15 Reasons to Be Optimistic About Globalization

The trade and foreign policy turbulence unleashed by the return of President Donald Trump to the White House in January 2025 has prompted a crescendo of predictions and debate about the end of globalization. Indeed, international business has become more challenging and trade more costly amid geopolitical shifts, record-high trade policy uncertainty, and the escalation of U.S. tariffs to the highest levels since the 1930s. But a major reversal of globalization is still far from certain. Consider 15 reasons for optimism about the future of globalization: 1. Global trade growth accelerated in 2025. Contrary to early predictions that global trade in goods would shrink in 2025, goods trade volume growth accelerated to the fastest pace since the post-Covid recovery. Trade got a temporary boost in early 2025 from U.S. buyers rushing to import goods in anticipation of tariff increases. But trade growth stayed positive even after this “frontloading” wave ended, in part because China dramatically increased its exports to Southeast Asia, Africa, Europe, and other markets, more than offsetting a sharp drop in its exports to the U.S. Moreover, trade growth is just one indicator of the resilience of international business. The cross-border share of M&A transactions remains within historical norms, implying that firms are not generally redirecting investment from international to domestic growth opportunities. 2. Tariff increases are forecast to slow but not reverse global trade growth. Recent forecasts reported in the October 2025 DHL Global Connectedness Tracker (that I coauthored with Caroline R. Bastian) call for global trade volumes to grow at a 2.5% annualized rate from 2025 through 2029—downgraded from a rate of 3.1% predicted before the U.S. began raising its tariffs. Trade growth is expected to slow in 2026 and then to recover to a typical rate in 2027. A historical comparison helps to maintain a sense of perspective. If global trade volumes do grow at a 2.5% rate between 2025 and 2029, trade growth over that period will exactly match the growth rate observed over the previous decade (2.5% between 2015 and 2024). Even with U.S. tariff increases, global trade is still likely to grow over the medium term at a very similar pace to what business leaders are used to from the recent past. 3. The U.S. does not trade enough to reverse globalization on its own. In 2024, the U.S. share of global goods imports was 13%, and the U.S. share of exports was 9%. Those numbers made the U.S. the world’s biggest importer and second biggest exporter (after China). But they also mean that the vast majority of global trade does not involve the U.S. at all, which is one of the major reasons why trade can continue growing at a reasonable pace, even as the U.S. imposes large new trade barriers. The U.S. share of global trade is far smaller than its share of many other measures of the world economy, such as outward foreign direct investment (FDI) stocks (23%; see annex table 4 for data), GDP at market exchange rates (26%), or stock market capitalization (54%). 4. Other countries are not following the U.S. in raising trade barriers. To the contrary, many countries are striking new trade agreements to secure better access to alternative markets. The long-delayed EU-Mercosur free-trade agreement is up for ratification, and the EU has also concluded negotiations on a new trade deal with Indonesia and an updated agreement with Mexico. India and the UK have signed a free-trade agreement, and the EU and India aim to sign one in early 2026. Meanwhile, China has announced a plan to eliminate all tariffs on its imports from Africa and upgraded its trade ties with Southeast Asia. There’s even movement toward closer ties between the EU and the 12-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). While an EU-CPTPP trade agreement is not immediately on the horizon, closer ties between the two blocs could be especially important amid heightened U.S.–China tensions since roughly 80% of all trade that involves neither China nor the U.S. involved one or both of these blocs in 2024. 5. Retaliation against U.S. trade barriers has been surprisingly limited. The fact that most countries did not retaliate in response to U.S. tariff increases—China being the most important exception—has been a positive surprise for global trade. One reason is the Trump administration’s pre-emptive threat to raise tariffs even more against any country that retaliates—a threat backed up by swift action in the case of China. But the lack of retaliation is not only a reflection of U.S. negotiating strategy. Many countries opted not to retaliate both because they saw the immediate costs outweighing the benefits for their own economies and because they saw long-term value in avoiding additional damage to the global trading system. 6. New U.S. tariffs have many exemptions, and more are probably coming. According to a rough estimate by IMD Business School Professor Richard Baldwin, about half of all U.S. imports as of August 2025 were exempt from new tariffs enacted by the Trump administration. Most imports from Mexico and Canada that comply with the USMCA trade agreement are exempt. So are most energy imports, along with generic drugs and branded pharmaceuticals from companies building plants in the U.S. Trade deals with specific partners also exclude some goods, such as aircraft and parts traded between the U.S. and the EU. And more exemptions are likely on the way. After high headline tariffs (the announced rates before exemptions) have done their job as a source of negotiating leverage, the U.S. is likely to exempt more products, especially inputs required for U.S. manufacturing. The U.S. can’t boost its manufacturing competitiveness if U.S. manufacturers have to pay higher input costs than their foreign competitors. 7. Economic realities constrain U.S. protectionism. The U.S. economy has weathered tariff increases and trade policy uncertainty better than many experts predicted, but costs are increasingly apparent. Tariffs are starting to contribute to price increases, and larger price hikes could follow as firms deplete the inventories they rushed into the U.S. before tariffs went up. At the same time, the U.S. jobs market has weakened, with some evidence that sectors impacted by tariffs are being hit especially hard. History shows that President Trump does shift course if the economic alarm bells become too loud to ignore. He cited a “queasy” bond market for his decision to suspend “reciprocal tariffs” just a week after he announced them. More recently he announced tariff cuts aimed at reducing food prices. 