Helfen statt Blockieren
DEENES
Menu

Economy, Analysis

Where are we heading?

· Helfen statt Blockieren editorial team

Is the world economy splitting into blocs, and what would that cost? The IMF, the WTO, the ECB, the World Bank and the Kiel Institute have calculated scenarios. This analysis sets their ranges side by side, from 0.2 to 9 percent of world output, shows how the weight of the world’s regions is shifting, and says what the calculations cannot do. It makes no forecast of its own.

0.2 to 7%long-run loss to the world economy if it splits into blocsIMF 2023
−13%world trade by 2050 if all countries join one of two blocsWTO 2023
19.9%China’s share of the world economy in 2026 (purchasing power); 1990: 3.6 percentIMF
+0.6%more world GDP by 2029 if the build-out of artificial intelligence is strongerIMF, October 2026

How to read scenarios

A scenario is not a prediction. It answers the question: what if? The WTO states explicitly that its own calculations are not forecasts. Every number depends on assumptions, above all on how easily firms can replace suppliers and customers. The Kiel Institute calls this substitutability the assumption with the greatest influence on the result. That is why ranges, not single values, are shown below.

Long run: what blocs could cost

In 2023 the IMF published the best-known range: a fragmentation of world trade could cost between 0.2 percent of world output (limited fragmentation) and up to 7 percent (severe fragmentation with high adjustment costs) in the long run; with technological decoupling added, 8 to 12 percent in some countries. Emerging and low-income economies would be most at risk because they would lose the knowledge that comes with trade and investment. In a second calculation on direct investment, the IMF arrived at about 2 percent of world GDP.

In its World Trade Report 2023 the WTO divided the world into two blocs, an eastern and a western one, up to 2050. In this case of “full rivalry”, world trade would fall by 13 percent; developing and least developed economies would lose 6.5 percent of GDP on average, developed economies about 3 percent. If some developing and all least developed countries stay neutral, the average loss is 2.8 percent, and the poorest countries would even gain 1.9 percent. In 2024 the ECB calculated an extreme case with prohibitive trade barriers between geopolitical blocs: world output would fall by up to 9 percent and inflation would rise by 4 percentage points in the first year.

What a fragmenting world economy could cost: eight estimates

Loss compared with a world without fragmentation. The studies measure different things (world output, income of individual countries, national expenditure) at different horizons; they cannot be added up. Axis: percent.

024681012Split into blocs, world, long run0.2 to 7% of world GDPIMF 2023plus technological decoupling, some countries8 to 12% of GDPIMF 2023Fragmented direct investment, worldabout 2% of world GDPIMF 2023two blocs by 2050, developed and developing3 and 6.5% of GDPWTO 2023partial rivalry, world, by 20502.8% of GDPWTO 2023extreme case: barriers between blocs, worldup to 9% of world GDPECB 2024hard decoupling from China, Germany, permanent1 to 2% of national expenditureKiel 2024same, Germany, first months4 to 5%Kiel 2024024681012Split into blocs, world, long run0.2 to 7% of world GDPIMF 2023plus technological decoupling, some countries8 to 12% of GDPIMF 2023Fragmented direct investment, worldabout 2% of world GDPIMF 2023two blocs by 2050, developed and developing3 and 6.5% of GDPWTO 2023partial rivalry, world, by 20502.8% of GDPWTO 2023extreme case: barriers between blocs, worldup to 9% of world GDPECB 2024hard decoupling from China, Germany, permanent1 to 2% of national expenditureKiel 2024same, Germany, first months4 to 5%Kiel 2024
Values as table
EstimateSourceRange
Split into blocs, world, long runIMF 20230.2 to 7% of world GDP
plus technological decoupling, some countriesIMF 20238 to 12% of GDP
Fragmented direct investment, worldIMF 2023about 2% of world GDP
two blocs by 2050, developed and developingWTO 20233 and 6.5% of GDP
partial rivalry, world, by 2050WTO 20232.8% of GDP
extreme case: barriers between blocs, worldECB 2024up to 9% of world GDP
hard decoupling from China, Germany, permanentKiel 20241 to 2% of national expenditure
same, Germany, first monthsKiel 20244 to 5%

Sources: IMF SDN/2023/001; IMF blog on WEO April 2023, chapter 4; WTO, World Trade Report 2023, figure D.4; ECB Occasional Paper 365; Kiel Policy Brief 170. Compiled by Helfen statt Blockieren, daten/werte_berichte.csv.

For Germany, the Kiel Institute calculated a hard, sudden decoupling from China in 2024: around 5 percent of national expenditure, meaning consumption and investment, in the first months, around 4 percent in the first year and 1 to 2 percent permanently. Less drastic paths, such as shielding only high technology, would cost less.

