The world is reeling. The United States’ announcement of sweeping new tariffs on nearly all countries has rattled global markets.
Malaysia faces a 24 per cent tariff under what Washington calls “reciprocal tariff rates” – aimed at neutralising America’s trade deficits with the rest of the world.
But economists are questioning the rationale behind the numbers. The big question remains: Will such protectionist measures bring manufacturing back to the US – making America great again – or will they derail globalisation, the key driver of global growth in recent decades?
Trade agreements now seem almost meaningless. The World Trade Organisation (WTO) – once hailed as the champion of fair trade – has been rendered nearly powerless.
Globalisation is facing major headwinds. Protectionism, geopolitical tensions, and shifting economic policies are disrupting the integration of global markets. While it’s too early to declare a full retreat, the signs of fragmentation are clear.
Several key factors are driving this pullback.
Protectionism is on the rise. Trade wars and shifting industrial strategies are reducing reliance on global trade.
Geopolitical tensions are worsening. The war in Ukraine, US-China decoupling, and rising sanctions have disrupted supply chains and led to the emergence of economic blocs.
The Covid-19 pandemic exposed vulnerabilities in global supply chains, prompting many nations to push for self-sufficiency in critical sectors.
National security concerns are growing. Technology restrictions – such as semiconductor bans and export controls – are limiting cross-border cooperation. Anti-globalisation sentiments in Western democracies have triggered more inward-looking policies.
The global consequences
The economic impact will be far-reaching. Protectionism inevitably raises costs and fuels inflation – through tariffs, redundant supply chains, and reduced efficiency.
Slower growth is almost certain. Trade has been a key driver of global GDP. Fragmentation risks lowering productivity and stifling innovation. Supply chain disruptions are becoming harder to avoid, exposing companies to geopolitical risks and operational inefficiencies.
Foreign investment is likely to decline. Increased uncertainty may deter capital flows, especially into emerging markets. A split tech ecosystem could hamper progress in artificial intelligence (AI), green technology, and semiconductors.
We are moving towards a less interconnected global economy. Some regions may benefit from strategic autonomy, but the challenge will be to balance national security with economic efficiency and resilience.
Impact on emerging markets
Emerging markets – which have long benefited from globalisation via trade, investment, and technology transfers – now face a mixed outlook.
The shift towards protectionism and tech decoupling could pose severe challenges for some, while creating new opportunities for others.
Countries like Vietnam, Mexico, and Bangladesh have thrived as manufacturing hubs in global supply chains. Trade barriers, however, could shrink their export markets.
If the US and European Union cut dependence on Chinese manufacturing, Southeast Asia may see slower growth in electronics and textiles. Technology decoupling may also mean Western firms will avoid investing in countries perceived as too close to their rivals.
Semiconductor and AI restrictions could limit access to critical technologies, hurting industrialisation in economies like India, Indonesia, and Brazil.
Opportunities amid the uncertainty
Despite the gloom, there are potential bright spots. Countries like Mexico, India, Vietnam, and Poland could benefit as Western firms look to diversify their supply chains away from China.
Mexico’s exports to the US have hit record highs amid a surge in nearshoring. India is pushing into semiconductor manufacturing. Indonesia is boosting nickel processing. Vietnam is experiencing an electronics boom.
Some emerging economies are carving out alternative tech alliances. Saudi Arabia and the UAE, for instance, are investing heavily in AI and fintech, independent of Western or Chinese influence.
Commodity-driven economies may also benefit. Latin American nations like Chile and Argentina (lithium) and African countries like the Democratic Republic of Congo (cobalt) are poised to gain from rising demand for minerals used in green technology. However, a slowdown in China’s economy could still hit these exporters hard.
A divided future
The future for emerging markets will be uneven. Winners will be those able to attract investment, build local technological capabilities, and avoid over-reliance on any single global power.
Losers will be those mired in debt, heavily dependent on a single export market, or caught in geopolitical crossfire.
The greatest risk is a new ‘Cold War 2.0’ – an economic divide that leaves many emerging markets struggling to access capital, technology, and trade routes, leading to slower growth and deepening inequality.
The views expressed here are the personal opinion of the writer and do not necessarily represent that of Twentytwo13.
