Global supply chains are undergoing a transformation that could fundamentally reshape the world economy in the coming decades. The COVID-19 pandemic, trade disputes, geopolitical tensions, and a growing emphasis on economic security have prompted governments and businesses to reconsider the existing model of international production. While cost and efficiency previously played the dominant role in decisions about where to locate production, questions of reliability, strategic independence, and political stability are increasingly coming to the fore. Does this mean the end of globalization, or rather the emergence of a new model in which the world's economic interconnectedness adapts to changing conditions?
For decades, international trade was guided by a relatively simple economic logic: produce where costs are lowest and deliver goods where demand exists. The development of transport infrastructure, trade liberalization, and technological progress allowed companies to divide the production process among several countries. Components were made on one continent, assembled on another, and the finished product was shipped to markets around the world. This system brought consumers lower prices, gave firms access to new markets, and offered many developing economies the opportunity to participate in the international division of labor.
Recent events, however, have shown that high efficiency does not automatically guarantee sufficient resilience. The COVID-19 pandemic disrupted production, transportation, and the availability of essential components. A shortage of semiconductors, for example, hit the automotive industry in Europe, Asia, and North America. Delays in maritime shipping and rising freight costs subsequently demonstrated how quickly problems in one link of the production chain can spread to other sectors. The war in Ukraine and other geopolitical conflicts further highlighted the risks associated with dependence on a limited number of suppliers of strategic raw materials, energy resources, and industrial inputs.
This was not merely a temporary disruption to trade. The way businesses and governments think about economic risks also changed. While diversifying suppliers was previously often primarily a matter of business strategy, it has now become part of broader economic and security policy. Companies increasingly assess not only the price and quality of supplies, but also the political stability of the country of origin, the availability of alternative routes, the regulatory environment, and the possibility of sudden export restrictions.
This shift is reflected particularly in the growing prominence of concepts such as nearshoring, friendshoring, and reshoring. Nearshoring refers to moving production closer to end markets; friendshoring means prioritizing trading partners with whom a country has relatively stable political and economic relations; and reshoring involves bringing production back to the domestic economy. All three approaches share a common goal: reducing the vulnerability of supply networks. However, their economic consequences differ, and none of them represents a universal solution.
The United States, for example, has long supported the return of strategic industrial production and the strengthening of domestic capacity in sectors such as semiconductors, batteries, and energy technologies. The European Union is similarly seeking to reduce excessive dependence on individual foreign suppliers and to strengthen its own industrial base. At the same time, it remains deeply integrated into international production networks. European industry, for instance, requires foreign components, raw materials, and technological inputs without which it would be impossible to maintain the current scale of production.
The key question, therefore, is not whether production will return to individual countries, but what the new geographical links between producers, suppliers, and consumers will look like. Complete localization of production could be economically very costly. According to an OECD analysis from 2025, large-scale relocalization of supply chains could reduce the volume of world trade by more than 18 percent and global real GDP by more than 5 percent. The organization also warns that shifting production to domestic economies does not automatically mean greater resilience to crises. More closed production systems may in fact be less flexible and less able to adapt to unexpected disruptions.
Countries in Southeast Asia also play an important role in the new geography of production. Vietnam, Indonesia, Malaysia, and Thailand are gradually becoming significant manufacturing and logistics hubs, attracting foreign investment in electronics, the automotive industry, and other sectors. Their advantage lies in a combination of relatively competitive production costs, growing industrial capacity, and access to regional and global markets. However, the transfer of some production activities to these countries does not mean a complete abandonment of existing supply relationships. Many companies continue to use components, technologies, and raw materials originating from other Asian economies.
Mexico represents a similar opportunity. Thanks to its geographical proximity to the United States and existing trade ties, it is gaining importance in North American production networks. Moving production closer to the American market can shorten delivery times and reduce certain logistical risks for companies. At the same time, it creates new demands on transport infrastructure, energy, skilled labor, and public services. Geographical location alone does not guarantee that a country will be able to attract and retain higher-value-added investment over the long term.
This is where one of the most important dimensions of the current transformation becomes apparent: the new distribution of production capacity may bring significant opportunities to some developing economies, but may also deepen disparities between individual regions. Countries with quality infrastructure, a stable institutional environment, and a sufficient supply of skilled workers are better positioned to attract foreign investors. States that lack these prerequisites may remain outside the main investment flows, even if they offer cheap labor.
Moreover, foreign investment does not in itself guarantee long-term economic development. If new production centers are limited to assembling imported components, their contribution to the domestic economy may be relatively modest. Truly strengthening the industrial base requires developing local suppliers, vocational training, technological capacity, and research. Only in this way can individual countries gradually move from simple manufacturing activities to those with higher added value.
The transformation of supply chains is not only about the geographical distribution of factories. Digital technologies, automation, and artificial intelligence are also gaining significant roles. Companies increasingly use digital systems to track inventories, anticipate demand, and identify possible supply disruptions. Automation is also changing the significance of low labor costs in decisions about where to locate production. If certain activities can be efficiently automated, the availability of a technological base, energy, and skilled specialists may matter more to a company than the cost of labor itself.
Environmental requirements are another factor. Manufacturing companies must increasingly take into account the carbon footprint of their products, energy consumption, and the origin of the raw materials they use. European climate and trade regulations, including the carbon border adjustment mechanism, are gradually affecting foreign suppliers who wish to remain part of European production networks. The green transition is thus becoming not only an environmental issue but also a factor in international competitiveness.
The new model of globalization, however, also brings certain contradictions. Diversifying suppliers can enhance supply security, but at the same time requires investment in new production capacities and logistical connections. Stricter rules for selecting trading partners may reduce certain risks, but can also increase costs for businesses and create barriers for smaller economies. If economic security becomes the primary criterion of trade policy, the significance of international rules and open markets may gradually erode.
The position of small and medium-sized economies also deserves special attention. For countries whose prosperity depends on exports and integration into international production networks, the fragmentation of world trade can be particularly problematic. They do not always have sufficient economic strength to independently build complete production capacities or to negotiate favorable terms with their largest trading partners. Their long-term strategy should therefore not be isolation, but rather the expansion of trade relations, improving competitiveness, and integration into more regional and global production networks.
Current developments suggest that globalization is not disappearing. However, its priorities and rules are changing. The OECD report on global value chains from July 2026 shows that international production linkages remain very strong and that the changes observed so far represent more of a realignment of production ties than a wholesale return of production to home countries. Companies are seeking to preserve the benefits of the international division of labor while at the same time reducing dependence on individual suppliers and vulnerable trade routes.
The future of world trade will therefore likely be characterized neither by a return to unconditional globalization nor by a complete division of the world into closed economic blocs. Rather, a more complex system will take shape in which global production networks, regional trade ties, and strategic partnerships coexist. The economies and companies that succeed will be those that can combine efficiency with flexibility and openness with responsible risk management.
The decisive question is therefore not whether the world economy can function without global supply chains. Without them, contemporary industrial production, international trade, and technological development would function only with great difficulty. What matters more is whether it will be possible to create a model of international cooperation that is more resilient to crises without sacrificing the benefits of open trade. It is precisely this balance between economic security and mutual interdependence that will be one of the main tests of globalization in the years ahead.
Prokop Stach