A shifting global order: The structural forces redefining trade and global supply chains
A new global economic landscape is emerging, where shifting alliances, trade policies, and the future of the U.S. dollar signal profound changes.
The global economy appears to be on the precipice of radical change, as the U.S. explores enacting the highest tariff rates in a century and once-stable alliances, such as that between America and Europe, begin to fracture.
“In just the past few months, we’ve seen a sharp acceleration in global economic and geopolitical fragmentation, particularly with the emergence of new U.S. trade policies and shifts in U.S. foreign policy,” said Jon Hoddenbagh, lead project investigator and assistant professor at the Johns Hopkins University School of Advanced International Studies (SAIS).
Academics and policymakers from around the world recently gathered at the Johns Hopkins Geoeconomic Conference at the Johns Hopkins University Bloomberg Center, to consider the changing world economy and examine the structural forces—like sanctions and resilient supply chains for national security—redefining international trade, international finance, and international affairs.
Here are three major takeaways from the discussion.
- The rise of geoeconomic fragmentation hurts global trade
Matteo Maggiori, Moghadam Family professor of finance at the Stanford Graduate School of Business, argued that modern global power is increasingly exercised not through military force but through control over strategic sectors like finance, where countries like the U.S. and China hold concentrated influence.
Additionally, the world seems to be shifting toward geoeconomic fragmentation—marked by reshoring efforts, rising tariffs, and the weaponization of trade policy, according to Pierre-Olivier Gourinchas, the economic counselor and director of research at the International Monetary Fund (IMF). The end of the de minimis rules, which allowed certain low-value shipments to enter the U.S. duty-free, earlier this month signals just one of many structural changes redefining cross-border commerce, he added.
Gourinchas noted that sustained tariff hikes could reduce global GDP by up to 7%. This trade fragmentation isn’t just theoretical, he said. It’s already creating disruptions in supply chains and raising costs for businesses and consumers globally.
Gourinchas called the reset of the trading system “profound” and said it’s unlikely to be reversed anytime soon. Although he admits there is an “incredible amount of uncertainty,” his analysis suggests that tariffs are playing out like a negative supply shock for the country that imposes the tariffs, bringing activity down and inflation up.
“So we are projecting that global trade is going to grow at a significantly lower rate, not just this year, but also in coming years,” he said. “In fact, we could well see a decline in global trade to GDP going forward on a sustained basis, something we haven’t seen up until now.”
- The U.S.’s shift away from economic norms could have resounding impacts
Trade fragmentation is not the only trend affecting the global order. The U.S. dollar’s role as the global reserve currency is also under scrutiny, driven by concerns over U.S. fiscal discipline and the increased use of economic coercion in foreign policy.
Jay Shambaugh, a professor of economics and international affairs at George Washington University and a former U.S. Treasury official, described the current moment as a “seismic shift” in international norms, one that he thinks will be studied 50-100 years from now as a key moment in global economics. He explained how the U.S. has reversed long-standing positions, such as restrained use of economic pressure. He cited the recent example of President Donald Trump threatening tariffs on countries that don’t accept deported migrants.
“So for things that are completely disconnected—it’s not a tariff fight or trade fight—that’s different,” Shambaugh said. “It’s ‘I’m going to connect other political goals to this and do so very explicitly and in a threatening way.’”
He cautioned that this approach upends the idea of a U.S.-led system of rules, and if allies and competitors begin to see the U.S. as an unreliable and unpredictable partner, it could erode long-term trust in both American soft power and the dollar’s global standing.
The fallout from this shift has already sparked discussions in Europe about technological independence. Henry Farrell, a professor at SAIS, and author of the book Underground Empire, said that Europe is exploring the idea of a “Eurostack”—a push for a fully independent technological stack encompassing semiconductors, cloud computing, and AI infrastructure.
“[Europeans are] trying to figure out ways in which they can ensure that Europe has an independent technological future which is not beholden to the United States of America,” Farrell said. “And in particular, is not beholden to the quite untrustworthy United States that we have seen manifesting itself over the last several months.”
- Shifting manufacturing away from China won’t happen overnight
Recent conflicts in trade, such as the U.S.’s 145% tariff on Chinese imports, could reshape global manufacturing and expose the vulnerabilities of hyper-concentrated supply chains. While “decoupling” from China has become a bipartisan goal in Washington, the realities on the ground are more complicated.
Caroline Freund, dean of the University of California San Diego’s School of Global Policy and Strategy, noted that while China’s share of U.S. imports has fallen, replacing China’s manufacturing capacity is complicated. Countries such as India or Vietnam stand to benefit but lack China’s infrastructure.
“China’s hard to replace,” Freund said. “It’s 30% of manufacturing, and with the incredible subsidies, it’s estimated to be an even higher share of global manufacturing in the future.”
The complexity of tech supply chains further complicates efforts to reduce trade with China, Financial Times columnist Gillian Tett said, with most products requiring the involvement of at least five countries. This complexity makes it nearly impossible to sustain technological innovation at the same rate without continued cooperation, she said.
Farrell added that innovation itself is tied to cross-border connections. Fragmenting these networks could have profound implications for technological progress.
“Innovation comes from connections and contrasts between people with different understandings of the world, different understandings of technology,” Farrell said. “And to the extent that we see those kinds of connections being broken off between different countries, I think it is highly plausible that we’re going to see a slowdown in technological progress as a result.”
As trade policies evolve and alliances shift, the global order and economy are entering a period of heightened uncertainty. Long-held assumptions about open markets, U.S. leadership, and stable supply chains are being tested, and experts made clear that we’re not only witnessing temporary disruptions, but deeper structural changes with lasting implications. How governments, institutions, and industries adapt to these changes will shape the trajectory of globalization.