Post: Global Trade Moves Toward Fragmentation, Says QNB

Accra:Qatar National Bank (QNB) Global trade is transitioning from rapid globalization to increased fragmentation, a shift that has evolved over a generation. Initially marked by 'hyper-globalization' in the early 2000s, followed by 'slowbalization' in the next decade, the current landscape is now characterized by greater fragmentation and policy constraints. According to Qatar News Agency, QNB's weekly commentary suggests that this shift has reshaped rather than dismantled trade and supply chains, leading to new agreements influenced by strategic and geopolitical factors. These changes have significant implications for global growth, prices, and the development prospects of emerging economies, which have relied on open markets to support growth. Global trade was a major economic driver at the start of the 21st century. Between 2000 and 2024, trade in goods and services nearly quadrupled, with the trade-to-global-output ratio peaking at around 60% in 2008. The global financial crisis marked a turning point, ending the 'hyper-globalization' era and leading to slower trade growth. The report highlights that trade momentum has waned, entering a turbulent period due to tariffs and trade restrictions. Understanding this shift is crucial, as trade has been a powerful engine of global economic growth and poverty reduction. QNB's analysis reviews three phases of global trade evolution the rapid expansion of the 2000s, the 'slowbalization' post-financial crisis, and the recent rise in protectionism reshaping global commerce. The 2000s saw deepening global trade integration, driven by China's WTO accession, global value chains, and reduced trade costs. During this period, trade expanded at twice the rate of global output, increasing the trade-to-GDP ratio and integrating emerging markets more deeply into the global system. Emerging markets' share of total global trade rose from about a quarter in the early 2000s to 40% today. Post-2008, trade growth slowed, with the trade-to-global-output growth ratio decreasing. This was attributed to the maturation of global value chains and a shift towards domestic demand-driven growth in major economies like China. Trade openness plateaued, leading to the term 'slowbalization.' The most significant phase has been the rise of protectionism, with new trade-restrictive measures doubling from 3,000 to 6,000 per year between the decades ending in 2010 and 2020. The value of imports affected by tariffs and import measures rose fourfold in the past year, with tariffs and trade-policy uncertainty reaching new heights. QNB concludes that trade fragmentation is increasingly occurring along geopolitical lines, redirecting commerce to more reliable partners. This raises costs, reduces efficiency, and negatively impacts global productivity over time. After world merchandise trade grew by nearly 3% in 2024, a sharp slowdown is expected, with warnings from the World Trade Organization about the risks of trade-restrictive measures and policy uncertainty.