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Fragmentation in International Investment and Trade

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  • Juuso Kaaresvirta
  • Eeva Kerola
  • Riikka Nuutilainen

Abstract

We study the signs of fragmentation—that is, the process of weakening economic interdependence between blocs of countries—in world trade and investment during the U.S.–China trade war (2018–21) relative to the period preceding it (2014–17). We show that although bilateral flows between the United States and China have been badly hurt, there is still little evidence of a wider fragmentation, even for technology intensive manufactures. We find some shifts in global trade, especially toward Central and Eastern Europe and ASEAN countries. This may reflect partial reshuffling of global value chains but is not necessarily driven by geoeconomic factors. Both China and the United States have been favoring these regions during the trade war.

Suggested Citation

  • Juuso Kaaresvirta & Eeva Kerola & Riikka Nuutilainen, 2024. "Fragmentation in International Investment and Trade," Asian Economic Papers, MIT Press, vol. 23(3), pages 55-71, Fall.
    • Handle: RePEc:tpr:asiaec:v:23:y:2024:i:3:p:55-71
    DOI: 10.1162/asep_a_00907
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