AN International Monetary Fund (IMF) study underscores the growing impact of US-China tensions on global trade dynamics, reports Bloomberg.
Unlike the stark divisions of the Cold War era, the current scenario is characterised by subtle yet significant fragmentation, with trade flows showing distinct patterns between US-aligned and China-aligned blocs.
Since Russia's full-scale invasion of Ukraine in 2022, trade volumes between countries aligned with the us and those closer to China have declined notably compared to intra-bloc trade.
Similarly, foreign direct investment projects have decreased more significantly between these blocs than within them.
Although the level of fragmentation remains relatively contained relative to the Cold War era, the IMF warns that prolonged geopolitical tensions and increased trade barriers could exacerbate this trend.
The emergence of 'connector' economies-non-aligned nations facilitating trade between the US and China - has mitigated some effects of fragmentation but underscores the complex interplay of global economic forces.
The study highlights the importance of maintaining open and inclusive trade policies to mitigate further economic disruptions arising from escalating US-China tensions.
'The magnitude of the decline is both economically and statistically significant,' said the paper.
'While the extent of fragmentation is still relatively small and we do not know how long-lasting it will be, the decoupling between the rival geopolitical blocs during the Cold War suggests it could worsen considerably should geopolitical tensions persist and trade restrictive policies intensify.'
SeaNews Turkey
Unlike the stark divisions of the Cold War era, the current scenario is characterised by subtle yet significant fragmentation, with trade flows showing distinct patterns between US-aligned and China-aligned blocs.
Since Russia's full-scale invasion of Ukraine in 2022, trade volumes between countries aligned with the us and those closer to China have declined notably compared to intra-bloc trade.
Similarly, foreign direct investment projects have decreased more significantly between these blocs than within them.
Although the level of fragmentation remains relatively contained relative to the Cold War era, the IMF warns that prolonged geopolitical tensions and increased trade barriers could exacerbate this trend.
The emergence of 'connector' economies-non-aligned nations facilitating trade between the US and China - has mitigated some effects of fragmentation but underscores the complex interplay of global economic forces.
The study highlights the importance of maintaining open and inclusive trade policies to mitigate further economic disruptions arising from escalating US-China tensions.
'The magnitude of the decline is both economically and statistically significant,' said the paper.
'While the extent of fragmentation is still relatively small and we do not know how long-lasting it will be, the decoupling between the rival geopolitical blocs during the Cold War suggests it could worsen considerably should geopolitical tensions persist and trade restrictive policies intensify.'
SeaNews Turkey
