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Geoeconomic Fragmentation and the Role of Non-Aligned Countries

Author

Listed:
  • Andreas Baur

    (ifo Institute and LMU Munich)

  • Florian Dorn

    (ifo Institute and LMU Munich)

  • Clemens Fuest

    (ifo Institute and LMU Munich)

  • Lisandra Flach

    (ifo Institute and LMU Munich)

Abstract

We analyze how non-aligned countries affect welfare outcomes in scenarios of global trade fragmentation. Using a quantitative trade model covering 141 countries and 65 economic sectors, we simulate different scenarios of geoeconomic fragmentation. We find that major non-aligned countries benefit from their neutral position, with welfare gains of up to 0.7%. Their manufacturing sectors particularly benefit under incomplete fragmentation, experiencing value added gains of 2.5%, while agriculture and services face modest declines. These gains turn into significant losses if they join either the Western or Eastern trade bloc. Moreover, world welfare losses increase from -1.9% under incomplete fragmentation to -2.7% when non-aligned countries join the West and to -3.7% when they join the East. Our results highlight the strategic importance of non-aligned countries in mitigating the negative effects of global trade fragmentation.

Suggested Citation

  • Andreas Baur & Florian Dorn & Clemens Fuest & Lisandra Flach, 2025. "Geoeconomic Fragmentation and the Role of Non-Aligned Countries," Rationality and Competition Discussion Paper Series 526, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:526
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    More about this item

    Keywords

    trade policy; gains from trade; global value chains; quantitative trade models; general equilibrium;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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