Trading differently, not less: when resilience beats efficiency

Predictions of globalisation's demise have proved premature. Trade is adapting to a world where resilience and economic security matter as much as efficiency.

For much of the past three decades, companies constructed supply chains with the simple objective of minimising costs. Falling trade barriers and increasingly integrated global markets allowed production to move across borders efficiently. The result was a sustained expansion of global commerce and increasingly interconnected economies benefiting from a dense ‘free trade’ network.

That model has come under pressure. The first Trump administration's tariffs on China, the disruption caused by the Covid-19 pandemic and the energy shock that followed Russia's invasion of Ukraine all exposed vulnerabilities in these supply chains, which were optimised for cost rather than resilience. More recently, renewed US tariff measures and rising strategic competition between the US and China have reinforced concerns about economic security.

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Such developments have led many observers to argue that trade is entering a de-globalisation phase. Yet the evidence suggests that trade continues to grow. Global trade in goods and commercial services reached a record USD 35 trillion in 2025, according to the World Trade Organization (WTO), an increase of 4% from the previous year. Goods trade rose by 6%, while services expanded by 8%. Rather than withdrawing from international commerce, businesses have therefore adapted by diversifying suppliers, carrying larger inventories, and building greater flexibility into their operations. And, with few exceptions, other nations have not retaliated against the US import measures, which are often applied to raw materials needed by American manufacturers and act largely as a tax on US consumers and industries.

The result is a ‘slowbalisation,’ with international supply chains increasingly designed to withstand disruption. Goods are still crossing borders, although they often travel through more complex routes and involve greater redundancy than in the past.

Economic security comes at a price

The clearest consequence of this shift is the growing emphasis on economic security. Countries that once relied heavily on global markets for energy, industrial capacity, and critical technologies seek greater control over strategically important resources and capabilities.

This has altered the geography of global trade as companies are redesigning supply chains, diversifying manufacturing locations, and using intermediate countries to manage tariff exposure and geopolitical risks. Trade no longer follows the shortest route between producer and consumer. Increasingly, it follows the most resilient one.

But resilience comes at a cost. That’s because more diversified supply chains require duplication, additional inventories, and alternative production capacity. Governments are investing in energy security, strategic infrastructure, and national defence while businesses redesign operations around redundancy and operational flexibility. Efficiency remains important, but it is no longer the sole objective.

A new investment cycle

While these adjustments raise costs, they also have significant economic and investment implications. Governments are committing resources to industrial policy, energy security, and defence for strategic reasons rather than short-term economic objectives. Companies are making similar decisions as they seek more robust supply chains and greater operational flexibility. Together, these choices are generating a durable source of investment demand.

Efforts to strengthen economic security also require sustained capital expenditure. New semiconductor fabrication plants for example require construction, specialised equipment, and advanced technology. More diversified energy systems demand investment in generation, transmission, and storage. Higher defence spending supports manufacturing, engineering, and innovation. Every attempt to improve resilience can therefore create demand somewhere in an economy.

The spending associated with economic security is consequently proving structural rather than cyclical. This helps explain why corporate profits and financial markets have remained more resilient than many expected despite tariffs, geopolitical tensions, and repeated supply-chain disruptions.

Investment implications

The winners of the globalisation era were often businesses that reduced inventories, concentrated production, and drove costs lower through increasingly efficient international supply chains. Today’s environment rewards supply-chain resilience, access to critical resources, technological leadership, and exposure to long-term investment programmes. Many beneficiaries are likely to be the companies providing the equipment, materials, and expertise needed to build a more secure economic system.

Read also: Rethinking stability: investing in a multipolar world

Trade fragmentation and economic security is therefore likely to remain a defining feature of the global economy for many years. Global trade may grow more slowly than during the more expansive decades of globalisation, while tariffs and geopolitical rivalries remain headwinds for growth and add inflationary pressures. However, these challenges are accompanied by a powerful investment cycle. Strategic competition, particularly between the US and China, is reshaping trade flows, investment priorities and industrial policy. In short, globalisation as we knew it in the wake of the Cold War may be over, but the world is trading differently, not less.

As governments and businesses adjust to that reality, the pursuit of resilience is generating new waves of investment across the global economy. For investors, the capital spending that finances these trends may prove just as significant as the globalisation boom that preceded it.