Trade Fragmentation Unveiled: Five Facts on the Reconfiguration of Global, US and EU Trade

Abstract

We examine recent changes in trade patterns amid rising geoeconomic fragmentation and present five key findings. First, a broad retreat from globalization is not taking place. Second, selective decoupling along geopolitical lines is ongoing, mostly driven by the weakening of specific trade relationships. Third, the US has been reducing its dependency on China since 2018, while the EU saw a decline only in 2023, driven mostly by a few advanced technology products (ATP). Fourth, not all dependencies on China are decreasing: the US and EU are increasingly importing Chinese goods critical for the green transition. Fifth, US supply chains from China are lengthening, with intermediate production stages shifting to third countries. Granular data for Italy show that an increasing share of ATP imported from other EU economies are of Chinese origin, suggesting that reductions in dependencies from China may be less significant than those emerging from aggregate data even for a large EU country. 

Keywords: globalization, trade decoupling, supply chains, advanced technology products

JEL Classification: F01, F10, D57