You won’t believe the truth behind the “deglobalisation” myth!

In a world constantly shaped by global events and economic trends, the concept of deglobalization has been a hot topic in recent years. The trade war under former US President Donald Trump and the disruptions caused by the Covid-19 pandemic have brought this idea to the forefront of discussions. However, recent developments suggest that perhaps the process of deglobalization may not be as significant as once thought.

1. Global Trade Trends
   • While global GDP grew by a steady 3.2%, global trade in goods saw a decline of just over 1% in 2023, according to the IMF. This unexpected dip may be a result of the world economy readjusting after the dramatic rebound from the pandemic in 2021-2022.
   • Despite this, global trade had surpassed pre-Covid levels by the third quarter of 2022, driven by the easing of supply chain issues and the need to replenish inventories.
   • The shift in consumer demand from goods to services post-Covid has also played a role in moderating global trade, but recent data points towards a modest expansion since the beginning of 2024.
2. Export Growth Patterns
   • Contrary to the idea of deglobalization, emerging market economies have seen a robust export growth of around 15%, far exceeding the 1% growth rate of advanced economies. This suggests that the process of globalization is ongoing, with emerging economies gaining market share against historically dominant countries.
3. Ratio of Global Trade to Industrial Production
   • A key indicator that has raised concerns about deglobalization is the decline in the ratio of global trade to global industrial production since mid-2022. Many economists fear that deglobalization could lead to inflation and hinder growth.
   • However, a closer look at the data reveals that China plays a significant role in this trend. China’s economic growth has outpaced the rest of the world, leading to a decline in its export-to-production ratio as domestic demand increases.
4. China’s Impact on Global Trade
   • China’s share in global exports has continued to rise in various merchandise categories, indicating its growing importance in global trade.
   • Although China’s import share spiked in 2020, it has since returned to pre-Covid levels, suggesting a complex interplay in global trade dynamics.
5. Globalization Trends vs. Deglobalization Narratives
   • Rather than a clear shift towards deglobalization, the evolving patterns in global trade suggest a more nuanced picture. Strategies like nearshoring and friendshoring may involve geographic shifts in trade but do not signify a complete withdrawal from global markets.
   • The challenges of reshoring production to advanced economies, coupled with historical trends in global trade patterns, further emphasize the complexity of the current economic landscape.

In conclusion, while the concept of deglobalization has sparked debates and discussions, the reality seems more nuanced. The evolving dynamics of global trade point towards a continued integration of economies, with shifting patterns reflecting the ever-changing nature of the global marketplace. As we navigate these complexities, it is essential to observe the data closely and adapt to the changing economic landscape with caution and foresight.