The world in the post-Cold War era was built on integrated economies, seamless trade, and global cooperation, but that is now on the edge of fragmentation. As the IMF’s Global Financial Stability Report 2025 warned of rising fragmentation and systemic shifts in global finance, it appears that a new era of economic blocs is emerging. The IMF’s Global Financial Stability Report (October 2025) and the IMF Blog “The Global Economy Enters a New Era” (April 2025) both warned that the global economy is moving towards fragmentation, slower trade, growth, and structural realignment. It seems that the end of hyper-globalization is no longer theoretical; it is evident in every trade agreement and currency policy, unfolding in real time. The world is facing an abrupt change in the globalization era; tariff wars have become the major focus, and technological decoupling is gradually dismantling the very idea of the globalized structure of the world that for long defined the global order. Quoting here, the World Economic Forum’s Global Risks 2025 report cautions that the unravelling of global cooperation in trade, technology, and climate could deepen fractures between major powers and fuel competition over scarce resources, while BlackRock’s latest outlook warns that we are entering a structural shift: a new era defined by fragmentation and competing global blocs. As global supply chains are usually disrupted, become targets of wars, and are redrawn, the economic alliances are disturbed, and so are the finances of the states. The world stands at the intersection of markets and geopolitics.
The states in today’s era are switching towards protectionism, imposing tariffs and domestic subsidies. It mainly aims to protect local jobs and balance trade deficits as well as reduce dependence due to high mistrust dominating international affairs or power-gaining mechanisms. On the other hand, it also portrays risks of rising prices and trade wars. Besides, reshoring and friend-shoring have become common practices, as states now seek to secure their supply chains by entrusting them to friendly partners after decades of relying on riskier ones. It is to illustrate that after COVID-19, the Russia-Ukraine war, and China-US tensions, several states have recognized the importance of it – that efficiency is not enough, but security guarantees matter a lot. These states now are securing their economics and advancing financial ties with political partners. Also, geo-economic competition in terms of sanctions, financial weaponization and especially payment system alternatives is evident: today the cases of China’s CIPS and BRICS currency discussions are in the limelight. Analysts from the Economist Intelligence Unit highlight that unpredictable policies are reshaping global trade, while a warning that echoes our mind comes from Black Rock that “globalization is being rewired as the world splits into competing blocs” underscores that multipolar fragmentation is becoming normalized in the world economy. Academic studies on arXiv point out parallel financial systems are taking shape, and the World Economic Forum cautions the world that such fractures in the economy and between states hold the power to heighten the tensions and slow collective progress.
Moreover, the world is not de-globalizing but globalizing. The political lines are more sharply drawn than ever before; neutral and free flow across the borders is not a trend anymore. The trade and technology still cross borders, but only within circles of trust and friendship defined by security guarantees. It is portraying a greater risk of security competition, and it is evident in today’s geopolitics: the U.S.-China chip war. When the US restricted its chip exports to China, it was initially an economic policy of Washington to secure its own industries, but with the elapse of time, it is more about who will run the technological market or control the future of military technology. As nations restructure supply chains and financial systems with a geopolitical lens, re-globalization is challenging the decades-old norms. Now the technological and strategic dominance is all-prevailing, along with the block politics and selective economic partnership.
Moving ahead, Pakistan and other similar powers stand in the middle of the geopolitics between the major powers; the economic blocs are affecting the finances of middle powers. These states deserve strategic autonomy and diversified partnerships to get to grips with their struggling economies; being trapped in a zero-sum alignment costs them in multiple spheres. In the case of Islamabad, the economic revival demands that both the US and China smartly navigate the path towards both powers, attracting investments without overdependence.
Pakistan’s economic vulnerabilities mirror these global fragmentations. The country’s export base is heavily dependent on a few sectors: textiles that are also tied with global western markets. Any protectionist shift that comes in the US and other foreign markets impacts the country directly, and foreign earnings get destabilized. In the meantime, financial stability is still threatened by dollar scarcity, and remittances, a vital source of outside funding, are subject to changes in Gulf economies’ policies. Pakistan must modify its export strategy to diversify markets, increase regional trade through safe financial channels, and lessen its reliance on the dollar in order to protect itself from outside shocks as international trade blocs are shifting and alternative payment methods are arising.
For middle powers, the struggle has started, and their economic strength lies within the geopolitics of aligning with one block. In the coming decades, for such powers, geo-economic diplomacy will become dominant: the art of trading with all but aligning with none and securing national interests.
The era of hyper-globalization may be over, but a new era has begun that is reshaping the economics of the global landscape. Those who can strike a balance between geopolitics and economics, between secure borders and open markets, and who emphasize diplomacy will define the next world order.
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