GCRI · Trade and Strategic Resources
Geoeconomics and fragmentation
Trade is increasingly shaped by security concerns: export controls, sanctions, investment screening, subsidies and tariffs that steer supply chains toward allies or home. These measures can reduce some dependencies while creating others, raising costs and splitting markets. This page sets out how geoeconomic fragmentation works, how it is measured, and what evidence serves the governments and firms that must navigate it.
Geoeconomics and fragmentation in seven parts.
- 01The questionGeoeconomics and fragmentation: how the risk develops
- 02Across the domainsFragmentation changes costs and resilience across domains
- 03IndicatorsWhat is measured, and how well
- 04SourcesWhere the evidence comes from
- 05DecisionsWho decides, and what the evidence serves
- 06Core questionsWhat experts ask about fragmentation
- 07Mechanisms and driversHow restrictions transmit
Geoeconomics and fragmentation: how the risk develops.
Restrictions, market transmission and substitution. The dossier below sets out how the risk develops, what is measured, where the data come from, how it is modelled and who decides.
Measures restrict and redirect
Export controls, sanctions and tariffs block or tax trade with particular partners. Trade often reroutes through third countries rather than stopping.
Subsidies relocate production
Industrial policies subsidise domestic or allied production of chips, batteries and clean technology. Others respond, and trade patterns shift over years.
Blocs form along alignment
Trade and investment grow faster between politically aligned countries. Fragmentation reduces efficiency gains from specialisation and can raise prices.
Retaliation compounds
Each measure invites a response. Escalating restrictions widen the set of goods affected and raise uncertainty for investment.
Corridor and chokepoint monitor.
The screen a team would use to follow this subject: its measures, states and decisions. Names are examples and values are illustrative.
Corridor and chokepoint monitor
Geoeconomics and fragmentation · Corridor A · Week 28
- Transit time22days9Alert
- Freight index21431Watch
- Vessels rerouted57this weekWatch
- Inventory cover37daysNormal
Corridors
red: disrupted
Time to recover vs time to survive
by critical input
| Fertiliser | Strait | 7 | 3 | Short |
| Fuel | Strait | 5 | 4 | Covered |
| Semiconductors | Port hub | 24 | 11 | Short |
| Grain | Corridor A | 2 | 8 | Covered |
Fragmentation changes costs and resilience across domains.
- EnergyCouplingSanctions and restrictions reroute energy flows.What to watchSupplier diversification
- FoodCouplingRestrictions on fertiliser and grain spread to importers.What to watchRestrictions by product
- HealthCouplingMedicines and ingredients cross many borders.What to watchIngredient source concentration
Fragmentation scenarios are designed for the Foresight Outlook series, labelled as scenarios. The IMF’s 2023 Staff Discussion Note and the WTO World Trade Report 2023 set out estimated costs and their wide ranges; the Global Centre for Risk and Innovation (GCRI) takes no position on any dispute.
- Cases where a restriction reached a supply chain.
- Critiques of fragmentation scenarios.
How geoeconomics and fragmentation is modelled, measured and tested.
The model, its assumptions, its data and its uncertainty, in the form a scientist or engineer would check. Structures follow published methods. The values drawn are illustrative, not findings.
System model
The couplings between the systems in geoeconomics and fragmentation: signs of influence, a reinforcing and a balancing loop, and cross-links where stress jumps.
What is measured, and how well.
Each indicator carries its unit, its cadence, the kind of source behind it and the evidence label a value would carry. No values are shown: a programme supplies them under its own authority.
| Indicator | Unit | Cadence | Source type | Label |
|---|---|---|---|---|
| Trade policy interventions | count of measures by type | monthly | Trade policy monitoring databases | REPORTED |
| Trade between geopolitical blocs | share of total trade | quarterly | Bilateral trade data with bloc classification | ESTIMATED |
| Goods covered by export controls | count of product codes | per change | Government control lists | Published statistics |
| Foreign direct investment screening decisions | count of reviews and blocks | annual | Investment screening reports | Published statistics |
| Average applied tariff | percent | annual | Tariff databases | Published statistics |
| Trade policy uncertainty | index value from text analysis | monthly | Published uncertainty measures | ESTIMATED |
Where the evidence comes from.