8. Polls show record-high U.S. public support for trade. Yes, you read that right. The share of Americans seeing trade mainly as an opportunity rather than a threat rose to 81% in 2025, the highest in 30 years of Gallup polling. The biggest increase was among Republicans, who tend to see the U.S. gaining more from trade under a Republican administration. But Democrats also became more supportive of trade. Polling from the Chicago Council on Global Affairs tells a similar story, with the share of Americans favoring a policy of global free trade rising from 35% in 2024 to 55% in 2025. The majority of Americans (63%) disapprove of President Trump’s handling of tariff policy, according to an October 2025 ABC News/Washington Post/Ipsos poll, although most Republicans do support the tariffs. 9. U.S. presidents do not have unconstrained authority to raise tariffs. Major parts of President Trump’s tariff agenda—including his “reciprocal” tariffs—were enacted under the International Emergency Economic Powers Act (IEEPA), and there is a substantial chance the U.S. Supreme Court will rule these tariffs illegal. While such a ruling would not end the current tariff campaign, it would force the president to rely on more cumbersome and constrained tariff authorities. Additionally, the U.S. Senate approved three resolutions in October 2025 opposing specific tariff increases. While these resolutions will not lead directly to tariff reductions, they could signal a political shift. 10. President Trump’s opposition to globalization focuses only on imports and immigration. Despite Trump’s famous declaration at the United Nations in 2018 that “We reject the ideology of globalism,” his current policy agenda focuses on curbing only two aspects of globalization—imports and immigration—while actively promoting two others—exports and investment. The Trump administration’s agreements with the EU, Japan, Korea, and other trade partners all feature headline-grabbing commitments by foreign countries to boost purchases of U.S. exports and to invest billions of dollars in the U.S. This juxtaposition implies that the Trump administration is intent more on reconfiguring or “rebalancing” rather than reducing U.S. engagement with the rest of the world. 11. Most international business is already between friendly countries. Escalating tensions threaten business ties between geopolitical rivals, but most trade and investment is not in the crosshairs of geopolitical conflicts. Direct trade between the U.S. and China was only 2.2% of global goods trade during the first half of 2024, down from 3.6% in 2016, and all other trade between rival blocs of close allies of the U.S. and China (as classified by Capital Economics) was only 10.2% (down from 12.5%). Putting these numbers together, recent trends toward a “fracturing” or “fragmentation” of the world economy along geopolitical lines have, so far, redirected less than 4% of world trade away from geopolitical rivals. International business investment is even more focused on friendly countries than trade. During the first half of 2025, only 5% of announced greenfield foreign direct investment (FDI) projects and 4% of announced M&A deals crossed between the U.S. and China or between their close allies. 12. De-risking can increase international trade and investment. For many companies serving Western markets, de-risking strategies focus on shifting production from China to other emerging economies, such as Vietnam and Mexico. Such shifts often lead to more rather than less international trade and investment. They increase trade because alternative production locations lack China’s domestic supply base, requiring companies to use more imported inputs. International investment grows both when major multinationals set up operations in new locations and when their suppliers follow. 13. Technology could still propel globalization forward. Technological advances have long fueled globalization by making it cheaper and easier to do business over long distances. There is substantial debate about the potential for automation and 3D printing to reduce trade by cutting the importance of labor costs and global scale economies. But trade in semiconductors and other equipment to build artificial intelligence (AI) infrastructure boomed in early 2025, and the WTO estimates that AI adoption could increase global trade in goods and services by 34-37% by 2040. Recent improvements in machine translation could ease communication challenges in multinational firms and boost international travel. 14. Multipolarity boosts opportunities for international exchange. The development of globalization is influenced not only by technology and policy but also by the distribution of economic activity around the world. During periods when economic activity spreads out across a wider variety of countries, globalization tends to advance simply because there are more opportunities to do business internationally than there are when just a few countries comprise most of the world economy. This kind of spreading out of economic activity—driven by growth in China and other emerging economies—was a key factor fueling the rapid expansion of global trade between 2000 and 2010. Looking forward, long-run GDP forecasts predict another period of economic activity spreading out more broadly around the world between 2025 and 2060. India and other countries in South and Southeast Asia are forecast to grow their shares of world GDP, while China’s share holds fairly steady and the U.S, Japan, and major European economies see their shares decline. This should lead to a more multipolar world with larger opportunities for international exchange. 15. Unfettered globalization was always a myth. The knee-jerk reaction that every new setback for open markets risks a collapse of globalization is rooted in what global strategist Pankaj Ghemawat has called “globaloney”—the pattern that most people think the world is far more globalized than it really is. Despite decades of globalization, only about 20% of all economic output serves foreign markets, and most international business takes place between nearby and friendly countries. Since international business has always been constrained by policy, geography, culture, and other kinds of cross-country differences, new constraints—while still harmful—don’t imply as big a break with the past as they would if we really lived in a world where national borders had long ago become irrelevant. . . . These 15 points caution against drawing a straight line from recent U.S. trade and foreign policy shifts to a reversal of globalization. Doing so overlooks questions about how far U.S. policy will go, how other countries will respond, and how companies will adapt to changing policy conditions. Prudent business leaders should take threats to globalization seriously. But it is essential to maintain a balanced perspective. So far, the U.S. remains very active in international business, other countries are bolstering rather than cutting international ties, and most companies are adapting to a more turbulent international environment rather than retreating behind national borders.

15 Reasons to Be Optimistic About Globalization

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