Why the World Is Deglobalising and What It Means for Everyone
Photo: Yan Krukau / Pexels
The era of hyperglobalisation lasted roughly two decades: from the mid-1990s, when the WTO came into force and China began its export surge, to roughly 2008, when global trade as a share of GDP peaked. In those years the price of manufactured goods fell, supply chains stretched across a dozen countries before a product reached a shelf, and economists spoke of the "Great Moderation" — stable prices, stable growth, stable interdependence. Since 2016, and with accelerating force since 2020, those assumptions have reversed. Trade barriers are rising, supply chains are shortening, and the planet is dividing into rival economic blocs. Here is what is driving that reversal, what it costs, and what it means for the decades ahead.
What "Deglobalisation" Actually Means — and What It Doesn't
The word "deglobalisation" overstates the case if taken literally. Global trade has not collapsed. The WTO projects that goods trade volume will grow roughly 3% in 2025, down from the 2.7% of 2024 but still positive.
What has changed is the relationship between trade and economic output. From 1990 to 2008, world merchandise exports grew roughly twice as fast as world GDP — the classic signature of deepening integration. Since 2008, trade has grown at roughly the same pace as GDP, or slower. Economists call this "slowbalisation," a term popularised by The Economist in 2019.
The precise story is more nuanced. Services trade (finance, consulting, software, tourism) has continued to expand faster than goods trade. What has stalled or reversed is the deep integration of manufacturing supply chains — the process by which a single product was assembled across eight countries to maximise cost efficiency.
Think of globalisation as a spider's web, and deglobalisation as not destroying the web but reweaving it — pulling key threads back toward the centre while leaving the outer strands intact.
Historical Context: How We Got to Peak Globalisation
To understand the reversal, you need to understand the foundations that made hyperglobalisation possible in the first place.
The institutional architecture (1944–1994). The Bretton Woods institutions — the IMF, the World Bank, and eventually the GATT (General Agreement on Tariffs and Trade) — built the rules of the postwar trading order. GATT rounds progressively reduced tariffs from an average of 40% in 1947 to under 5% for manufactured goods by the 1990s. When the WTO replaced GATT in 1995, it extended that architecture to services and intellectual property.
China's entry into the global economy. China's 1978 reforms under Deng Xiaoping initiated export-led growth, but the decisive event was China's WTO accession in December 2001. In the decade that followed, China's share of world manufacturing output grew from roughly 8% to over 20%. The "China shock" — the term used by economists David Autor, David Dorn, and Gordon Hanson in their landmark 2013 paper — describes the concentrated job losses in US manufacturing communities that followed. Those losses were real, deep, and permanent for the workers who experienced them, even as consumers nationwide paid less for goods.
Source: Autor, Dorn, and Hanson, "The China Syndrome," American Economic Review, 2013
The efficiency doctrine. "Just-in-time" manufacturing — minimising inventory by ordering components only when needed — reduced working capital requirements and cut costs. The logic was compelling: hold zero inventory, source each component from wherever it is cheapest globally, and deliver finished goods to market in days. Toyota pioneered the concept; by the 2000s it had become the operating assumption of global manufacturing.
The problem with just-in-time, as the 2020s would demonstrate, is that it has zero tolerance for disruption. A system optimised for efficiency is inherently brittle. There are no buffers.
The Shocks That Broke the Consensus
Three events between 2018 and 2022 exposed the fragility of peak-globalisation assumptions.
The US-China Trade War (2018 onward)
The Trump administration's first-term tariffs — beginning with washing machines and solar panels in January 2018 and expanding to $360 billion of Chinese goods by 2019 — broke a consensus that had held since the 1990s: that trade liberalisation was irreversible. The Biden administration, despite rhetoric about multilateralism, maintained and extended most of those tariffs. The second Trump term has added substantially to them.
The tariffs did not simply reduce Chinese exports to the United States. They triggered a global restructuring of supply chains. Companies that had invested heavily in Chinese manufacturing capacity began building parallel capacity in Vietnam, Mexico, and India — incurring enormous transition costs in pursuit of geopolitical insurance.
COVID-19 and the Supply Chain Shock (2020–2022)
The pandemic demonstrated in the starkest possible terms what happens when a global supply chain encounters a simultaneous shock in multiple nodes.
