Deglobalization and Regionalization

Globalization increased after World War II, accelerating to hyperglobalization in the 1990s and 2000s. The financial crisis in 2008 slowed down this trend, and various disruptors of the last few years are causing a shift towards deglobalization. Supply chain challenges during the COVID-19 pandemic resulted in increased onshoring (domestic outsourcing instead of offshoring) activities. In addition, the war in Ukraine, ideological differences between governments, and differing sustainability approaches are spurring the trend toward rethinking external dependencies, redefining trusted partners, and reframing what resilience looks like.

Geopolitical goals are becoming an increasingly deciding factor in economic policy and international trade. Ambitions for self-sufficiency and independence from rival powers are resulting in increased friend-shoring and onshoring financed through subsidies, policy, visa bans, and even the exclusion of companies from specific markets. U.S. companies are reducing their investments in China and actively seeking alternative manufacturing locations, and to protect its farmers, Arkansas passed legislation to ban foreign companies from owning agricultural land. Meanwhile, the EU approved tariffs on electric vehicles from China following an anti-subsidy investigation, and inbound or outbound investment screening practices are being considered in the U.S., Switzerland, and other places.

With growing competition on the global stage, the use of tariffs and sanctions has increased political influence over the emerging trend toward deglobalization. However, according to a recent Farsight Magazine interview with Parag Khanna, a leading global strategy advisor, these policies may be isolating Western countries, which comprise only 12 percent of the world's population, from the rest of the world. For the other 88 percent, a trend toward reviving traditional values and rejecting Western influence seems to be on the rise. The consequence is a trend toward multialignment among some countries, such as India, which are choosing to partner with multiple countries and players on both sides.

This trend is likely to accelerate and broaden in 2025 with the upending of global trade markets by President Trump's imposition of new tariffs on traditional U.S. foes and allies alike. These global dynamics could have local economic consequences for business operations, and planners should be aware of new policies as they are introduced.