(The opinions expressed here are those of the author, a columnist for Reuters.)

 LONDON: Globalisation may have stalled amid the fiery geopolitical posturing of recent years - but many doubt it's in reverse yet given supply chains have been re-routed rather than returned home and overall trade volumes less disturbed than first feared.

Direct bilateral trade between the United States and China has clearly fractured during six years of tit-for-tat tariffs, post-pandemic insecurities and all the political and investment rivalries that hardened since Russia invaded Ukraine.

And since former U.S. President Donald Trump launched a tariff trade war on Chinese imports in early 2018, China's export market share in the United States has indeed plunged from a high watermark of 21.6% in 2017 to just 14% last year.

Joe Biden's administration has merely reinforced China trade aversion with a 'de-risking' strategy of its own as geopolitics worsened around Taiwan and Ukraine.

That breakdown can be seen most clearly in the fact that after 16 years as the biggest single exporter of goods to the United States, China ceded that crown to Mexico in 2023.

And if Trump succeeds in his bid to return to the White House in this year's election, his promise of more of the same - mooting even higher tariffs of over 60% on Chinese goods - means any repair of direct trade links is a distant prospect.

Boston Consulting Group's (BCG) annual world trade study expects that rift between the world's two biggest economies to deepen and sees the value of bilateral trade between them dropping by almost $200 billion over the coming decade - more than three times the 10-year hit they forecast last year.

And yet fears that broken relationship would seed a wider 'de-globalisation' of trade have not yet been borne out.

According to analysis this week from Stephen Jen and Joana Freire at Eurizon SLJ Capital, total cross-border trade as a share of global output has barely changed and the current 22% share of non-oil trade-to-GDP is well within 20-year ranges.

What's more, China's 15% share of world exports also remains unchanged - it is still the largest exporter in the world by some distance.

"While we cannot rule out de-globalisation in the years ahead, so far at least there has been scant evidence supporting this widely-held view of de-globalisation," Jen and Freire said in their analysis.


Jen and Freire argue that China has succeeded in overcoming U.S. tariffs by heavy direct investment in third countries such as Mexico and Vietnam that the United States is still happy to import from, exporting intermediate goods to these third countries for final assembly to avoid U.S. trade barriers.

The BCG analysis bears that out too, showing how familiar routes that defined the world trade map are being redrawn, blocs playing a greater role and "third" countries acting as go-betweens for those at loggerheads or global companies trying to navigate between the two.

However, it forecast that world trade growth over the next decade will indeed be slower than global GDP growth, amid a "fundamental shift away from the trend of trade-led globalism that has been prevalent since the end of the Cold War."

It sees the world of "re-shoring" or 'friend-shoring" of supply chains containing a number of features over the next 10 years.

First is a solidifying of the North America 'stronghold' between the United States, Canada and Mexico - with U.S. trade growing by almost half a trillion dollars with these neighbors by 2032.

Another trend will likely see South East Asian nations become the biggest winners, with cumulative ASEAN trade forecast to grow $1.2 trillion over the next decade - due largely to companies adopting "China + 1" diversification strategies in what are seen as generally unaligned countries.

And, as many point out, they see India as a major beneficiary - with a $393 billion trade expansion through 2032 that includes a $180 billion increase with the United States and $124 billion rise in trade with China.

Jen and Freire say that the relative stability to date of overall global trade to this geopolitical shakeout has other potential consequences - one being that a much-feared inflation pulse from "re-shored" supply chains may be wide of the mark.

If production is merely being shifted away from China to other cheaper-cost developing countries - often cheaper than maturing China at this point and not back 'home' to expensive rich economies as some assumed - then goods inflation may continue to subside.

There are some exceptions to the relative benign scenario for both China and the United States, however.

First is damage to China's ability to climb the value chain of production as a result of the recent collapse in foreign direct investment. That source of overseas 'know how' and research is still seen as badly needed for its development.

And for the United States, any realization of Trump's mooted 60% tariff threat could unavoidably spur inflation at home.

"China has so far managed to retain their dominant position as the world’s pre-eminent manufacturing base," Jen and Freire concluded. "However, we suspect that foreign investors' retreat from China - a change in financial globalisation - may prove to be much more damaging to China's long-term growth outlook."

TS Lombard's Davide Oneglia delved deeper into that "financial reshoring" or capital flight from China and reckoned it was only in its infancy and likely had further to run.

"Capital flows are being redirected into developed markets and other emerging markets in search of superior risk-adjusted returns and to finance the new 'de-risking' and 'friend shoring' agendas of the West - but also to fund China's own efforts to strengthen its foothold abroad."

Even with all the masking of trade in goods, the financial unwind may just be beginning.

The opinions expressed here are those of the author, a columnist for Reuters.

(Editing by Emelia Sithole-Matarise)