Semiconductors provide the clearest case study. Advanced chip manufacturing was concentrated in Taiwan (TSMC), South Korea (Samsung, SK Hynix), and Japan (various specialty processes). When pandemic demand surged simultaneously for consumer electronics, cars, and medical equipment, the system had no slack. Auto manufacturers idled plants; hospitals delayed equipment purchases; game consoles sat on backorder for 18 months.
Personal protective equipment told a similar story. By 2020, roughly 85% of global PPE production had migrated to China. When COVID struck and China's own demand surged, export allocations tightened. Countries that had offshored their PPE manufacturing discovered they could not source basic medical supplies during a public health emergency. Several governments explicitly classified this as a national security failure.
Pharmaceuticals. The FDA's 2020 analysis found that 87% of active pharmaceutical ingredient (API) manufacturing facilities for drugs sold in the US were located outside the country, with significant concentration in China and India.
Russia's Invasion of Ukraine (2022)
Europe's energy crisis after Russia's February 2022 invasion of Ukraine was the third demonstration that economic interdependence creates leverage. Germany had tied approximately 55% of its natural gas supply to Russia through the Nord Stream pipelines — a strategy that had been defended for years as an example of how trade creates mutual dependence and therefore peace. The theory held until it didn't.
European natural gas prices rose by more than 400% between 2021 and the peak of the crisis in August 2022. German industrial output declined; energy-intensive industries (chemicals, glass, ceramics) relocated production outside Europe.
Each of these three episodes made the same argument: the efficiency gains of optimised global supply chains are real, but the resilience cost — the cost of having no redundancy, no buffer, no alternative supplier — can exceed those gains in a tail-risk event. And tail-risk events, it turns out, are not that rare.
The Mechanisms of Deglobalisation in Practice
Reshoring
Reshoring means returning manufacturing to the home country. In the United States, the CHIPS and Science Act (2022, $52.7 billion) and the Inflation Reduction Act (2022, approximately $369 billion in energy and manufacturing incentives) represent the largest industrial policy investments since the Second World War. The intent is explicit: bring semiconductor and clean energy manufacturing back to American soil.
The challenge is that reshoring is slower and more expensive than its advocates acknowledge. Building a semiconductor fabrication plant (a "fab") takes 3–5 years from groundbreaking to first chip. TSMC's first Arizona fab, announced in 2020, began limited production of 4-nanometer chips only in late 2024. The facility required importing hundreds of experienced engineers from Taiwan because the US workforce lacked sufficient expertise — a constraint that no tariff policy can address quickly.
Source: TSMC Arizona production timeline, Reuters, December 2024
Friend-Shoring
"Friend-shoring" — relocating supply chains to geopolitically aligned countries rather than strictly back to the home country — is the more realistic version of reshoring for most industries.
Mexico is the clearest beneficiary. US goods imports from Mexico surpassed imports from China for the first time in 2023, a milestone that reflects years of investment by US and Asian manufacturers in Mexican facilities. The USMCA trade agreement provides preferential access; proximity reduces shipping time and costs; labour costs remain competitive for many applications.
Vietnam has absorbed substantial electronics manufacturing capacity from China. Apple now assembles significant volumes of AirPods, iPads, and MacBooks in Vietnam. Samsung manufactures a majority of its smartphones in Vietnam.
India is the large-scale long-term bet. Its combination of population scale (1.4 billion), an English-speaking technical workforce, and improving infrastructure has attracted manufacturing investment from Apple, Foxconn, and numerous semiconductor companies. Apple now manufactures roughly 14% of its iPhones in India, up from near zero in 2020.
Trade Restriction Proliferation
The number of trade-restrictive measures enacted globally has accelerated sharply. In 2019, approximately 1,100 new trade restrictions were imposed globally. In 2022 that figure rose to 3,200, and approximately 3,000 were added in 2023.
Source: European Commission, Autumn 2024 Economic Forecast — Global Trade Outlook
The most consequential are export controls rather than import tariffs. The US Commerce Department's restrictions on the export of advanced semiconductors and chip-making equipment to China — implemented in October 2022 and tightened substantially in 2023 — represent an attempt to freeze China's progress at the semiconductor technology frontier. They are the most aggressive use of export controls since the Cold War.
