Article
Rewiring globalization: Five geoeconomic trends transforming the business environment
The Deloitte Geoeconomics Index identifies the major drivers behind geoeconomic shifts, highlighting where businesses will need to adapt
As geopolitical tensions surge, it becomes increasingly relevant for businesses to understand the international geopolitical and economic landscape to mitigate risks and build resilience. Our new Whitepaper builds on the proprietary Deloitte Geoeconomic Dynamics Index that combines different dimensions of international connections. We provide a holistic picture of how international partnerships have changed and what major trends will shape geoeconomics in the future. The Whitepaper pays special attention to where Europe can find new opportunities in this rewired globalization and where it retains critical dependencies.
Globalization is undergoing a period of significant transformations. Marked by the aftermath of the COVID-19 pandemic and arising global conflicts, the 2020s signal a pivot in the global economic and political environment. These geopolitical crises have a profound impact on economies, supply chains, and trade worldwide – setting the stage for a new form of globalization.
As politics and economics are increasingly intertwined, it becomes essential for businesses to build competencies to understand and navigate these challenges. To address these questions, we leverage the Deloitte Geoeconomic Dynamics Index that quantifies the linkages between countries at a highly granular level over time. Based on over 32 million datapoints, the Index combines economic with geopolitical variables to quantify the depth of connections between countries and regions.
This design allows for an in-depth analysis of trends and drivers of geoeconomic shifts. Specifically, we answer four core questions:
Five geoeconomic key trends
1. Global linkages are on the backfoot
Globalization, which flourished, particularly before the Great Financial Crisis, has seen a lot of volatility over the last 15 years. However, since 2020, Covid-19 and increasing fragmentation caused a stagnation and then a severe downturn in the depth of international connections.
2. Global divergent drivers
The increasing global fragmentation is driven by declining geopolitical cohesion. But, while geopolitical tensions are rising and geopolitical ties are fracturing, economic factors, including trade, financial integration, and social connectivity, remain robust.
3. Regional integration accelerates amidst global
reorientation
Increasingly, intensified regional integration is compensating for the declining global linkages. Countries in Asia, Europe, and North America are focused on building up their intra-regional partnerships. Europe, in particular, is redefining its international relationships, focusing on new partnerships and adjusting its trade dynamics in response to geopolitical shifts.
4. Strengthening Western and transatlantic ties
With stronger regional integration, there is also a trend towards deepening connections between politically aligned countries. The transatlantic relationship between Europe and the United States has deepened and can deliver new growth opportunities in the future.
5. The EU remains dependent on critical international supply chains
Even within the ongoing geoeconomic reorientation, Europe's supply chains in critical sectors like chemicals, pharmaceuticals and technology remain dependent on international partners for inputs. The EU's trade dynamics reveal a strategic pattern of importing intermediate products predominantly from the United States, China, and Switzerland.
Those businesses who proactively integrate geoeconomic factors into their strategies will be better positioned to gain a competitive edge in this new environment.
Dr. Alexander Börsch, Chefökonom & Director Research
For companies, navigating these geoeconomic trends poses an important challenge. Businesses should expect disruptions and shifts to become more common in this transformative era. Building geoeconomic resilience will therefore be essential to maintain competitiveness.
For more information, please download the Whitepaper here.
Ihre Ansprechpartner
Dr. Timo Walter
Associate Manager | Economics
twalter@deloitte.de
Samuel Günther
Senior | Economics
samguenther@deloitte.de
