The New Global Order in 2025: Geo-economics and Trade Fragmentation

By the end of 2025, the global economy is influenced not only by market forces and multilateral institutions but increasingly by geo-economic strategies.

- Madhusudhanan S

Countries are using economic instruments—such as trade policy, financial controls, investment screening, and supply chain leverage— to pursue geopolitical goals. This marks a decisive shift toward trade fragmentation, visible in the rise of regional blocs, the weaponization of interdependence, and the weakening of the post-WTO global trade framework. This article examines the major drivers behind this trend, its consequences, and its implications for India, concluding with an outlook on the future of global trade.

What Is Geo-economics?

Geo-economics refers to the strategic use of economic tools— such as sanctions, trade restrictions, and investment rules— for geopolitical objectives. Unlike earlier globalization, which emphasized interdependence and efficiency, this new phase prioritizes resilience, security, and autonomy.

The World Economic Forum’s 2025 Global Risks Report emphasizes this shift, noting that “the weaponization of trade, finance, and technology is now a central feature of international relations.”

Declining Global Trade Integration

Over the past six years, global trade integration has steadily declined, as the following table shows.

Metric 2019 2023 2025 (Est.)

Global Trade-to-GDP Ratio 60.1% 56.2% 54.8%

WTO Dispute Cases Filed 38 17 11

Share of Trade in Regional Blocs 52% 58% 63%

Sources: World Bank, WTO, IMF Direction of Trade Statistics

According to the World Bank’s 2025 Trade Outlook, continued fragmentation could reduce global GDP by up to 7% over the long term, especially if restrictions extend to technology and capital flows.

Drivers of Trade Fragmentation