In Reinventing Globalization Part I, we demonstrated that global supply chains are being overhauled to reduce vulnerabilities and to restrict Chinese imports of “dual-use” products. This is especially affecting energy and tech (particularly semiconductors). As globalization retreats, we expect Chinese equities to underperform. Many U.S. multinational corporations (MNCs) will also take a hit as exports to China have frequently accounted for 40% of their sales growth over the last decade.

Part II of the series shows that deglobalization implies a regime change, with trend increases in capex and the labor share, as well as a higher cost of capital, lower potential growth and greater government involvement in the economy.

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