- 31/3/2025

Multi-globalisation as a means of breaking the yoke of American dependence

4 min

The era of hyper-globalisation is over. Between 2000 and 2008, global trade grew by around 6% each year. Since the 2008 financial crisis, this growth has declined by half. During his first mandate, Donald Trump increased tariffs on many Chinese products, causing China's share of American imports to drop sharply. Since then, however, Chinese products have been imported into the U.S. through trade diversion. Since 2019, Chinese companies have invested heavily in factories, particularly in Vietnam. The latter assembles imported Chinese intermediary products and then exports finished products to the U.S.

A new phase in global trade

In addition to tariff avoidance, this is a logical next step in the history of Chinese growth. Outsourcing to China due to its cheap labour has reached its limits. The country currently accounts for 35% of global industrial manufacturing. Its production thus exceeds that of the nine next-largest manufacturers combined. Alongside the increase in technological knowledge and productivity in recent decades, wages have also risen. Today, China outsources low-skilled labour to low-cost emerging countries, just as Western countries used to do to China.

This is a good thing for these emerging countries. It means they can follow the development path of their illustrious predecessor, achieving growth through exports. Countries that participate in the complex global value chain are developing faster, importing skills and technologies, and creating jobs. "The biggest leap forward occurs when countries move from exporting commodities to exporting simple industrial goods (such as clothing) based on imported inputs (such as textile products)," states the World Bank. Thailand, Cambodia, and Vietnam, among others, are following this path. Vietnam's share of U.S. imports has surged to around 9% since 2018, more than doubling its previous level.

‘Reciprocity’ – the buzzword

Donald Trump is now threatening to increase tariffs on imports from all countries. The diversion of Chinese exports therefore no longer makes much sense. Reciprocity, the new keyword of the U.S. administration, also implies that emerging countries, which have higher customs tariffs to protect and develop their domestic industry and employment, will be proportionally more affected than other countries. With a strong trade surplus compared to the U.S. and a high importance of this trade in their own economy, these emerging countries are extremely vulnerable. Globalisation is therefore likely to give way to deglobalisation. Developing countries will no longer be able to grow through the traditional path of more global trade.

Where one door closes, another opens. Where globalisation stops, regionalisation offers an alternative solution. In the last 40 years, intra-regional trade in Asia has increased by 43%. President Trump is now forcing these countries to follow this path, even more than before. Today, more than half of Asian trade is regional, and this is set to increase.

The European response

This must also be part of the European response to a future increase in U.S. customs tariff rates. 20% of trade from non-EU countries goes to the U.S. However, 62% of the EU's trade occurs between Member States. Despite this high percentage, growth potential is significant at this level. Today, the barriers to trade between EU Member States are substantial, with 53% for goods and 110% for services. A reduction of these barriers to 13% – the U.S. level for commodities – would significantly increase both intra-European trade and the resulting productivity, according to the IMF.

Increase in digital services trade

A second important pillar of this multi-globalisation model is a relative increase in digital services trade to compensate for the slowdown in commodity trading. The share of 'other commercial services' – all services other than transport and travel – has doubled over the last 30 years. These are mainly 'intermediary' services or services provided between two or more parties, such as financial accounting, IT services, consultancy, etc., which can stimulate globalisation, says Richard Baldwin, Professor of International Economics at the IMD Business School in Lausanne, Switzerland.

Advanced digitalisation – telepresence, universal language machines – facilitates the provision of digital services. It is practically impossible to levy customs duties on intermediary services. Demand for these services is strong in developed countries, as intermediary services are needed both in the production of goods and the provision of services. Here too, administrative tasks and other services must be provided. At the same time, in emerging countries, there are many skilled people – working with or without next-generation AI – who can provide these services digitally at a fraction of the price in developed countries.

An unreliable ally

Proclaiming the death of globalisation is therefore premature. Now that the U.S. has revealed itself to be an unreliable ally, countries will however opt more for regional business partners, with the added benefit that it makes the supply chain less complex and less risky. The slowdown in trade in goods subject to higher customs duties will also be offset by increasing outsourcing of intermediary digital services. Globalisation is transforming into multi-globalisation and is helping many countries and regions shake off the yoke of U.S. dependence. It is unlikely that the U.S. will emerge victorious from this evolution.