The US-China Decoupling: The Dominant Geopolitical Driver
The US-China strategic competition is not simply a trade dispute. It is a contest over which country will define the technology standards, supply chain structures, and geopolitical alignments of the second half of the 21st century.
The US logic: Economic interdependence with China provides a near-peer competitor with capital (via trade revenues), technology (via supply chain access), and leverage (via the threat of supply disruption). The policy response is to reduce that interdependence in sectors where the risk is highest: advanced semiconductors, AI hardware, quantum computing, biotechnology, and critical minerals.
The China logic: China's "dual circulation" strategy, articulated by President Xi Jinping from 2020 onward, seeks to reduce Chinese dependence on Western technology while expanding domestic consumption to reduce reliance on export markets. State investment in domestic semiconductor development has been estimated at over $150 billion since 2014, though progress toward the frontier has been constrained by the US export controls on ASML's extreme ultraviolet lithography machines.
Where decoupling is real: Advanced chips (TSMC will not sell 3nm or 2nm chips to Chinese customers under US export controls), AI hardware (Nvidia's H100 and H200 GPUs are controlled; Nvidia developed a downgraded H20 for China, which is now also subject to review), and investment in sensitive sectors (US outbound investment restrictions in AI and quantum computing were formalised in 2024).
Where decoupling is not happening: Total US-China goods trade was approximately $582 billion in 2023, down from a peak but still among the largest bilateral trade relationships in the world. Agricultural exports, consumer goods, and lower-technology manufacturing remain deeply intertwined. Full decoupling would be economically catastrophic for both sides, and neither government is pursuing it.
Why Deglobalisation Is Inflationary
Globalisation was a 30-year deflationary force operating through three channels, each of which is now reversing.
The cheap labour channel. Manufacturing in China, Bangladesh, Vietnam, and other low-wage countries suppressed the price of manufactured goods in wealthy countries. A television that cost $1,000 in 1990 cost under $200 by 2010, largely because of this effect. As manufacturing relocates to higher-wage locations — whether reshored to the US or moved to Mexico and India, where wages are still lower than the US but higher than China's 2005 levels — the cost advantage diminishes.
The competition channel. Import competition from low-cost producers kept domestic manufacturers' pricing power constrained. As tariffs rise and import competition weakens, domestic producers regain some pricing power.
The just-in-time channel. Building redundant supply chains — keeping strategic buffer stocks, maintaining multiple suppliers rather than a single optimised source — costs money. Those costs are priced into goods.
The Peterson Institute for International Economics estimated in 2022 that the Trump first-term tariffs raised consumer prices for affected goods by 0.3–0.4%, with downstream effects on other goods.
Source: Peterson Institute for International Economics, "Trump's Trade War Timeline," 2022
More broadly, the IMF's research arm estimated that complete fragmentation of global trade along geopolitical lines could reduce global GDP by 2.5–7%, with the losses concentrated in emerging markets that depend on trade for development. The inflationary and growth effects of partial fragmentation are correspondingly smaller but still significant.
The Geopolitical Consequences: A Bloc-Divided World
The deepest consequence of deglobalisation may not be economic but geopolitical. The post-1945 liberal order was built on the premise that economic integration would bind nations together, making war costly and reducing its probability. This was the theory behind the European Coal and Steel Community (1951), the WTO, and the engagement strategy toward China.
The theory has not been wholly discredited — Europe is the strongest evidence for it, where six decades of economic integration have made war between France and Germany genuinely unthinkable. But it has failed as a universal rule. Russia's invasion of Ukraine demonstrated that a country deeply integrated into European energy markets would still invade a neighbour. China's territorial pressure on Taiwan has not abated despite enormous mutual economic interests.
The emerging structure is neither a fully globalised single market nor a Cold War division into two hermetically sealed blocs. It looks more like three or four overlapping gravitational fields — the US-centred USMCA/G7 bloc, the China-centred Belt and Road/RCEP structure, a partial Indian sphere, and a contested middle ground of countries (Saudi Arabia, Indonesia, Brazil, Turkey, South Africa) that deal with all sides and resist alignment.
