What is the global economic impact of a U.S.-China bipolar world

Investing.com -- Wells Fargo said the world economy is entering a “second era of deglobalization,” marked by the fragmenting of global trade and finance into rival blocs led by the United States and China.

The analysts explained that “rather than one cohesive and integrated global economy, countries with similar views on geopolitics, foreign policy and domestic economic policy—among other considerations—form distinct blocs of nations.”

Over time, Wells Fargo warned, “cross-bloc trade is diminished, or even eliminated, cross-bloc capital flows cease, while broader financial and geopolitical relationships are eventually ended.”

According to the bank, U.S.-China relations have deteriorated despite tariff reductions and trade truces.

“Cooperation, in the broadest sense of the term, between the world’s largest economies has receded sharply,” Wells Fargo said. Looking ahead, the bank expects both nations “to reduce dependencies rather than pursue deeper integration.”

The framework developed by Wells Fargo suggests most G10 countries would align with the United States, while many nations across Asia and Africa could lean toward China. Latin America, the analysts said, appears “most split as neither the U.S. nor China is dominant in the region,” leaving it a potential battleground for influence.

The firm also noted some countries may attempt neutrality, though it warned this “might not be tenable” over the long term.

While blocs may have been forming for nearly a decade, Wells Fargo concluded that “the global economy is still far from full fragmentation,” with final alignments likely to shift alongside trade and geopolitical changes.

You May Also Be Interested In

• IAEA says status of Iran nuclear programs unknown
• Volkswagen plans to close four German plants by 2034, report says
• Goldman Sachs refreshes conviction lists on both sides of the Atlantic