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Excerpt from amp.scmp.com
Her remarks come at a time of increased geopolitical uncertainty over a number of challenges, most notably an escalating rivalry between the US and China and the war in Ukraine.
Although economic fragmentation is not yet as severe as it was during the Cold War, Gopinath said, it carries a much greater potential cost thanks to higher global reliance on trade.
China’s share of US imports fell by 8 percentage points between 2017 and 2023 as trade and overall relations between the two countries fragmented, while the US’ share of China’s exports fell by about 4 percentage points during the same period.
Trade between blocs of countries aligned with either China or the US was also negatively affected, Gopinath said.
Between the middle of 2022 and 2023, the average weighted quarter-on-quarter trade growth between US-leaning countries and China-leaning countries fell by nearly five percentage points compared with the five-year period between 2017 and early 2022.
Similar patterns could also be observed following Russia’s invasion of Ukraine, with trade and investment between blocs falling more than trade within blocs.