The idea that global trade is back to an era of great powers and geopolitics is now firmly entrenched in policymakers’ minds. Given the energy shock from the Ukraine war, the demand for critical minerals for the green transition and the fragility of agricultural production, there’s a specific fear that the world economy is being fragmented in a zero-sum battle for scarce raw materials and food.Now, it’s certainly possible to scare yourself thinking about the risks to global prosperity of a new cold war between rival blocs centred on Washington and Beijing. But past experience and present observation suggest strategic attempts to corner commodity markets are often countered by adaptable companies and pragmatic governments.
The IMF, whose annual meetings are taking place this week, has long warned about geofragmentation. In their latest assessment, the fund’s economists estimate the impact of commodity markets splitting into geoeconomic blocs centred on the US and Europe on one side and China on the other.
For some raw materials, the shocks would be dramatic. Palm oil and soya bean prices in the China-centred bloc would rise by more than 500 per cent, with similar increases in the costs of refined minerals in the US-Europe area.