The World Is Splintering Into Trade Blocs. For Developing Countries, That Is Both an Opportunity and a Threat.
Something significant is happening to the architecture of global trade, and it is moving faster than most policymakers anticipated. What is often called deglobalisation is more accurately described as a targeted recalibration. Certain sectors, technologies, and supply chains are being reorganised around geopolitical priorities rather than cost efficiency alone. This environment became even more pronounced at the start of 2026, with discussions about a new world order featuring prominently at the World Economic Forum in Davos.
The scale of the fragmentation is visible in the data. Since 2020, around 18,000 new discriminatory trade measures have been introduced globally. As of March 2026, the WTO listed 381 notified regional trade agreements in force. The Regional Comprehensive Economic Partnership alone spans 15 countries representing approximately 30% of global GDP and one-third of the world's population.
Several connector economies have emerged to bridge the widening gap between US and Chinese supply chains. Cambodia, Egypt, Vietnam, and Indonesia are functioning as logistical hubs and assembly points, helping stabilise trade flows and cushion the impact of geopolitical fragmentation on global commerce. These countries are capturing manufacturing investment and trade volumes that previously flowed through more direct US-China channels.
The picture for developing countries is genuinely two-sided. South-South trade, which is commerce between developing economies, has become a major growth engine. Between 1995 and 2025, South-South merchandise exports surged from approximately $0.5 trillion to $6.8 trillion. Today, 57% of developing-country exports go to other developing economies, up from 38% in 1995.
But the risks are real. Investment remains subdued in most regions, reflecting corporate caution and tighter financing conditions globally. For smaller, commodity-dependent developing countries, the restructuring of global trade around geopolitical alliances they have no part in shaping represents a genuine threat to market access and development prospects.
The countries best positioned in this new landscape are those with stable institutions, diversified exports, and the infrastructure to serve as connectors within new regional networks. The ones most exposed are those with narrow export bases and high dependence on trade relationships that are being restructured above their heads.
