EXECUTVE SUMMARYGlobal trade is not deglobalizing—it is rewiring. Trade patterns are being redrawn by a mix of geopolitics, policy shifts, and security concerns. The result is a more complex trade landscape defined by strategic realignment and adaptation. Governments are layering national security considerations onto economic decisions. New tariffs, export controls, and investment restrictions are reshaping how—and why—countries trade.
US President Donald Trump's expansive tariff policy marks a new era in American trade policy. But it also reflects a broader global shift toward narrower definitions of national interest. Across advanced and emerging economies, governments are reconfiguring trade ties, reshoring production, and seeking greater economic self-reliance in strategic sectors.
In this environment, middle powers are emerging as key players—not by picking sides, but by pursuing strategic multi-alignment. Countries such as India, the Gulf states, and ASEAN members are navigating uncertainty with pragmatism. They are separating economic engagement from political disputes, diversifying trade relationships, and leveraging their position in shifting supply chains. Their adaptability is becoming a competitive advantage as they balance relationships with multiple major powers simultaneously.
Sectoral shifts are occurring along the fault lines of geopolitics, policy, and resilience. In defense, Europe's rearmament drive is fueling a divergence in stock market performance, with EU- and UK-listed firms surging while US defense giants lag—raising questions about future procurement priorities and supply chain exposure. Energy—particularly LNG—has become a bargaining chip in trade diplomacy, with US trade partners ranging from India to the EU offering increased purchases to offset tariffs, although performance across the value chain varies sharply. Technology sits at the center of national security concerns and industrial strategy, with semiconductors, biotech, and critical minerals increasingly treated as strategic assets. This security framing is driving both fragmentation and opportunity: new manufacturing hubs are emerging, and firms that can navigate regulatory divides and deliver compliant, localized solutions are gaining a competitive edge.
This is not a temporary disruption—it is a structural transformation. The line between economic and geopolitical strategy is blurring. The most successful organizations will be those that combine geopolitical insight with market-based analysis to spot where opportunity is emerging—despite, or because of, the global trade rewiring.
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This report was also published by LSEG here on April 22, 2025.
