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Is the Global Economy Deglobalizing? And if so, why? And what is next?

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  • Pinelopi K. Goldberg
  • Tristan Reed

Abstract

Data on global trade as well as capital and labor flows indicate a slowdown, but not reversal, of globalization post the 2008-09 financial crisis. Yet profound changes in the policy environment and public sentiment in the largest economies over the past five years suggest the beginning of a new era. Increasing anxiety about the labor market effects of import competition from low-wage countries, especially China, laid the groundwork, but was not the catalyst for the reversal in attitudes towards globalization. Similarly, the COVID pandemic provided novel arguments against free trade based on global supply chain resilience, but neither the pandemic nor short run policy response had enduring effects on trade flows. We demonstrate that global trade was remarkably resilient during the pandemic and that supply shortages would likely have been more severe in the absence of international trade. After a temporary decline in 2020, global trade in goods and services increased sharply in 2021. Russia’s invasion of Ukraine raised new concerns about national security and the exposure of supply chains to geopolitical risk. This was followed by demands to diversify away from “non-friendly” countries and to the employment of trade policy, export restrictions in particular, to halt China’s technological development. The future of globalization is highly uncertain at this point, but these new policies will likely slow global growth, innovation, and poverty reduction even if they benefit certain industries in certain countries. Regarding resilience, the main goal of recent trade policy changes, measures of trade volatility or concentration can be helpful, but resilience will be elusive as long as we lack benchmarks against which policy performance can be measured.

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  • Pinelopi K. Goldberg & Tristan Reed, 2023. "Is the Global Economy Deglobalizing? And if so, why? And what is next?," NBER Working Papers 31115, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:31115
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    2. Juanma Castro-Vincenzi & Gaurav Khanna & Nicolas Morales & Nitya Pandalai-Nayar, 2024. "Weathering the Storm: Supply Chains and Climate Risk," NBER Working Papers 32218, National Bureau of Economic Research, Inc.
    3. Cilekoglu, Akin A. & Moreno, Rosina & Ramos, Raul, 2024. "The impact of robot adoption on global sourcing," Research Policy, Elsevier, vol. 53(3).
    4. Awokuse, Titus & Lim, Sunghun & Santeramo, Fabio & Steinbach, Sandro, 2024. "Robust policy frameworks for strengthening the resilience and sustainability of agri-food global value chains," Food Policy, Elsevier, vol. 127(C).
    5. Leonardo Baccini & Arianna Bondi & Matteo Fiorini, 2023. "Global Value Chains and the Design of Trade Agreements," RSCAS Working Papers 2013_56, European University Institute.
    6. Jésus Fernández-Villaverde & Tomohide Mineyama & Dongho Song & Jesús Fernández-Villaverde, 2024. "Are We Fragmented Yet? Measuring Geopolitical Fragmentation and Its Causal Effects," CESifo Working Paper Series 11192, CESifo.
    7. Ciani, Andrea & Stiebale, Joel, 2024. "Export Performance Under Domestic Anti-Dumping Protection," World Development, Elsevier, vol. 183(C).
    8. Aiyar, Shekhar & Malacrino, Davide & Presbitero, Andrea F., 2024. "Investing in friends: The role of geopolitical alignment in FDI flows," European Journal of Political Economy, Elsevier, vol. 83(C).
    9. Mohr, Cathrin & Trebesch, Christoph, 2025. "Geoeconomics," Kiel Working Papers 2279, Kiel Institute for the World Economy (IfW Kiel).
    10. Giovanni Carnazza & Paolo Liberati & Agnese Sacchi, 2024. "Political instability and international trade in the European Union: A network-based approach," Discussion Papers 2024/319, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    11. Eichenauer, Vera & Wang, Feicheng, 2024. "Mild deglobalization: Foreign investment screening and cross-border investment," Kiel Working Papers 2265, Kiel Institute for the World Economy (IfW Kiel).
    12. Ayadi, Rym & Giovannetti, Giorgia & Marvasi, Enrico & Zaki, Chahir, 2024. "Trade networks and the productivity of MENA firms in global value chains," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 10-23.
    13. Antoni Estevadeordal & Gaston Nievas, 2024. "Trade and diplomacy Economic determinants of international cooperation agreements and its effect on international trade in the post World War II era: 1945-2022," PSE Working Papers halshs-04721902, HAL.
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    15. Wassie, Mengistu Alamneh & Kornher, Lukas & Zaki, Chahir, 2024. "Revisiting the Impact of Trade Facilitation Measures in Africa: Structural Gravity Estimation and Ad Valorem Tariff Equivalents," IAAE 2024 Conference, August 2-7, 2024, New Delhi, India 344296, International Association of Agricultural Economists (IAAE).
    16. Cathrin Mohr & Christoph Trebesch, 2024. "Geoeconomics," CESifo Working Paper Series 11564, CESifo.
    17. Vera Z. Eichenauer & Feicheng Wang, 2024. "Mild Deglobalization: Foreign Investment Screening and Cross-Border Investment," CESifo Working Paper Series 11538, CESifo.

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    More about this item

    JEL classification:

    • F0 - International Economics - - General
    • F1 - International Economics - - Trade
    • N0 - Economic History - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other

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