Countries in that contested middle are often the biggest beneficiaries of the current transition. Vietnam, Mexico, and India are all growing their trade shares by serving as connectors between the competing blocs — receiving Chinese-origin components, adding value, and exporting to Western markets.
What Deglobalisation Means for Developing Countries
The distributional consequences of deglobalisation fall hardest on developing countries that built their development strategy on integration into global supply chains.
Bangladesh's garment industry, which employs 4 million workers and accounts for 80% of Bangladesh's export earnings, depends on its position in global fast-fashion supply chains. If those chains shorten toward Western markets, or if protectionist policies penalise garment imports, the consequences for Bangladeshi workers would be severe.
Sub-Saharan Africa presents a more complex picture. The African Continental Free Trade Area (AfCFTA), which came into force in 2021, aims to create an integrated African market — a form of regional deepening even as global integration slows. If successful, it could provide Africa with the kind of regional integration that supercharged Europe's postwar development, independent of the geopolitical turbulence at the global level.
The development model that pulled hundreds of millions of people out of poverty in East Asia between 1970 and 2010 — export-led manufacturing, technology transfer through supply chain integration, foreign direct investment — may be less available to the next generation of developing countries. This is one of the least-discussed but most significant costs of deglobalisation.
The WTO's Diminished Role
The World Trade Organization's dispute settlement system has been effectively paralysed since the United States began blocking appointments to the Appellate Body in 2019, under a policy continued by subsequent administrations. Without a functioning appeals body, WTO rulings cannot be enforced, and countries can appeal adverse rulings into a void.
Source: WTO, Appellate Body status, 2025
This institutional paralysis matters because the WTO's dispute settlement system was the closest thing the global trading order had to a rule of law. Its incapacitation means that trade disputes are now resolved through bilateral negotiation, economic pressure, or retaliation rather than through rules-based adjudication. Countries with greater economic weight win those contests; smaller countries lose.
Trade policy is increasingly bilateral and regional — USMCA, the EU's network of free trade agreements, the RCEP in Asia, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The multilateral trading system is not dead, but its authority to constrain powerful countries' behavior has been severely weakened.
Common Misunderstandings About Deglobalisation
"It means trade is declining." Global trade volumes are growing — they are just growing more slowly relative to economic output than they did in 1990–2008. The DHL Global Connectedness Index and the KOF Globalisation Index do not show globalisation retreating at the aggregate level. The change is in composition (more services, fewer manufactured goods moving through global chains) and in the distribution of trade flows (more within-bloc, less across adversarial divides).
"The US is reindustrialising quickly." The CHIPS Act and IRA have triggered significant investment announcements — over $400 billion in manufacturing investment commitments since 2022, per the White House's own tracking. But announced investment and deployed production capacity are different things. Many projects have faced delays from permitting, workforce availability, and the practical difficulty of rebuilding industries that departed over decades. The productivity gap between newly built US fabs and established Asian ones will take years to close.
"Cheap goods will just come from Vietnam and India instead." Partial substitution is happening, but it is not seamless. Vietnam's manufacturing ecosystem, while impressive, lacks the depth of supply chains that took China 25 years to build. India's infrastructure constraints limit the speed at which it can absorb manufacturing at scale. Costs will be higher in the transition period — and possibly permanently for some categories.
"This is temporary — trade will re-globalise once tensions ease." Structural forces — the demographic aging of China's workforce (which is raising Chinese wages), the geopolitical calculus around Taiwan and the South China Sea, and the political economy of manufacturing constituencies in wealthy democracies — are durable. The conditions that enabled hyperglobalisation (cheap Chinese labour, benign geopolitics, uncontested US hegemony) are not returning.
Trends to Watch Through 2030
Critical minerals as the new semiconductor battleground. The clean energy transition requires cobalt (DRC), lithium (Chile, Argentina, Australia), rare earth elements (China controls 60%+ of processing), and nickel (Indonesia, Philippines). These minerals are distributed no more evenly than semiconductors, and control over them is becoming as strategically contested as control over chip manufacturing. China's export restrictions on gallium and germanium (2023) were the first shot in what may be a prolonged critical minerals contest.
