The rising intensity of shocks affecting global supply chains in the past 5-6 years gained further momentum this year through adverse geopolitics. Indeed, after the shocks of the COVID period in 2020-2021, trade wars and geopolitical tensions have escalated to such a degree as to become a key factor that the corporate sector has to systematically monitor and integrate into its early warning systems. The Federal Reserve Bank of New York’s data released in early April of this year revealed that its Global Supply Chain Pressure Index (GSCPI) grew to 0.68 in March, the highest level since early 2023[1]. Against the backdrop of these intensifying shocks, corporates are actively recalibrating their supply routes and networks – the Allianz Trade Global Survey 2026[2] showed that with 65% of respondents citing geopolitical risks as their top business risk, 80% have diversified trade since Trump’s tariffs, 63% are sourcing from new suppliers and 57% are rerouting through third markets. In devising strategies to cope with intensifying risks to supply chains, corporates will need to develop new business models and discover new regions that may be more resilient to the shocks of trade disruptions and geopolitics.
A report produced by the Japan Economic Foundation (JEF) in 2025 titled “Policy recommendations on supply chain resilience”[3] identifies three causes of supply chain disruption, namely: physical risk (pandemics, natural disasters), cyber risks and geopolitical risks. Among the key measures aimed at mitigating the risks of supply chain disruptions, Japanese experts highlight the importance of the use of rules-based frameworks of the WTO, FTA strategies, utilization of plurilateral agreements, diversification of critical supply chains, as well as the advancement of regional cooperation. Of the above measures, regional integration is likely to be increasingly important as an anchor of economic stability through convergence criteria and economic policy coordination creating a more predictable economic environment. On a related note the quality of the regulatory regime, including with respect to trade and investment, is crucial not only in terms of the quality of norms, but also their stability and enforcement. Diversification of supply routes as well as optionality in terms of connectivity and infrastructure (including payment systems) to support the operation of supply chains is also likely to grow in importance as the costs of disruptions around the global chokepoints[4] such as the Strait of Hormuz have spiked since the eruption of the Iranian war this year.
In terms of the severity of geopolitical risk that is currently seen as a key factor in supply chain resilience, one may identify several macro-regions that exhibit relatively lower risks compared to the rest of the world economy. One is the Southern Hemisphere, where despite significant governance issues in parts of Latin America and Africa, the overall level of international tensions and conflicts is significantly lower than other parts of the globe. Another such region is the Western Hemisphere, that is increasingly seen as a potential platform focused on building supply chain resilience[5], though this will depend on its ability to forge ahead with greater regional integration while avoiding the pitfalls of geopolitical interventionism.
More generally, on most of the counts alluded to above, the Southern Hemisphere appears to be favorably positioned to increase its role in the global re-configuration of supply chains. In particular, apart from the relative quiescence of geopolitical risks, it is well equipped with regional integration projects such as Mercosur, SADC, ASEAN, PACER+ that could serve as key drivers of rules harmonization and anchors of regulatory/economic stability. The Southern Hemisphere also offers more options in terms of the diversification of connectivity and trade routes that hitherto have been either unexplored or underutilized[6]. And while in some respects, the infrastructure pertaining to logistical connectivity is yet to be developed (and may trail the levels observed in the North), the relative neutrality and low levels of geopolitical strife in the region leave significant scope for sizable investments to build the capabilities to sustain the operation of resilient supply chains.
The process of global supply chain re-configuration will likely advance along several trajectories. Across companies, a greater weight ascribed to supply chain resilience is likely to take hold, with business model innovation increasingly seeking to discover new pathways to containing the adverse impact of geopolitics. Back in 2024 we developed a business model for OASES economies (Oriental Republic of Uruguay, Austria, Switzerland, Emirates (UAE) and Singapore), with one of the benefits of such a business model framework being greater supply chain resilience compared to some of the larger economies that are more exposed to geopolitical risks: “the openness of OASES markets renders them more integrated into regional and global value chains, with the risks of geopolitical disruptions being contained by the fact that all OASES countries are (de jure or de facto) neutral”[7].
