The End of Globalization…Again? Creative Destruction and the Global Order

April 1, 2025
Andrea Little Limbago

Author: Dr. Andrea Little Limbago, SVP, Applied AI  

The April 2nd tariffs are the latest culprit blamed for the death of the interdependent economic system that began following World War II.  

Much has been written about the immediate impact of these tariffs but there has been much less attention on how these tariffs fit into the broader, macro-trends reshaping the global economy.  

The immediate ‘fog of uncertainty’ disrupting financial markets and supply chains is part of a deeper restructuring that is underway, one which is driven by a generational technological revolution, and the resulting geopolitical competition shaping this new order.  

How We Got Here 

Following World War II, global leaders gathered in Bretton Woods, New Hampshire and created three global institutions to shape the world order: the International Monetary Fund, the World Bank, and the General Agreement on Tariffs and Trade (which evolved into the World Trade Organization).  

The goal was to create an interdependent economic system to promote post-war recovery and international cooperation. As a result, global trade in 2023 was 134 times greater than in the early 1960s, and has shaped what many call the modern era of globalization. 

Since then, there have been persistent rumors of the death of globalization. In the early 1970s, President Richard Nixon ended the Bretton Woods monetary regime and its fixed exchange rate system. 

 While it ended one system, many believe this ushered in the current era of globalization.  

In the late 1980s and early 1990s, the end of the Cold War opened up new markets that were cut off from decades of global trade, leading some to argue this is when globalization truly went global.  

At that same time, the rise of preferential trade agreements (PTAs), such as NAFTA and the EU, sparked concern over the demise of free trade. The 2008 financial crisis, 2018 US-China trade war, and 2020 global pandemic additionally instigated claims of the death of globalization. While extremely different circumstances and rationale, at the macro-level, these conversations are mirror those today on the impact of President Trump’s tariffs.  

In short, globalization has experienced a series of disruptions, expansions, and restructuring over the decades. What arguably makes this time different is the digital and technological revolution, and the tariffs more so reflecting one of many realpolitik-focused responses to today’s geo-strategic realities. 

A New Era of Creative Destruction 

In the late 1930s and 1940s, Joseph Schumpeter coined the term ‘creative destruction’ to refer to the evolutionary nature of capitalism, wherein technological advances make obsolete previous products and processes, leading to significant reallocation and labor market disruptions. He experienced real-world examples of technological disruptions, perhaps most notably Ford’s assembly line as well as the military revolution during World Wars I and II.  

Earlier this year, the World Economic Forum argued that today’s ongoing technology convergence is paving the way for the Fifth Industrial Revolution. At the same time, the WEF noted that the technological revolution requires a reskilling revolution, with 22% of today’s jobs already changing due to AI and big data, while at least 60% will require upskilling in the coming years. 

 This is on par with the job destruction detailed by Schumpeter almost a century ago and may even understate the foundational shift underway thanks to great power politics. As Chinese President Xi Jinping  noted at the National Science and Technology Awards Conference 2024, “The scientific and technological revolution and the great power game are intertwined.” 

Today, the tariff debate is nestled within the broader context of global decoupling along geopolitical fault lines.  

Last year, an IMF study highlighted the shift toward ally-shoring or friendshoring – reorienting supply chains toward allied partners. While nearshoring has garnered more attention, they note that trade distances have grown due to a prioritized focus on like-minded, allied countries. A similar study noted a 7% decline in trade between non-allied countries. Together, the forces of creative destruction and geopolitical competition are creating unchartered territory. 

For decades, just-in-time, lowest cost, hyperspecialized supply chains drove globalization with minimal thought to geopolitics.  Today, geopolitics is playing an outsized role in reshaping the global economy, with recent tariffs simply one of many factors indicative of this transformation. In the United States, the CHIPS Act and Inflation Reduction Act preceded President Trump, and prioritized domestic manufacturing.  

In addition, well before President Trump’s ‘Liberation Day’, China initiated the Made in China 2025 policy, aimed at decreasing reliance on foreign goods and manufacturers. Over the last decade, export controls and industrial policy have further promoted trusted technology networks, sparking a supply chain bifurcation of technologies from drones to 5G to AI.  

Just like the elevation of tariffs, the DeepSeek moment likely will accelerate this decoupling and spark additional AI-focused export controls or bans aimed to promote national technology champions. 

 Tariffs & Global Transformation 

The global economy continues to evolve, with this current era a significant inflection point driven by creative destruction, and the competition to ‘win’ the digital revolution. The tariffs – regardless of the eventual scale and scope– are a symptom of the ongoing global transformation, at times referred to as glocalization. Governments race to adapt to creative destruction and the wave of uncertainty as new policies, regulations, and realpolitik upend existing processes and norms. 

While reciprocal tariffs could be an equalizer, placing US tariffs on par with higher tariffs imposed on US goods, concern grows that they could lead to subsequent beggar-thy-neighbor trade policies that have historically hurt all involved.  

Regardless, they are in opposition to global free trade and tightly entangled with geopolitics (on allies and adversaries alike), leading to a range of knock-on effects. For instance, Kentucky Senator Rand Paul recently referenced years of literature on the pacifying effects of free trade on global conflict, noting, “The more we trade…the less we fight.” Significant academic literature has been devoted to the pacifying effects of free trade.  

In many ways, tariffs are a symptom of the broader global transformation underway. It is essential to assess their immediate impact, but companies seeking greater resilience must view them in the context of a broader transformation to the global economy.  

This transformation is fueled by the technological revolution, and the geopolitical race to establish the governance and institutional structures guiding it.  

We are in the beginning phases of creative destruction, one that is upending all forms of market risk and stability, with tariffs the latest disruption, but certainly not the last transforming the international order. 

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