Interconnectivity disrupted by fading globalization: A network approach to recent international trade developments

The post-World War II decades experienced rapid growth in international trade, but recently a trend of weakening globalization has been consolidating. We construct an International Trade Network (ITN) using bilateral trade (2010 to 2022) to assess how interconnectedness has evolved in the face of recent developments. Our analysis reveals that while network connectivity initially improved, there was a shift towards a negative trend from 2018, coinciding with an increasingly unfavorable environment for international trade. We also document significant changes in the roles of countries within the ITN. While the USA remains the primary hub and China solidifies its second position, key countries like Germany, France, Great Britain, and Japan have notably lost relevance, whereas nations like India and the Republic of Korea are gaining prominence. Finally, employing an econometric model, we show that countries with large economies, significant manufacturing sector, lower inward foreign direct investment stock, and economic and geopolitical stability tend to occupy more central positions in the ITN.