Fracture, not collapse: the return of geopolitics

Globalization hasn’t ended. Under political and security pressure, it’s splintering into blocs and reshaping the economic order.

For a generation after the Cold War, geopolitics seemed to fade into the background. Markets expanded, institutions spread, and globalization became shorthand for an era of deepening interdependence, deregulation, offshoring of production bases, and the invisible, implicitly wise hand of market forces. Alarmists even suggested that history itself, well, political history, had ended. But history declined the invitation. Following China’s change in mood since the ascension of Xi, and the United States’ increasingly inward focus, times have changed. The 2020s have, so far, brought war in Europe, tension in East Asia, and a steady stream of headlines proclaiming the return of geopolitics.

So what does that mean? Well, it’s tempting to interpret this as the death of globalization, tempting to see a binary option of “to globalize or not to globalize”. Yet that misses the deeper pattern. Trade flows continue to rise, capital moves across borders, and migration is expanding. What is changing is the shape of those flows, the political terms under which they operate, and the sectors where barriers are starting to harden. The container ships haven’t yet been recalled to their home ports, nor are we all desperately trying to duplicate China’s manufacturing base in each nation state. 

We are not witnessing collapse, but something more complicated: fracturing.

Fracturing, not deglobalizing

“The global economy starts to splinter into competing blocs.”

“Reglobalization—rather than deglobalization—best describes current integration alongside fracturing across sectors.”

Chatham House.  

Chatham House’s framing is useful: not an end to globalization, but a selective splintering, reglobalization, where supply chains still bind economies, but along lines that are increasingly defined both by security concerns and the level of strategic loyalty. In parallel, Neil Shearing (Group Chief Economist, Capital Economics) has crystallized a similar view in his new book, The Fractured Age, and in a recent FT discussion arguing that “the world isn’t deglobalizing; it’s fracturing,” with trade, capital, and migration remaining resilient in their current patterns, even as strategic alignment, the political landscape, shifts.  

Where the fracture lines run

So, where are the key areas we will see changes?

Semiconductors top the list. Washington has restricted Chinese access to advanced chips and the equipment to make them since the previous administration; Beijing then countered with export controls on critical inputs like gallium and germanium, and the same security logic is bleeding into AI, quantum, and green tech: technology has become too central to national strategy to remain a neutral marketplace. (See Shearing’s FT interview for a useful map of where decoupling will hit the hardest.)  

Energy is another fracture line. After Russia’s invasion of Ukraine, Europe raced to kick its addiction to Russian pipeline gas almost overnight, by buying shiploads of liquefied natural gas (LNG) from places like Norway, the United States, and the Gulf, and to throw up new terminals to handle it at speed. Prices went through the roof in 2022 and, even after calming down, still sit well above what people were used to in the 2010s. The market is still global, sure, gas goes where it’s needed, but the political map of who buys from whom has been redrawn.

Digital rules are fracturing too. Countries are no longer treating the internet as a shared, borderless space. Europe has tough privacy laws (the GDPR), the United States tends to let the market lead, and China runs a much stricter, state-controlled model. For companies, that means one app or service might need three very different playbooks to operate across these markets, a bit like carrying three passports and hoping border guards don’t compare stamps.

Even in consumer goods, where integration looks resilient, the hedging is unmistakable. “China +1” is quietly evolving into “China + many,” with fresh capacity and sourcing across places like Vietnam, Mexico, Poland, and Turkey. So, we’re seeing diversification rather than a wholesale abandonment of China, but with real cost and complexity attached.   

Emerging blocs

The world isn’t shutting down, it’s sorting itself into blocs. That word may sound like Cold War déjà vu from forty years ago and eighties spy movies, but the idea is simple: groups of countries pulling closer together to reinforce shared interests or political/economic alignments. 

