Military conflicts and trade tensions are inflicting substantial economic damage, estimated at up to $14.5 trillion globally over five years. Their impacts extend far beyond simple transport disruptions or rising costs, triggering a chain reaction of inflation, raw material shortages, and heightened uncertainty. In response, businesses are proactively diversifying their supply chains, investing in new technologies, and building reliable partner networks. In this context, “third countries” such as Vietnam are presented with opportunities to become key nodes in the emerging supply chain landscape, but they also face internal challenges such as high logistics costs and underdeveloped infrastructure.
The “Old” Globalisation: From Efficiency to Fragility
The second half of the 20th century witnessed a remarkable boom in global trade, with trade as a share of world GDP climbing to a record 61% in 2007 (compared to only about 25% in the early 1970s). The just-in-time (JIT) supply chain model became the foundation, enabling firms to minimise costs by relocating production to low-wage economies such as China, Vietnam, and Mexico while keeping inventories lean. This system thrived as long as trade routes remained open and stable—for instance, containerised shipping across the Pacific grew fivefold between 1980 and 2010.
Yet this very dependence on a small set of suppliers and routes created fragility: the 2011 Tohoku tsunami crippled global automotive and semiconductor supply chains for months; the Ever Given blockage in the Suez Canal in 2021 disrupted 12% of global trade for just a few days, inflicting an estimated $9–10 billion in losses per day.
See further: The History of Global Sourcing and the World’s Largest Sourcing Hubs
This chart illustrates the volatility of GDP growth over the following periods: post-war period, oil crisis, recovery, to the 2008–2009 financial crisis.
This graph illustrates geo-economic movements: the decline of China and India in the 19th century, followed by their resurgence in the late 20th century.
The First Shocks: Cracks in the System
The end of borderless globalisation began with the Global Financial Crisis (2008–2009), when world trade volumes collapsed by 12% in 2009 alone—the steepest drop since World War II. From then on, trade growth no longer outpaced GDP as it once had.
Next came the U.S.–China trade war (2018–2019): the U.S. imposed tariffs on over $370 billion worth of Chinese goods, while China retaliated with tariffs on about $110 billion in U.S. exports. Some third economies benefited—Vietnam’s exports to the U.S. jumped 35.6% in 2019, fueled by supply chain shifts from China.
The most devastating shock was COVID-19 (2020–2021), which froze supply chains worldwide: global auto output plunged 16% in 2020, while a semiconductor crunch paralysed industries as demand soared, but production was disrupted. Scenes of container backlogs at Los Angeles and Shanghai, or shortages of masks and medicines in developed countries, exposed dangerous overreliance on a handful of suppliers and the lack of resilience in global systems.
See more: Shipping Crisis – How U.S.–China Rivalry Is Reshaping Global Logistics
Current Geopolitical Conflicts: The Core Driver of Restructuring
Even as the world began to recover from the pandemic, new geopolitical conflicts worsened the fragility. The Russia–Ukraine war (since 2022) disrupted more than 30% of global wheat supply and sent European natural gas prices soaring fivefold in 2022, pushing eurozone inflation to a 40-year high. In the Middle East, Houthi attacks on shipping in the Red Sea (2023–2024) slashed Suez Canal traffic—normally 12% of world trade—by over 40% in early 2024, forcing reroutes around the Cape of Good Hope and inflating costs and transit times by double-digit percentages.
The WTI crude oil price chart over the past decade vividly reflects these shocks: collapsing below $0 in early 2020, then surging above $120 per barrel in 2022 as demand recovered and geopolitical tensions escalated.
These events are not isolated causes, but accelerants of a restructuring process already underway. The cumulative shocks—financial crisis, trade war, pandemic, and now armed conflicts—have shifted perceptions of risk: from “acts of God” to systemic and persistent threats.
Macroeconomic and Microeconomic Consequences
The ripple effects are global. Lloyd’s of London (2023) estimates that a hypothetical geopolitical conflict could wipe out $14.5 trillion in global GDP over five years—roughly 7% of world output.
At the macro level, energy disruptions pushed Brent crude above $120/barrel in mid-2022, while European gas prices soared 5x their 2019 average. Shipping costs skyrocketed: the Drewry World Container Index hit a record $10,300 per 40ft container in Sept 2021, nearly seven times pre-pandemic averages.
At the micro level, production costs surged, fueling global inflation to 8.8% in 2022 (IMF)—the highest in decades. Indirect risks also mounted: congestion at Los Angeles and Shanghai ports stretched lead times by 20–30 days, while tighter customs procedures and mandatory stockpiling pushed warehouse costs in the U.S. and EU up 25–30% between 2021–2023.
Strategic Shifts: Reshoring, Nearshoring, and Friendshoring
To adapt, firms are embracing new supply chain strategies:
- Reshoring: Bringing production back home.
- Nearshoring: Moving production closer geographically.
- Friendshoring: Relocating to allied nations with shared political/economic values to mitigate geopolitical risks.
- Onshoring: Keeping production domestic from the outset.
Each approach has trade-offs. Reshoring boosts quality control and domestic jobs but raises costs. Nearshoring blends cost savings with proximity—IBM’s shift from the U.S. to Mexico is a prime example. Friendshoring enhances political security but may reduce competitiveness if partners lack cost or technological advantages.
This is more than a geographic shift—it is a philosophical transformation. Where low labour cost once dictated location, the new priority is minimising risk and building resilience, even at higher costs. The rise of friendshoring—selecting partners based on shared political, economic, or even military values rather than just price or quality—is perhaps the clearest manifestation of this shift.
See further: Global Sourcing Trends – Current and Future
Table 1: Comparison of Supply Chain Relocation Strategies
Conclusion
The past decade has shown that globalisation no longer guarantees smoothness and efficiency. Global supply chains have revealed deep vulnerabilities, from financial crises and pandemics to geopolitical conflicts. These consecutive shocks have transformed risks from localised disruptions into systemic threats, forcing businesses and policymakers to rethink production, trade flows, and risk governance.
Yet within this turbulence lies opportunity. A new wave of supply chain restructuring is taking shape: new production hubs, more flexible business models, and shifting flows of capital and technology are redrawing the map of global trade. Vietnam, with its rising role in global value chains, now has the chance to elevate its position—not merely as a low-cost manufacturing destination, but as a strategic node in the diversification strategies of multinational corporations.
In Part 2, we will explore:
- The restructuring of critical industries: energy, semiconductors, and China’s central role.
- Government and corporate responses to enhance resilience.
And finally, the opportunities and challenges for “third countries” like Vietnam in the emerging global supply chain landscape.
