical “East” and “West” blocs whose members are determined by nations’ UN voting records.
The WTO report “Is the Global Economy Fragmenting” notes that growth in value terms has remained flat, suggesting a fall in export and import prices of 2.6 percent for this year. Much of this decline is led by energy prices.
Within Asia, research from East & Partners suggests corporates in China are increasingly seeking to trade with their Southern neighbours of Vietnam, Thailand and Indonesia.
“Using monthly data on trade in goods between January 2016 and February 2024, this study assesses the impact of recent shocks on the fragmentation of the global economy, looking in particular at the dynamics of friend-shoring, near-shoring and decoupling between the world’s two largest economies” stated WTO report authors Michael Blanga-Gubbay and Stela Rubínová.
“Global trade and international supply chains are evolving in response to new technologies and changing patterns of comparative advantage. We analyse monthly trade data to gauge whether the recent shocks have added momentum to the fragmentation of the global economy, focusing on friend-shoring, near-shoring, and decoupling between China and the United States.”
“We find early evidence of a trend towards a stronger alignment between trade flows and geopolitical affinities since the onset of the war in Ukraine. Our estimates suggest that trade between hypothetical East and West blocs grew around four percent slower than trade within the blocs.”