The United States and its close allies are tightening rules on trade, tech, and investment to keep their networks secure. China, via its foreign policy strategies such the Belt and Road Initiative in particular, is doing the same in parts of South and Central Asia, and with other initiatives in Africa and Latin America, offering loans, infrastructure, and access to its expanding domestic market with the expectation of a fair dollop of political goodwill (read: favor, or alignment) in return. Chatham House summed it up neatly: the global economy is starting to split into competing camps.

However, the world is not neatly fracturing in two, not yet. Between these competing poles of influence sit the so-called swing states. India, Brazil, Indonesia, Turkey, and others are trading widely, hedging alliances, and resisting binding commitments. Think of them as the Non-Aligned Movement’s sequel: everyone wants to be their friends; but with no strings attached. These choices will determine whether the overall fracture settles into two coherent blocs or drifts into a looser multipolar patchwork. 

Implications

For businesses and investors, this constitutes changes, so the immediate consequence is rising cost and complexity. Duplicate supply chains are less efficient than integrated ones. Divergent standards in different blocs also lift compliance costs, and access is gated by politics as much as price. More blocs using more native systems increases overall complexity, as opposed to the ideal, at least, of globalization, where we would drift towards singular system adoptions with simplification. 

The price chaos of 2022 never really went away, gas and other essentials still swing more wildly than they used to, and companies have to plan as if those ups and downs are the new normal. Where to invest, what markets to enter, and how much risk to take on all become more of a boardroom headache in this fracturing environment.

That reshaping also reaches everyday life. EVs get pricier if battery manufacturing chains must be duplicated across blocs. The green transition is, therefore, prone to slowing, when governments prioritize self-reliance over pure efficiency. Pharmaceutical access gets patchier when vaccine capacity is treated as a strategic hedge, instead of a formalized supply agreement with economic partners. The old globalization promised cheaper goods and faster innovation; whereas the fractured version offers redundancy and resilience, but at a greater price. For more, and if you have a spare weekend to dive deep, read the Centre for Economic Policy Research’s report. (CEPR).  

For governments, the space in which they can cooperate is shrinking. Climate, pandemics, and financial stability all require collective action, but fragmentation weakens institutions and erodes trust. UN climate talks lurch forward unevenly; pandemic treaty efforts stall; and economists worry about mismatched financial rules in an age of mobile capital. The shared incentives that once pushed toward coordination are now giving way to a morass of competing priorities.

For citizens, the effects are subtler but still very real. Inflation shocks ripple through food and energy when supply chains get politicized or tariffs implemented as a part of inward drift to nationalism. Apps and services freely available abroad become off-limits at home. Visas tighten on short notice. And then there’s the new environment of keenly sensed volatility: the background anxiety of knowing your phone or fuel can be recast as a strategic chess piece overnight. (IEA).

High-level geopolitics in context

This is the terrain that frames our coverage. When the Shanghai Cooperation Organization convenes in Tianjin, when India hedges across Eurasian energy and security networks, or when Washington tinkers with export controls, these aren’t isolated headlines. They’re coming into view as chapters in the same story: a fractured era where the forces flip roles and politics outruns economics, leaving globalization to splinter into new shapes. 

We aren’t rewinding to the Cold War, and we’re not shutting down either. We’re navigating strategic splintering: trade continues but on stricter terms; technology divides even as consumer goods connect; blocs harden in some areas while blurring in others. Fracturing may instinctively sound like a bad thing, but at least it is a clearer label than ‘doom’ or ‘nostalgia’. The world remains connected, but the fault lines are now becoming visible, and they’ll continue to shape politics, economics, and security into the 2040s.  

Read this. Notice that. Do something.

• Read this: Chatham House’s concise argument for fracturing over deglobalizing.
• Notice that: energy and tech are where fracture lines impact first; the EU’s scramble to restructure its gas supply and persistent volatility in natural gas prices, plus semiconductor/AI controls as the new trade policy.
• Do something: try to pressure-test any “end of globalization” headlines you see, watch how supply chains re-route, not retreat; keep an eye on swing states like India, Vietnam, Mexico, Turkey, and Poland.

Previously on GYST: India at the SCO summit, another angle on how geopolitics is redrawing the map.