The Death of Globalization: Assessing the Evidence and Consequences

Trade as a share of GDP has plateaued since 2008, but this alone does not prove deglobalization.

World imports rebounded sharply in 2021 after the pandemic dip, and intermediate-goods trade has continued to grow, indicating ongoing participation in global value chains.

Why: Practical limits exist on how many goods can be shipped versus locally produced, and richer economies naturally shift toward more locally consumed services.

"Because the decline is small and trade as a percentage of GDP is still close to its highs, a lot of people are describing this as more of a slowdown in globalization, it is not exactly a reversal of trend."

Capital and labor markets show no clear downward trend in globalization.

Inward FDI stock remains near 60% of GDP in the U.S. and the rest of the world; Germany and the U.S. continue to absorb migrants at rising shares of population.

Why: Financial and human capital flows respond to different incentives than goods trade, and policy restrictions have so far targeted goods more than capital or labor.

"In the United States and the rest of the world, the stock of inward FDI investment accounts is valued at nearly 60% of GDP and shows no major downward trend."

Governments, not firms or voters, are driving the new wave of trade restrictions.

Goldberg & Reed find firms sought to diversify suppliers after COVID but still keep existing ones; policy changes such as U.S. semiconductor export bans and the CHIPS Act came ahead of broad private-sector demand.

Why: Policy responds with a lag to sentiment, but current restrictions appear anticipatory rather than reactive to immediate economic pressure.

"The paper argues that governments are not actually responding to private sector demand or voter demand with these new trade restrictions, but are instead driving this trend."

National security has become the dominant justification for trade intervention.

Mentions of “national security” in news articles now exceed levels seen right after 9/11, underpinning U.S. export controls on semiconductors and EU concerns over U.S. subsidy discrimination.

Why: Security externalities override traditional comparative-advantage logic when critical supply chains are perceived as vulnerable.

"The paper points out that the use of the phrase national security shows up in a higher percentage of news articles today than it did immediately after the September 11 attacks."

Friend-shoring, near-shoring, and reshoring are rising in corporate rhetoric but remain operationally constrained.

Apple has added India and Vietnam as manufacturing sites yet still relies on China’s unmatched scale, infrastructure, and skilled workforce for volume production.

Why: Physical infrastructure and labor pools cannot be replicated quickly, creating inertia against rapid reshoring.

"because of the lack of trade infrastructure, things like high quality roads and ports, in places like India and Vietnam where they have moved some of their manufacturing, it would be almost impossible to manufacture in these countries on the same scale that they are currently manufacturing in China."

A sudden reversal of globalization would likely be inflationary and recessionary.

Loss of productivity gains from global specialization could trigger protracted trade disruptions and price increases.

Why: Global supply chains have acted as a deflationary force for decades; unwinding them compresses supply relative to demand.

"If deglobalization began to materialize and a meaningful part of the productivity gains that have been driven by globalization were to disappear over a short period of time, this would likely be inflationary and result in major trade disruptions and a protracted recession."

Globalization’s benefits and costs are unevenly distributed within and across countries.

U.S. consumers enjoyed 40% lower durable-goods prices over 25 years, while millions of manufacturing jobs disappeared and labor unions weakened.

Why: Comparative advantage maximizes aggregate welfare but creates concentrated losses that can dominate political narratives.

"The result was more jobs abroad, economic growth for the countries where the manufacturing was being done, increased competitiveness for US importers, and cheap goods for American consumers... this offshoring led to the elimination of millions of American jobs, the hollowing out of the manufacturing regions and middle class, and the weakening of private sector labor unions."

Goldberg & Reed identify three distinct phases of globalization deceleration since 2008.

Phase 1 (≈2015) centered on import-competition and refugee concerns; Phase 2 (pandemic) on supply-chain fragility; Phase 3 (post-Ukraine invasion) on national-security-driven decoupling.

Why: Each phase introduced new arguments that cumulatively shifted policy and public sentiment against unfettered globalization.

"They describe three phases of the slowdown in globalization that has occurred since the financial crisis."