Short run: the shocks of 2026

In April 2026, after the war in the Gulf began, the IMF calculated two scenarios. In the adverse one (oil 80 percent dearer), world growth in 2026 would have fallen by 0.8 percentage points to 2.5 percent; in the severe one (oil plus 100, gas plus 200 percent) by 1.3 points, to around 2 percent, which the IMF called “a close call” for a global recession. In June the World Bank arrived at only 1.3 percent for a case with energy and financial stress (calculated at market exchange rates, hence lower than the IMF). None of these has materialised so far: in October the IMF expects 3.1 percent for 2026, the OECD 2.9 percent in September.

Short term: what the IMF considered possible in April and what it expects in October

World economic growth, percent. Baseline derived from the scenario gaps (2.5 plus 0.8; 3.0 plus 0.2); severe scenario 2026 “around 2 percent” according to the foreword.

Case20262027
Baseline January 20263.33.2
adverse scenario (oil +80%)2.53.0
severe scenario (oil +100%, gas +200%)2.02.2
actual forecast October 20263.13.4

Sources: IMF, World Economic Outlook April 2026, chapter 1, pages 7 to 10 and foreword; IMF, World Economic Outlook October 2026, table 1.1.

There is also room on the upside: according to the IMF, a stronger build-out of artificial intelligence could raise world GDP by 0.6 percent by 2029. The IMF names the downside risks in October (new tariffs, a longer war, a setback in investment in artificial intelligence, a repricing in financial markets) but does not quantify them in the main text.

The direction: a multipolar world

Regardless of scenarios, the weight is shifting. Measured at purchasing power, China’s share of the world economy rose from 3.6 percent (1990) to 19.9 percent (2026), India’s from 3.4 to 8.6 percent. The United States fell from 21.7 to 14.6 percent, the EU from 25.0 to 13.8 percent, Germany from 6.4 to 2.9 percent. The IMF extends these lines to 2030. In April 2026 the IMF wrote that the world need not become more fragmented even as it becomes more multipolar.

The world is becoming multipolar: shares of the world economy

Share of world gross domestic product at purchasing power parity, percent; 2030 IMF projection.

YearChinaUnited StatesEUIndia
19903.621.725.03.4
20006.720.421.63.9
201012.817.117.65.3
202018.415.315.26.8
202519.614.614.08.2
2030 (projection)20.313.912.99.9

Source: IMF DataMapper, series PPPSH (WEO October 2026), accessed 3 Nov 2026; daten/ergebnis_iwf_anteil_kkp.csv.

Three paths, as the WTO describes them

  • Full rivalry: all countries join one of two blocs. Highest costs, above all for developing economies.
  • Partial rivalry: two blocs, but many countries stay neutral and trade with both. Lower costs; the neutral poorest countries could gain.
  • Revival of multilateralism: tariff increases are reversed, barriers to goods and services lowered, uncertainty falls. According to the WTO, all economies would then be better off over time than in any fragmentation case.

Which path materialises is decided by governments, not models. What the data show: the world is currently moving between the first and the second path. According to the WTO, trade between the two hypothetical blocs has grown 4 to 6 percent more slowly than trade within them since the war in Ukraine began, but it is growing. And the number of regional agreements is rising (World Bank).

Two readings

The case against alarm

  • The models are cautious: many assume that firms find it hard to replace suppliers. In reality they have rerouted, and trade grew by 4.2 percent in 2025 (WTO).
  • The IMF’s severe scenarios of April 2026 have not materialised so far.
  • Security has a price that governments pay deliberately; a small loss of prosperity can be chosen in exchange for less vulnerability to pressure.

The case for concern

  • The costs of fragmentation build up slowly and become visible late, for example as missing investment and less knowledge in poorer countries (IMF).
  • Uncertainty is higher than at any time since 1990; on its own it holds back investment, even without new tariffs.
  • The ranges are wide, but almost all estimates show a loss; no model shows a gain for the world as a whole.

Check the numbers: daten/abruf.py downloads the IMF, World Bank and uncertainty series; the extracts are in daten/ergebnis_*.csv, values taken from reports in daten/werte_berichte.csv.

This analysis is information, not legal, tax or investment advice. It reflects the view of the editorial team, presents arguments from both sides and makes no forecast of its own. “Helfen statt Blockieren” is non-partisan.

Sources

All online sources accessed on 3 November 2026. Secondary sources are marked; the figures there come from the publisher named.

To the situation report Blockades and the world economy 2026