THE 3D RESET: DeglobalisationA new world order will challenge globalisation.
A decades-long process of globalisation is coming to an end as the world becomes more protectionist*, favoring opportunities closer to home.
Covid-19 and the subsequent lockdowns in 2020 exposed the vulnerabilities of global supply chains*, particularly those that were too reliant on China and Chinese imports. Geopolitical tensions between the US and China—which pre-dated the pandemic—have only intensified, re-emphasising these risks and exacerbating inflation.
In response to the disruption, we are seeing a new international dynamic emerge. Multinational corporations are diversifying where they produce goods and relocating closer to home; this process is known as reshoring*. This trend represents backtracking from the globalised model of extended supply chains* that have defined international trade in the past few decades.
* Defined within the 3D Reset glossary
Exposed global supply chains
The existing globalised model of extended supply chains is increasingly being questioned. Multinational firms are considering onshoring, nearshoring, and/or friendshoring production, driven by concerns around supply chain resilience and reliability. Therefore the easy gains - the globalisation dividend - could be over as security of supply becomes increasingly important.
Long-term inflationary pressures
The pandemic further intensified the already strained relationship between the West and China as widespread blockages in the Chinese supply chain exacerbated inflation. The Russia-Ukraine conflict exposed similar dependencies, particularly regarding energy and agriculture in Europe.
A new world order is developing
Multinational firms are diversifying their production and relocating it nearer to home in a process known as reshoring. Economies that attract these manufacturing firms could boost their growth over time.
Accelerating the energy transition
This new regime shift is likely to cause an acceleration in the energy transition, feeding the decarbonisation trend. Recent spikes in geopolitical tensions, such as the Russia-Ukraine conflict, have accelerated the need for countries to end their dependence on traditional energy sources and strengthened their appetite to make real progress on the energy transition.
THE 3D RESET
The world's disruptive return to the old normal
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Glossary – 3D Reset
Scroll through our reference guide of key economic terms to better understand how The 3D Reset will shape a new economic regime