BNP Paribas sees geopolitics deepening global economic divide

what happened

Geopolitical tensions will likely produce a more divided global economy and trade landscape over time, BNP Paribas said in a research note. The bank notes that the EU is trying to limit the economic fallout from Chinese imports, while China is working to keep its leadership across a growing range of technology products and product families.

According to the bank, this will lead to rising friction in cross-border activity. BNP Paribas believes the global economy is moving toward two distinct ecosystems, one centered on the US and the other on China. Companies based outside both countries that need access to supply chains and end markets in each will face higher costs.

why it matters

For investors, this signals that trade fragmentation could keep raising the cost of doing international business. The scenario matters for exporters, companies with global supply chains, and currencies and equity indices of economies that depend heavily on trade with the US and China.

market impact

Global trade and supply chains: higher costs for firms outside the US and China pressure their margins

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