‘Friend-Shoring’ Might Be Bad for Global Growth and Inflation

‘Friend-Shoring’ Might Be Bad for Global Growth and Inflation

Some economists worry that picking trade partners for geopolitical reasons could create a world of antagonistic blocs

As geopolitical tensions rise, Western governments have urged international companies to shift more business to friendly countries. Some critics think that could split the global economy into hostile camps, hurting growth and worsening inflation.

Advocates think “friend-shoring,” as the trend is nicknamed, can protect access to vital raw materials and components, drawing on lessons learned during the Covid-19 pandemic that saw shortages of semiconductors and some other components threaten vital industries.

But many economists fear restricting trade and direct investment to political allies could undo decades of gains from globalization,…