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Protectionism, Pandemic, War, and the Future of Trade - Rise of ASEAN

Global trade is slowing as the Ukraine conflict and its consequences have replaced the pandemic as the leading drag on growth. Trade will grow at a slower average rate than GDP in the coming nine years, reversing the pattern of trade-led global growth that has prevailed in recent decades. Familiar trade patterns will shift, not only as a result of the war in Ukraine, but also owing to Western nations’ decreasing reliance on China trade and to the rise of economic blocs such as the Association of Southeast Asian Nations (ASEAN) as companies continue to diversify their supply chain risks. By Marc Gilbert, Nikolaus Lang, Georgia Mavropoulos, and Michael McAdoo BCG

World trade will continue to grow, but at a rate of just 2.3% per year through 2031, according to a Boston Consulting Group analysis—less than the 2.5% annual increase forecast for global economic growth.

As economies adjust to changing geopolitical and economic dynamics, including inflation and potential recession in the near term, the resulting shakeout will produce new global winners and losers.

The impacts will be especially strong in three areas:

  • Russia-West Fallout. Trade between the EU and Russia will decline sharply, shrinking by $262 billion during the period from 2023 to 2031, as Western sanctions on Russia take effect and Western Europe weans itself from its dependence on Russian oil and gas. Russian trade will shift from Europe to other regions, particularly China and India. The most disruptive impacts will occur in the energy sector, but the changes will affect other commodities as well.

  • China Trade Dynamics. Trade between the US and China will decrease by $63 billion through 2031. EU-China volumes will grow, but at a slower rate than the global average, as companies focus on increasing their resilience. These trends will drive world trade growth with ASEAN countries, India, and Mexico, as near-shoring and friend-shoring gain pace.

  • ASEAN Trade Growth. Southeast Asia will be the principal beneficiary of the redrawn trade map. The region will see significantly greater trade with China, the US, Japan, and the EU, driven by companies’ desire to diversify global supply chains in the face of growing geopolitical tensions and the rising costs of manufacturing in China. ASEAN trade with China will grow by $438 billion, the largest interregional increase on our 2031 map. Companies will be attracted to Southeast Asia by the region’s lower costs and the growing breadth and depth of its manufacturing capabilities.

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