Geopolitical tensions and trade: Mitigating through partner diversification Article

Yilmazkuday, H. (2025). Geopolitical tensions and trade: Mitigating through partner diversification . JOURNAL OF ECONOMICS AND BUSINESS, 10.1016/j.jeconbus.2025.106274

cited authors

  • Yilmazkuday, H

authors

abstract

  • This paper investigates the growing impact of geopolitical tensions on global trade and the mitigating role of trade partner diversification. Adapting a trade model and employing a novel bilateral geopolitical disagreement measure based on trade sanctions, we use comprehensive sectoral trade data covering the period of 1966–2020 to analyze trade flows of 167 countries. Our findings reveal that geopolitical tensions significantly reduce trade across all sectors, whereas trade partner diversification acts as a powerful buffer, offsetting these trade losses. We further identify sector-specific trade partner diversification thresholds, offering actionable insights for policymakers aiming to build more resilient trade networks in an increasingly fragmented global economy.

publication date

  • January 1, 2025

published in

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