Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/276269 
Year of Publication: 
2023
Series/Report no.: 
BOFIT Policy Brief No. 12/2023
Publisher: 
Bank of Finland, Bank of Finland Institute for Emerging Economies (BOFIT), Helsinki
Abstract: 
This paper utilizes available aggregate country-level data, as well as bilateral trade and investment data, to identify signs of fragmentation in trade and investment patterns among ten major trading countries or regional trading blocks. We compare the trade and investment trends in the years during the US-China trade war and increase in geopolitical tensions (2018-2021) against the years preceding the trade war (2014-2017). Our analysis generally corroborates findings in the existing literature. Bilateral flows between the US and China have been damaged, but there is little evidence of wider fragmentation or that the world is splitting into competing spheres. Even focusing on technologyintensive manufactures that are increasingly subject to trade restrictions, we find no evidence of broad fragmentation. Our analysis does reveal, however, shifts in global trade and FDI, particularly towards Central and Eastern Europe (CEE) and ASEAN countries. This may reflect a partial reshuffling of global value chains that is a natural outcome of favorable developments in these regions, as well as rising production costs in China. Such shifts do not necessarily reflect global fragmentation driven by geoeconomics factors.
Subjects: 
Global trade
foreign direct investments
fragmentation
Persistent Identifier of the first edition: 
Document Type: 
Research Report

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