The End of Globalization as We Knew It

Last week, the UK’s Chief Secretary to the Treasury, Darren Jones, said on BBC Sunday Politics that "globalization as we’ve known it for the past few decades is over." His comments came amid the backdrop of new tariffs introduced by Donald Trump’s administration and a growing sense that the world is shifting toward a more fragmented and protectionist economic model. When asked whether the era of cheap fast fashion and low-cost electronics was finished, he responded simply: "Yes, it is."

It’s a stark claim—but not without merit. After World War II, the United States assumed an informal yet vital role as the guarantor of global order: its navy patrolled sea lanes, allowing countries to trade without needing their own military escorts. This created the foundation on which the just-in-time model and sprawling international supply chains could thrive.

But today, that geopolitical consensus is unraveling. Trade wars driven by national self-interest, the COVID-19 pandemic exposing supply chain vulnerabilities, the war in Ukraine, and the deterioration of U.S.-China relations all signal a rapid departure from the old global order.

The impact of these trade wars has already hit financial markets. Following Trump’s announcement of sweeping tariffs, the Russell 3000 index fell by 5%, and after China's retaliatory measures, it dropped another 6%. JPMorgan Chase now estimates a 60% chance of a global recession this year. Over the past week, cyclical stocks (airlines, automakers) have significantly underperformed defensive stocks (consumer staples, utilities), in line with a soft global recession scenario.

The effects of the trade war are being felt beyond the U.S. The MSCI World Index, which covers 85% of the market capitalization of developed countries, has declined almost as much as U.S. indices. Earnings expectations for European companies have fallen by 1.5%—mirroring the drop in U.S. corporate earnings forecasts.

Not everyone shares this pessimistic outlook, however. World Bank economist Marcos Troyo argues: "Globalization isn’t dying—it’s shifting into a digital form, where digital platforms and virtual markets replace physical supply chains." History suggests globalization is cyclical. In the early 20th century, the world experienced a period of unprecedented trade growth and international cooperation, which came to a halt with World War I and the Great Depression.

Darren Jones noted that negotiations with the U.S. are ongoing, and a tariff agreement is still possible. But for consumers and companies, the reality is already shifting: cheap goods that once seemed routine are becoming the exception. The new economic order, it appears, will be more expensive—and more complex.

World Trade Organization Director-General Ngozi Okonjo-Iweala recently warned: "A world where everyone only protects their own interests—that’s a path to poverty."

One positive factor is that the global economy remains in relatively good shape. The composite index of global economic growth showed improvement in March, particularly in the services sector, which has so far remained unaffected by tariffs. Unemployment across OECD countries is still below 5%. The U.S. economy added 228,000 new jobs last month, and current growth is tracking above 2% annually. While Donald Trump may have committed one of the greatest political miscalculations of all time, he was fortunate to inherit a strong economy. The question is—how long will that resilience last?