Digital trade divergence. While goods trade faces friction, digital services (cloud computing, AI models, data flows) are growing rapidly. But they face their own deglobalisation pressures: data localisation requirements (the EU, India, Indonesia, Brazil), algorithmic sovereignty concerns, and efforts to create national AI infrastructure. The question of whether the internet remains truly global or fragments into incompatible national or regional internets is one of the defining technology policy questions of the decade.
The role of AI in reshoring. One underappreciated variable is automation. If advanced robotics and AI reduce the labour cost component of manufacturing, the cost advantage of low-wage offshore production diminishes. A fully automated factory in Ohio and a fully automated factory in Guangzhou may have similar economics. This could accelerate reshoring in capital-intensive industries — not because of tariffs but because the underlying economics of offshoring weaken.
Frequently Asked Questions
Q: Is deglobalisation good or bad? A: It depends entirely on your position in the system. Workers in wealthy countries whose jobs were offshored over the past 30 years benefit from reshoring. Consumers who relied on cheap manufactured imports face higher prices. Workers in developing countries whose development depends on export manufacturing access face disruption if supply chains withdraw. The gains and losses are distributed unequally, which is why this is a political as much as an economic question.
Q: Will China and the US fully decouple? A: Almost certainly not in any near-term timeframe. Total bilateral trade remained near $580 billion in 2023 despite years of tariffs and restrictions. Both economies are too intertwined for rapid complete separation. Targeted decoupling in high-technology sectors — advanced semiconductors, AI hardware, quantum computing — is happening and will continue. General economic decoupling is not.
Q: What does deglobalisation mean for climate change? A: The relationship is complex and often contradictory. Shorter supply chains may reduce shipping emissions, but national industrial policy often conflicts with optimal clean energy deployment — US tariffs on imported solar panels have raised installation costs and slowed solar build-out. The climate transition requires global coordination on technology and finance at precisely the moment when global cooperation is becoming harder.
Q: Is the WTO still relevant? A: Formally yes, practically diminished. Its dispute settlement system is paralysed, its rule-making function has been blocked for years, and major powers increasingly prefer bilateral or regional frameworks. The WTO provides a forum, maintains trade statistics, and holds agreements that still govern trillions in trade — but its ability to constrain powerful members has weakened substantially.
Q: Does deglobalisation make war more likely? A: The theory that economic integration prevents war has mixed empirical support. High bilateral trade did not prevent the US-China tension escalation or Russia's invasion of Ukraine. Some research suggests that asymmetric interdependence (where one side depends more than the other) can actually increase conflict risk by giving the less-dependent party leverage. The relationship between trade and peace is real but not automatic.
Q: How does deglobalisation affect interest rates and monetary policy? A: If deglobalisation is structurally inflationary — raising the price floor for manufactured goods — central banks may face persistent upward pressure on prices that requires higher neutral interest rates than the 2010s environment. The 15-year era of near-zero interest rates was partly a function of globalisation's deflationary pressure on goods prices. Its reversal is one reason why central banks may not return to the ultra-low rate environment of 2012–2022.
The Takeaway
Deglobalisation is not a collapse of world trade. It is a structural reconfiguration driven by three durable forces: supply chain shocks that exposed the fragility of optimised-for-efficiency systems, US-China strategic competition that has made economic interdependence a security liability in critical sectors, and the political backlash in wealthy democracies against the distributional consequences of hyperglobalisation. The result is a world trading system that is growing more slowly, structurally more inflationary, regionally more concentrated, and geopolitically more fragmented than it was in 2005. The institutions built for the era of deepening integration — the WTO most prominently — are ill-equipped for this environment. What comes next is not a return to the postwar trading order, nor a descent into autarky, but a world organised around competing regional blocs that trade with each other selectively, strategically, and always with one eye on the exit.
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SciHub101 is an independent science and technology publication founded and edited by Buğra Sözeri, a software engineer and app developer based in Türkiye. AI tools assist with drafting and research. Source documentation in the existing archive is uneven, and articles are being reviewed and corrected. The Editorial Team byline identifies editorial responsibility; it does not certify specialist or independent human review. Where we compare products, anything built by our own team is labelled as such — see the editorial guidelines and About page for how corrections and disclosures work.
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