Multinational businesses are scrambling to rearrange their supply chains - reshoring production at home, "friend-shoring" it in allied countries, or spreading operations across multiple markets. The goal is to reduce vulnerability to trade wars and geopolitical disruption. The unintended result, according to one prominent economist, may be the opposite.
Eswar Prasad, a trade policy professor at Cornell and Brookings Senior Fellow, has laid out the paradox in a Foreign Affairs essay, "Hvylya" reports. "This new form of globalization might ultimately intensify, rather than lessen, economic and geopolitical volatility," Prasad argued.
The logic is counterintuitive but straightforward. Globalization was originally built on the premise that intertwined economies would have less reason to fight. Companies operating across borders served as bridges between rival capitals, creating mutual stakes in stability. As those same firms now retreat from markets in countries their home governments consider adversaries, the bridges collapse.
Apple shifting phone production from China to India, Chinese manufacturers setting up in Mexico and Vietnam to dodge US tariffs - Prasad cited these as textbook examples of the resilience playbook. Minimizing costs is "no longer the main factor" driving decisions about where to build, he noted. Political safety has overtaken economic efficiency.
The problem is structural. Every company that pulls out of a geopolitical rival's market removes one more thread from the web of shared interests that once made conflict costly. Without those mutually beneficial commercial networks, Prasad wrote, "businesses no longer serve as bridges to help maintain good relations." The resilience each firm gains for itself subtracts from the stability the system needs.
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