We have long lived in an age of globalization, where goods and services flowed freely across borders under the banner of "economic efficiency." But today, most indicators suggest the world is moving toward "economic fragmentation," or what some call "slowbalization." Economic analysis shows this fragmentation is driven by the geopolitical rivalry between the United States and China, with each power striving to build its own economic bloc, relying on its allies and partners.
This fragmentation is clearly evident in supply chains. In the past, companies chose where to produce based on cost. Today, regulations and geopolitical concerns play a decisive role. We see a strong trend toward excluding Chinese technology from Western infrastructure (such as Huawei's 5G networks), while China, in turn, is striving for self-sufficiency in semiconductors and artificial intelligence to avoid dependence on Western technology.
The result is "investment doubling." Companies may be forced to build dual production lines: one for the Western bloc and another for the Eastern bloc, driving up operating costs and reducing global efficiency. The International Monetary Fund has warned that this division could cost the global economy up to 7% of GDP in the long run—a staggering figure equivalent to years of lost growth.
The most affected sector is digital technology. A war is raging over standards and data. The United States is imposing restrictions on the export of artificial intelligence chips, and China is imposing restrictions on outward data flows. This makes it difficult for global companies like Apple and Microsoft to operate in a unified global environment, as they may be forced to offer different or separate products for each market.
Third-world countries face a difficult dilemma in light of this division. Historically, these countries have benefited from the East-West competition to secure investment and better trade terms. But now, the pressure is mounting to choose a side. Major powers may refuse to provide technology or support to countries they consider allied with the other side.
In conclusion, the globalization of the 2000s is receding, to be replaced by an ecosystem of regional economic blocs. This shift will make goods more expensive, inventions less widespread, and international relations more strained. The economic future will be less efficient but may be "more secure" geopolitically, as companies reduce their reliance on their governments' adversaries.
