Trade Fragmentation and the Risk of a New Cold War

In an essay for Foreign Policy, Gita Gopinath, Deputy Managing Director of the IMF, highlights the rise of trade fragmentation along geopolitical lines. She notes that in 2023, there were 3,000 new trade restrictions imposed, three times the number in 2019, and this trend can lead to a new Cold War. However, Gopinath emphasizes that this is not the same as deglobalization, as global trade as a share of GDP remains high. Factors contributing to fragmentation include the pandemic, security concerns, US-China competition, and conflicts like Russia's war in Ukraine. Gopinath acknowledges the potential for a slippery slope towards protectionism and expresses limited optimism that countries may contain the extent of decoupling.