**Introduction** The ongoing US-China conflict is reshaping the world economy by pushing firms and governments to redesign supply chains around resilience and political risk, intensifying competition over “strategic” technologies through controls and subsidies, and accelerating a shift from rules-centered globalization toward a more bloc- and power-centered global order[1][2]. **Contextual background** The conflict now operates less as a bilateral tariff dispute and more as a contest over dependencies: who controls key nodes (advanced chips, critical inputs, data-enabled services, and manufacturing capacity), who can deny access through policy tools (export controls, investment screening, subsidies), and who can attract or redirect production and investment toward “trusted” jurisdictions[1][3]. **How the US-China conflict is reshaping the global economy** **1.** **Supply chains are being reconfigured around resilience, redundancy, and “trusted” networks** Supply chains are increasingly designed to reduce exposure to single-country concentration risks and to manage the possibility of sudden restrictions on trade, technology, finance, or investment. This is visible in the broader pattern of fragmentation in trade and investment linkages, alongside policy-driven efforts to “relocalize,” “nearshore,” or diversify production footprints[1][4]. At the same time, the economic costs of aggressive localization strategies are becoming clearer: resilience strategies that rely heavily on duplicating production or restricting sourcing can introduce inefficiencies and reduce the gains from specialization, prompting a search for approaches that diversify without fully dismantling global production networks[5]. Investment patterns are also being affected: geoeconomic fragmentation and diverging regulatory environments are reconfiguring international supply chains and altering where productive investment flows, with more focus on regionalization and diversifying partnerships[4]. **2.** **Technological competition is shifting from market rivalry to state-managed rivalry** The conflict has accelerated a rules-and-instruments race centered on chokepoints in advanced technology — especially semiconductors, AI-related supply chains, and dual-use capabilities — where governments increasingly combine export controls, investment screening, and domestic support to shape technology trajectories and limit strategic dependence[3][6]. This dynamic is not limited to bilateral measures. It also encourages competitive industrial policies and localization pressures across third economies — particularly in clean-tech, advanced manufacturing, and key enabling services — because access to the US and Chinese markets and their technology ecosystems is increasingly conditioned by security and policy alignment rather than price alone[6][7]. **3.** **Global order is moving toward fragmentation and more selective rulemaking** The cumulative effect is a gradual shift away from a single, widely shared framework for trade and investment governance toward a more segmented system where geopolitics increasingly shapes commercial decisions and where compliance incentives weaken when enforcement and consensus are constrained[2][8]. In parallel, more rulemaking and coordination are occurring through narrower coalitions, standards forums, or issue-specific groupings — often focused on economic security — rather than through universally binding updates to multilateral rules. This reduces predictability for firms operating across blocs and raises adjustment pressures on economies that rely on stable, open access to multiple markets[2][8]. **4.** **Conclusion** The US-China conflict is catalyzing a structural transition: supply chains are being redesigned for political risk and resilience, technology competition is becoming more state-directed and security-oriented, and the global order is shifting toward more fragmented governance with greater reliance on selective partnerships and constraints-based competition[1][3][4].