Named public datasets and institutional records, each with its licence class. Sources by agreement are used only under their terms and never republished.
| Source | What it gives | Licence class |
|---|---|---|
| Global Trade Alert | Trade policy interventions by country and type | Public, terms to check |
| WTO trade monitoring reports and Integrated Database | Trade measures and applied tariffs | Public, WTO terms |
| OECD investment screening reports | Investment screening mechanisms and activity | Public, OECD terms |
| Authority export control and sanctions lists | Restricted items, entities and countries | Public records, licence per government |
| IMF and WTO analysis of geoeconomic fragmentation | Estimates of fragmentation costs and trade shifts | Public, terms per publisher |
Who decides, and what the evidence serves.
Trade and Strategic Resources prepares evidence. The decisions below are taken by the authorities named, under their own rules, and never by the platform.
| Who decides | The question | Evidence this page serves |
|---|---|---|
| Ministries of trade and foreign affairs | How to respond to and design trade measures | Measure trackers; fragmentation scenarios |
| Firms with global supply chains | How to adjust sourcing and investment to policy risk | Rerouting analyses; control lists |
| Multilateral institutions | How to monitor and reduce fragmentation costs | Trade monitoring evidence |
Outputs this topic produces
- Trade measure trackers for products and partners of interest
- Rerouting analyses of trade through third countries
- Scenarios of fragmentation effects on supply
- Evidence notes for trade policy dialogues
What experts ask about fragmentation.
- How do restrictions change trade flows, and how much trade is rerouted through third countries?
- Which products and sectors are most affected, and how quickly can supply be substituted?
- What are the costs of fragmentation, and who bears them?
- How do retaliatory measures and policy uncertainty affect investment and supply decisions?
- How does fragmentation interact with energy transitions and technology development?
How restrictions transmit.
Trade measures change relative prices and access. Importers seek alternative suppliers; exporters seek new markets; and some trade is rerouted through intermediary countries. In the short run, substitution is limited by capacity, qualification requirements and contracts, so restrictions raise prices and cause shortages. In the long run, supply chains reorganise, sometimes at higher cost.
Uncertainty is itself a channel. When firms expect policy to change, they may delay investment, build buffers or duplicate supply chains. These responses can increase resilience but also reduce efficiency and raise prices.
Measures can spread. Restrictions by one country can prompt responses by others, and broad categories of goods, such as technology or critical minerals, may become subject to overlapping controls.
Methods and their limits.
- 01
Gravity and trade models
Econometric models of bilateral trade used to estimate effects of measures, using econometrics. Results depend on specification.
- 02
Input-output analysis
Tracing how restrictions on one sector affect others. Aggregation hides firm-level substitution.
- 03
Policy databases
Records of trade measures by product and country. Classification and coverage differ between sources.
- 04
Network scenarios
Simulating the removal of trade links using network science. Behavioural responses are simplified.
Estimates of fragmentation costs vary widely with assumptions about substitution and adjustment time, and are presented with their ranges.
How it is studied, and what the methods cannot say.
- 01EconometricsPrice transmission · Effects of trade measures · Disruption impacts on outputApplied here
- 02Network science and contagionTrade network centrality · Multi-tier dependency mapping · Disruption propagationApplied here
- 03Geospatial information systemsFacility hazard overlays · Sourcing region deforestation · Corridor mappingApplied here
- 04Optimisation and operations researchRerouting under chokepoint closure · Strategic stock sizing · Sourcing portfolio designApplied here
Where this page’s references lead.
The bodies and documents this page is read against. Status and editions change; each link goes to the issuing body.
Questions and answers.
What is geoeconomic fragmentation?
What is friend-shoring?
Do sanctions stop trade?
Does the platform take positions on sanctions or tariffs?
Does it give compliance guidance?
Is fragmentation always harmful?
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