Differences between the western economic bloc led by the United States and China have threatened global trade cooperation and overall economic growth.
A senior official of the International Monetary Fund (IMF) said that the whole world is now driven by economic security and national security concerns in determining with whom they trade or invest.
The two topics will continue to cause small countries to widen their gap in either favor between China and the United States.
Although global economic resilience is seeing improvement and strengthening, the trend of fragmentation in the trading system and reversal of profits is also becoming more apparent.
Tensions between Washington and Beijing have been rising since the US increased trade restrictions on China over national security concerns.
In addition, the conflict in the South China Sea and the rhetoric surrounding Taiwan also worsened sentiment.
The growing tension between the world's two largest economies has been illustrated by more than 3,000 trade sanctions taking place worldwide in 2022 and 2023. It has tripled compared to 2019.
According to Gopinath, trade between China and the US has declined compared to their bloc group.
US blocs in Europe such as Canada, Australia and New Zealand. Meanwhile, the Chinese bloc is more focused on Russia, Eritrea, Mali, Nicaragua and Syria.
Since the invasion of Ukraine, trade between the two groups has fallen by about 12% and foreign direct investment has also fallen by 20%.
China's economy is now struggling to retain foreign investment amid rising tensions with the West. Foreign direct investment flows into the country reportedly fell 26% in the first three months of 2024 compared to the same period the previous year.
Although economic fragmentation has not yet reached the serious level of the Cold War, its potential impact is greater due to the high dependence of the global economy on trade.
