- Portfolio Manager
United States, Institutional
Change
The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
Accelerating globalization was a hallmark of the late twentieth and early twenty-first centuries. Now, we’re trending toward a reversal. We explore the roots and potential effects of deglobalization.
How did we get here?
Three central themes underpin today’s shift toward deglobalization:
1. Economics
In the 1990s and early 2000s, major global economies gained access to cheap, formerly inaccessible labor, first from the then-newly disbanded USSR and later from China.
However, incremental benefits from globalization were waning as wages had risen, and then the COVID-19 pandemic laid bare the fragility of many global supply chains, which, in turn, raised security concerns. Major global economies, like the US, became aware of how much they depended on labor other markets and began taking action to change this.
2. Politics
Globalization helped curb global inequality via fast-developing market growth and use of undervalued foreign labor. The other side of the coin is that access to inexpensive labor helped push corporate profits to new highs in developed countries, benefiting capital while reducing labor’s share of GDP, exacerbating domestic inequality.
In the past few years, these dynamics have come under fire and policies have been put in place to restrict the movement of goods, people, capital, and technology. And this isn’t just about competition with China. Legislation such as the Inflation Reduction Act favors domestic industry, including versus allies, such as Europe.
3. Geopolitics
The US-led geopolitical order of the past three decades is changing. China is narrowing its economic and military power gap with the US and offers a different model for developing countries. Granted, China’s economy remains closely intertwined with the US and the world. But the breakdown of the old regime has begun with both military and economic conflicts, such as sanctions against Russia and export restrictions to China, among others. This has increased the risk of western countries’ economic dependence on developing countries whose political structures may not mirror their own.
What does the data say?
For decades, global trade/GDP trended consistently upward. But in the past ten years, it’s been flat.1 Policy-imposed trade restrictions have more than quadrupled since 2017.2
Mentions of “reshoring,” “onshoring,” and “nearshoring” have increased tenfold in corporate presentations.3 And it’s not just talk; manufacturing construction starts in the US are at an all-time high, likely reflecting onshoring projects already underway (Figure 1).
Figure 1
Capital has been impacted too. Russian holdings were wiped out because of conflict in Ukraine and investors were forced to sell Chinese companies caught with sanctions, so investors have become wary of deploying capital internationally.
There’s a clear desire from policymakers and corporations to reverse some aspects of globalization and it’s starting to impact the economy and markets.
Understanding the implications
If deglobalization continues to accelerate, Generally, growth rates will be lower while inflation will be higher as goods and labor become less optimized. Economic cycles may become more volatile amid less international risk-sharing and corporate margins could be pressured, especially among the companies that have benefited from outsourcing labor. There’s also the potential for an increase in capex, especially considering the capex needs of the energy transition and a nascent commodity cycle.
Identifying the opportunities
Despite this rather negative picture for capital markets, opportunities remain. Commodities, for example, could see long-term tailwinds because. less efficient supply chains and competition with domestic industrial sectors for services tend to increase marginal commodity production costs.
What’s more, geopolitical instability creates supply risks. For example, at least 23% of oil production occurs in countries currently facing US sanctions.4 Countries may compete for resources, for example inputs into the energy transition, which can push up prices and further contribute to the deglobalization process.
Gold may stand to benefit both as a risk hedge to a more unstable world and from any weakening in the US dollar’s reserve status. In fact, central bank demand for gold spiked to record highs last year, possibly a result of reserve diversification away from the US dollar and euro after Russia invaded Ukraine.
US Steel companies are a good example of the commodity dynamics at play. Increased manufacturing construction and customers’ focus on a domestic supply chain currently support US steel demand. Meanwhile, tariffs driven by geopolitical concerns are in place, so increased imports cannot alleviate the tightness, which allows for the domestic steel industry to earn elevated profit margins.
Industrials, such as engineering and construction companies, could also benefit from domestic infrastructure spending and onshoring. After a long downcycle, capacity is limited and increased demand could see tightness and significant pricing power. Similarly, services that rent equipment to these engineering and construction companies could benefit. So, too, might rail services as transit between domestic manufacturing hubs increases.
Automation and staffing services could experience a boost from these trends. Decreased immigration and increased desire for local production could tighten labor markets, potentially increasing demand for staffing expertise and for substitution in the form of automation as wages grow.
Deglobalization is here
It appears highly likely that these trends will continue given the confluence of political and economic factors, but the path forward will likely take unexpected turns and the sectors and companies that benefit from shifting market dynamics will ebb and flow with the cycle. But, regardless of how deglobalization takes shape, we believe it will likely be a key market driver going forward.
1International Monetary Fund, 2023. | 2Global Trade Alert, 2023. | 3As of 2022, compared to pre-pandemic levels. International Monetary Fund. | 4International Energy Agency, 2023.
Expert
Related insights
Showing
of
Insights Posts
It’s different this time: Trump faces challenging geopolitical dynamics
Continue reading
3
min
Article
2025-11-30
URL References
Related Insights
Stay up to date with the latest market insights and our point of view.
Read next
Showing
of
Insights Posts
Trump 2.0: US election market impacts
In the wake of the US election, macro strategists Juhi Dhawan and Michael Medeiros join host Thomas Mucha to discuss the market, policy, and geopolitical implications of Trump 2.0.
21
min
Podcast
2025-11-30
It’s different this time: Trump faces challenging geopolitical dynamics
Our expert explores how Trump may approach the heightened geopolitical challenges his second administration faces.
3
min
Article
2025-11-30
Unearthing the unseen in geopolitics
Unearthing the unseen in geopolitics. Watch Geopolitical Strategist Thomas Mucha delve into the investment impact of structural geopolitical shifts and share his latest take on the upcoming US election.
30
min
Event replay
2025-09-30
What’s next after Iran’s missile attack on Israel?
Geopolitical Strategist Thomas Mucha shares his analysis of the latest escalation in the Middle East conflict, including his thoughts on a wider regional war and the market implications.
2
min
Article
2025-10-02
Monthly Market Review — August 2024
A monthly update on equity, fixed income, currency, and commodity markets.
12
min
Article
2025-09-30
Four investment perspectives amid a pivotal US election
How can investors reposition portfolios for a pivotal but highly unpredictable US elections? Nick Samouilhan explores potential avenues in conversation with three leading portfolio managers.
6
min
Article
2025-09-30
Monthly Market Review — July 2024
A monthly update on equity, fixed income, currency, and commodity markets.
12
min
Article
2025-08-31
Harris vs Trump: The foreign policy and investment implications
Our expert examines expected Harris and Trump foreign policies and their potential impact on the investment landscape.
4
min
Article
2025-02-28
Financial Market Review
A monthly update on equity, fixed income, currency, and commodity markets.
17
min
Article
2026-07-31
Monthly Market Snapshot — June 2024
A monthly update on equity, fixed income, currency, and commodity markets.
17
min
Whitepaper
2025-07-31
Surprise French election result: what does it mean for investors?
Macro Strategist Nick Wylenzek and Investment Director Thomas Kramer discuss the surprise French election and its implications for European equities.
4
min
Article
2025-07-31
URL References
Related Insights
Monthly Market Review — August 2024
Continue readingBy
Brett Hinds
Jameson Dunn