Friend-Shoring in International Trade: Risk Reduction Strategy or Economic Fragmentation?

Abstract

This paper examines the structural transformation of global trade under contemporary geopolitical tensions, with a focus on the concept of friend-shoring. It evaluates whether friend-shoring constitutes an effective strategy for reducing risks in global supply chains or contributes to the deepening of geoeconomic fragmentation. The paper contributes to the emerging literature on geoeconomic fragmentation by integrating insights from global production network theory with recent empirical and macroeconomic evidence on trade reconfiguration. The analysis is based on a qualitative review of specialized literature and the interpretation of secondary data from academic studies and institutional reports published by organizations such as the IMF, ECB, EBRD, NBER, WTO, and the World Bank. The results indicate that while friend-shoring can enhance short-term resilience by reducing exposure to geopolitical risks, it generates significant economic costs, including higher intermediate input prices, reduced innovation efficiency, and weaker diffusion of productivity gains. Furthermore, geoeconomic fragmentation leads to uneven welfare losses across regions, with emerging economies facing disproportionate adjustment burdens. The findings also show that decoupling does not produce a clear separation between trade blocs, but instead reconfigures global interdependencies through intermediary economies and indirect supply chain linkages, limiting the effectiveness of politically driven supply chain restructuring. The paper argues that friend-shoring represents a transformation of globalization rather than a retreat from it, reshaping the balance between economic efficiency, supply security, and geopolitical resilience. UDC: [339.5:005.21]:339.97; JEL: F13, F14, F23, F,52, F60