The decline of the West and the rise of ‘the Rest’ will lead to a new world order

Current geopolitical tensions, including US tariff policies, are accelerating a fundamental shift in the global order, moving beyond Western dominance towards a "multiplex" system. This emerging order features distributed power among key players like the US, China, and the EU, alongside increasingly influential regional blocs, fostering issue-specific alliances rather than rigid blocs. Crucially, the world is undergoing "re-globalization" with an "eastern turn," led by Asia and the Global South, driving new, localized supply chains and potentially enhancing economic agency for non-aligned nations, which are increasingly attractive to global investors.

Analysis

The global economic system is undergoing a structural transformation, not a collapse, accelerated by US tariff policies. This shift is moving away from a US-led order towards a 'multiplex' world characterized by distributed power centers including the US, China, the EU, and influential regional actors like Indonesia and South Africa. In this framework, nations are expected to pursue issue-specific, fluid alliances rather than rigid blocs, hedging their positions between major powers. This geopolitical evolution is concurrent with a 're-globalization' marked by an 'eastern turn.' Asia now accounts for 57% of global GDP growth (2015-2021) and over half of global trade, with intra-regional trade comprising 57% of its total. While this shift presents significant risks for economies heavily dependent on US market access—such as Vietnam, South Korea, Taiwan, and Mexico—it is also fostering new, more localized supply chains and encouraging 'South-South' trade. A key insight from an Economist Group survey indicates that a non-aligned strategic position is increasingly attractive to global investors, suggesting that capital flows may pivot towards nations that successfully navigate this new, decentralized landscape.

Key Decisions for Investors

• Investors should reassess geographic allocations, potentially increasing exposure to non-aligned emerging markets and key Asian economies that are leading the 're-globalization' trend and are less dependent on US-centric supply chains.
• Scrutinize portfolio companies for supply chain vulnerabilities, specifically those with high export dependency on the US market, and favor firms that are actively diversifying their manufacturing and trade routes to mitigate tariff risks.
• Adopt a more nuanced view of geopolitical risk, moving beyond a simple US-China binary to analyze the fluid, issue-specific alignments that will define the 'multiplex' order and create discrete opportunities in sectors like regional infrastructure, technology, and trade.
• Consider long-term thematic investments focused on the growth of 'South-South' trade corridors and the increasing economic agency of the Global South, as this represents a structural departure from traditional Western-dominated globalization.