The era of hyper-globalisation, driven purely by cost and efficiency, is undergoing a fundamental transformation. According to the 2026 Geostrategic Outlook report by Ernst & Young (EY), world trade is not collapsing but is being selectively redesigned around the principles of trust and strategic alignment. The consultancy predicts that friendshoring and mini-lateral trade deals will dominate global supply chains in the coming year, marking a decisive shift from seeking the cheapest producers to prioritising reliable, geopolitically safe partners.
The New Drivers of Global Trade: Tariffs, Security, and Resilience
EY forecasts a sharp slowdown in global trade growth next year, with North America likely contributing negatively for a second consecutive year. This is not a sudden stop but a strategic recalibration, where governments are increasingly privileging resilience, security, and domestic capacity over pure efficiency and openness. This projection is backed by 2025 data from the World Trade Organization (WTO), which showed global merchandise trade volume growth slowing to around 2.6%, down from post-pandemic highs, amid rising tariffs and sanctions.
The report underscores that tariffs are now a permanent feature of economic statecraft, not a temporary shock. The United States is expected to continue using historically high tariffs to reduce bilateral trade deficits and boost domestic production in strategic sectors. Even if courts challenge some measures, EY notes that Washington is likely to re-impose similar duties using alternative legal authorities, with potential new tariffs on critical minerals and truck parts.
Beyond Tariffs: The Rise of Export Controls and Industrial Policy
The reshaping of supply chains extends far beyond tariffs. Export controls, justified on national security and competitiveness grounds, are becoming a structural part of the trade landscape, especially in artificial intelligence, semiconductors, and advanced manufacturing. China remains central to this trend, particularly through its restrictions on rare earths and critical minerals, where it accounted for over 60% of global production in 2025.
Simultaneously, countries are using industrial policy to secure their positions. Indonesia's nickel export restrictions, for example, helped it capture over 50% of global refined nickel supply by 2025, reshaping battery supply chains. In Europe, the European Commission is centralising authority over export controls, and local content requirements are rising in response to perceived overcapacity from China.
How Companies Are Already Adapting to the Friendshoring Reality
Friendshoring has moved from theory to practice, with major multinationals restructuring their supply chains in response to geopolitical risks and policy incentives.
Apple's 'China Plus Many' Strategy: While China remains crucial, Apple significantly expanded iPhone and component assembly in India and Vietnam during 2024–25. By early 2025, India accounted for an estimated 12–14% of global iPhone production, a textbook friendshoring outcome driven by production-linked incentive schemes and a deliberate move to reduce geopolitical risk.
Semiconductor Localisation: In advanced manufacturing, friendshoring is most visible in chips. Intel, TSMC, and Samsung have committed tens of billions to new fabrication plants in the US and Europe, closely tied to subsidies from the US CHIPS Act and EU Chips Act and export control regimes.
Automotive and EV Supply Chains: Companies like Tesla have expanded regional sourcing in North America and Europe to qualify for subsidies under laws like the US Inflation Reduction Act. Battery supply chains now prioritise suppliers in allied nations for critical minerals, a shift highlighted by the International Energy Agency.
Vietnam and Mexico as 'Connector Economies': According to the World Bank, these nations have positioned themselves as politically acceptable, cost-competitive hubs. In 2025, Mexico overtook China as the largest goods exporter to the US by value, while Vietnam saw sustained inflows of manufacturing FDI in electronics and apparel.
What This Means for Businesses, Investors, and Policymakers
For business leaders, supply chain resilience is now a core determinant of competitiveness. As former US Treasury Secretary Janet Yellen outlined, the goal is deepening integration with trusted partners. For investors, geopolitical fragmentation is altering capital flows. Investments aligned with government priorities in semiconductors, clean energy, and critical minerals may benefit from subsidies and policy certainty despite higher upfront costs.
For policymakers, the lesson is that competitiveness in 2026 will be defined less by tariff schedules and more by a country's position within trusted networks. While WTO Director-General Ngozi Okonjo-Iweala has warned that unchecked fragmentation could hurt global growth, the trend towards pragmatic, politically filtered trade is now unmistakable.
