Geoeconomic fragmentation and the role of non-aligned countries

We analyze how non-aligned countries affect welfare outcomes in scenarios of global trade fragmentation. Using a quantitative trade model covering 141 countries and 65 economic sectors, we simulate different scenarios of geoeconomic fragmentation. We find that major non-aligned countries benefit from their neutral position, with welfare gains of up to 0.7 percent that vary significantly across sectors. These gains turn into significant losses if they join either the Western or Eastern trade bloc. Moreover, world welfare losses increase from −1.9 percent under incomplete fragmentation to −2.7 percent when non-aligned countries join the West and to −3.7 percent when they join the East. Our results highlight the strategic importance of non-aligned countries in mitigating the negative effects of global trade fragmentation.