Iqra Zar
Throughout much of the post-Cold War era, the central narrative of the global economy was integration: decreasing tariffs, growing supply chains, and an increasing agreement that trade openness was a pathway to mutual prosperity. That narrative is no longer the sole one being shared. Since 2022, an alternative narrative has emerged, wherein governments view trade not just as an economic transaction but also as a national security issue.
The IMF clearly characterizes this change as a “policy-driven reversal of global economic integration,” and its most recent World Economic Outlook anticipates an average growth in world trade volume of only 2.9 percent in 2025–26, a decline from 3.5 percent in 2024, with “ongoing trade fragmentation restricting benefits.”
This transition unfolds in real time; what stands out to me the most is not that fragmentation is occurring, but rather how selectively and unevenly it is occurring, which is exactly why it warrants more detailed examination than the sensational headlines often permit.
Economic fragmentation indicates the shift or reconfiguration of international economic connections based on political considerations instead of solely commercial interests. It is propelled by multiple interrelated factors: escalating geopolitical rivalry between the United States and China, sanctions enacted after Russia’s invasion of Ukraine, restrictions on semiconductor exports and other dual-use technologies, and a wider evaluation of supply-chain weaknesses revealed by the COVID-19 pandemic.
Administrations that previously prioritized efficiency as the main factor in sourcing choices now consider resilience and strategic independence in addition to expense. The outcome is not a cohesive withdrawal from globalization but rather a mosaic of limitations added to an otherwise operational trading framework.
This is the central argument worth making: fragmentation is transforming global trade, not ending it. The evidence for this lies in how firms and states are actually adapting, rather than in the rhetoric surrounding decoupling. A WTO analysis of global trade patterns finds that despite widespread talk of reshoring, companies have mostly pursued diversification, adding alternative suppliers rather than eliminating foreign sourcing altogether.
Nearshoring to Mexico, friend-shoring toward Vietnam and India, and the proliferation of regional trade agreements such as the African Continental Free Trade Area all point to reorganization rather than retreat. A separate WTO working paper confirms that trade flows have grown measurably more sensitive to geopolitical distance since the war in Ukraine began, evidence that alignment, not autarky, is becoming the organizing principle of trade.
The three biggest economic blocs are influencing this transition differently. The United States has integrated tariff escalation with industrial strategy, employing tools like the CHIPS Act to bring back essential manufacturing while upholding tariffs that, according to WTO projections, still impact 2026 trade expansion. Confronted with stricter Western limits on technology transfer, China has intensified its focus on diversifying exports to Southeast Asia and the Global South, enabling Vietnam to achieve some of the quickest export growth globally.
The European Union has adopted a balanced approach referred to as “de-risking, not decoupling”, a strategy established through its Economic Security Strategy and Critical Raw Materials Act, aiming to lessen reliance on China in specific critical areas while maintaining the overall trading relationship. None among the three is opting for solitude; each is adjusting their level of exposure.
For developing and emerging markets, this adjustment brings a varied legacy. On the one hand, diversifying supply chains has generated real opportunities: nations identified as “connector economies” between competing blocs have attracted fresh investment and manufacturing efforts that previously could have remained in China.
Conversely, the IMF has previously projected that a complete division of the global economy into competing factions could decrease worldwide production by nearly 7 percent in the long term, losses that would primarily impact smaller, trade-reliant economies that are least able to withstand them. Increased input expenses, redundant infrastructure, and diminished economies of scale are already evident in industries compelled to establish parallel supply chains.
According to the WTO, Africa’s services exports are anticipated to increase at about half the global pace through 2026, highlighting how fragmentation could exacerbate rather than lessen the divide between economies with negotiating leverage and those lacking it.
None of this supports fatalism. The nations and companies navigating this transition most effectively are not those withdrawing into self-reliance, but rather those focusing on adaptability, varied sourcing, enhanced regional cooperation, and being involved in multiple supply-chain networks simultaneously.
For policymakers in economies such as Pakistan’s, this indicates a distinct priority: enhancing regional trade connections, reducing regulatory barriers that hinder small exporters from adjusting supply chains, and participating in multilateral platforms instead of remaining passive while fragmentation settles.
Global trade is not reverting to its pre-2018 path, but it is also not vanishing. The more critical question for researchers and policymakers is not if globalization endures, but which countries develop the resilience to stay essential in whatever form it takes next.
The author is pursuing an MS in Media Science at Bahria University, Islamabad. She has remained associated with PTV News in the current affairs and news department and has also worked with Rethinking Economics Islamabad on research and writing.
