The world's largest asset managers and central banks are now operating from a shared assumption: the era of hyperglobalization has ended, and we are moving toward a more fragmented, regionalized economic order. This narrative of "de-risking" from China, nearshoring supply chains, and building fortress economies is being sold as inevitable, even prudent. It deserves far more skepticism than it is currently receiving.
Let me be clear about what I am not arguing. The geopolitical tensions are real. Recent developments in trade policy, technology competition, and regional stability have created legitimate hedging concerns for multinationals and governments alike. The question is not whether de-risking exists as a trend. The question is whether the consensus price already embedded in markets and policy reflects its actual cost.
The prevailing view treats decoupling as a one-time adjustment. Investors talk about "transition costs" and "repositioning" as though they are discrete events, after which we settle into a new equilibrium that is merely less efficient, but stable. This framing is misleading.
Economic fragmentation is not a ratchet that moves once and locks. It is a compound process. Every bifurcation in standards, supply chains, or technology ecosystems creates new friction that compounds over time. When Europe builds its rare earth processing capability independent of China, or when the United States subsidizes domestic chip fabrication, those are not neutral substitutes for what came before. They are more expensive, less optimized, and they create ongoing deadweight losses that ripple through multiple industries.
The consensus narrative also underestimates switching costs in knowledge-intensive sectors. For decades, multinational firms optimized their R&D, manufacturing, and talent distribution across the most efficient global locations. Reversing that integration is not like rewiring a building. It requires retraining workforces, rebuilding supplier relationships, and re-establishing regulatory pathways in new jurisdictions. These costs are diffuse, which is precisely why they are undercounted.
There is a deeper risk to the consensus view: it assumes that fragmentation stops at geopolitical fault lines. History suggests otherwise. Once countries begin treating economic efficiency as secondary to strategic autonomy, the logic extends inward. Why rely on another region when you can rely on your own? Regional blocks then splinter into national ones. The gains from specialization and scale evaporate in waves.
Some analysts argue this is already priced into markets because equities and bonds have already adjusted. But markets are notoriously poor at pricing slow, persistent drags that lack a discrete trigger date. A 0.3 percent annual drag on global GDP growth over a decade is almost invisible to equity markets in the short term. Over ten years, it compounds into something substantial.
The consensus also fails to account for asymmetric impacts. Advanced economies with large domestic markets, technological sophistication, and capital can manage fragmentation. Middle-income countries that relied on trade integration as a path to prosperity face a different calculus entirely. This distributive risk is geopolitically destabilizing in ways that markets do not yet price.
None of this is an argument against managing legitimate security concerns in supply chains or technology. But the current path treats de-risking as costless. It is not. It is a bet that geopolitical stability is worth a smaller economic pie, sustained over decades.
Before accepting that bet as inevitable, markets and policymakers should demand more rigorous accounting of what we are actually giving up. The consensus may prove correct. But right now, it is pricing certainty into a fundamentally uncertain outcome.