Across countries, the world economy is likely to witness the formation of platforms and alliances that are increasingly targeting supply chain resilience. One of the recent examples is the Future of Investment and Trade (FIT) Partnership[8] – an alliance of small and medium-sized economies that advances the goal of building resilient supply chains as one of its key priorities. The plurilateral and flexible set-up of the platform as well as the composition of members represented mostly by small, neutral, innovative, open and agile economies, greatly enhances the capabilities of the platform, making it one of the most competitive such undertakings on the international arena.
Across regions, we are likely to see greater coordination among the regional platforms and integration arrangements that prioritize supply chain resilience. This would to a significant degree be facilitated by the ongoing regionalization trends in governance and supply chains across the global economy. The platforms that are likely to be involved in the expanding networks targeting supply chain resilience may include the likes of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the newly created FIT Partnership, as well as potential regional accords with low geopolitical tensions such as the Southern Five (S5) proposed platform[9].
Overall, the re-configuration of supply chains across the global economy will involve a mix of new regions, new business strategies and alliances. To a significant degree, this process is likely to involve the building of de novo and more diversified supply chains/cooperative frameworks, despite the added costs that this may involve in terms of new investments into supply chain infrastructure. In 2025 the IMF published a working paper that developed a model of supply chain resilience, with the authors underscoring the importance of the resilience-efficiency trade-off: “Because countries cannot immediately reconfigure supply chains in response to shocks, supply chain diversification can potentially improve resilience, at the cost of efficiency. Quantifying the resilience-efficiency trade-off suggests that diversifying the sources of targeted imports—those more exposed to shocks, positioned upstream in the supply chain, and subject to greater rigidities—can enhance expected welfare when the probability of a large trade shock is sufficiently high”[10]. And since 2025 the scale of shocks has only intensified further.
In the end, the severity of geopolitical shocks in the past several years is likely to result in a hysteresis effect in the global economy, with geopolitical risk mitigation rising significantly in the list of priorities of the emerging cob-web of regional and global supply chains. This in turn is likely to become a potent factor reshaping the global economy bottom-up rather than top-down (the dominant trend of the past phases of globalization), with a powerful role played by ongoing trends of regionalization and reshoring/nearshoring. A world economy that is more impervious to geopolitical shocks would then be in a better position to address a widening array of global challenges, with the key to success being a concerted effort to build greater optionality and diversification in the expanding network of supply-chains.
[1] https://finance.yahoo.com/economy/articles/ny-fed-says-supply-chain-144040939.html
[2] Allianz Survey of 6,000 firms in 13 countries before and during the Iran war: https://www.allianz-trade.com/en_global/news-insights/news/global-survey-2026.html
[3] https://www.jef.or.jp/journal/pdf/262nd_Cover_Story_01.pdf
[4] In our 2024 publication “From chokepoints to bridges: a different look at the world map” we noted the vulnerabilities associated with the chokepoints in the global economy and called for devising supply and trade strategies based on building networks among what we referred to a bridge economies that could serve as logistical hubs in building more resilient supply networks: https://brics-plus-analytics.org/from-chokepoints-to-bridges-a-different-look-at-the-world-map/. The economies identified as potential elements in such resilient networks included the likes of Singapore, Switzerland, UAE – those that are not only small and agile, but also neutral – a factor that serves to reduce geopolitical risks.
[5] https://repositorio.cepal.org/server/api/core/bitstreams/3202daef-c586-4652-add3-c33cc55af4f2/content;
[6] https://brics-plus-analytics.org/hemispheric-perspectives-from-down-under/
[7] https://brics-plus-analytics.org/business-model-innovation-shifting-the-focus-to-small-economies/
[8] https://www.seco.admin.ch/seco/en/home/Aussenwirtschaftspolitik_Wirtschaftliche_Zusammenarbeit/internationale_organisationen/WTO/fitpartnership.html
[9] https://brics-plus-analytics.org/the-southern-five-a-platform-to-balance-the-global-economy/
[10] https://www.imf.org/-/media/files/publications/wp/2025/english/wpiea2025102-print-pdf.pdf
Yaroslav Lissovolik, Founder, BRICS+ Analytics
Image by geralt via Pixabay