The US, China and the European Union (EU) will shape the post-pandemic world economy as key pillars of a tripolar world due to a hardening of attitudes during the coronavirus crisis, and the compounding of existing trends, Moody’s Investors Service said.
The task of repairing and rebuilding domestic economies will lead countries to increasingly focus on self-sufficiency, especially in strategic industries while competition and conflicts in technology, trade and politics will continue or intensify, Moody’s said in an analysis on Tuesday. It also said political considerations will influence global investment and capital flows.
Moody’s did not name India in the report, but the Narendra Modi administration is on a drive to improve self-reliance to both steer the economy out of the current crisis as well as to avoid future supply disruptions. India is offering production incentives to global firms setting up factories in India and has in recent months stepped up tariffs on imported items like television parts. Electronics and mobile phones are sectors the Modi administration is keen to step up local production capacity for which tariff measures are also employed.
“Full-blown confrontation between the three pillars is unlikely given their interdependence and some degree of global cooperation on issues such as climate change and pandemics will remain," said the report.
Trade relationships will increasingly have a regional focus given the attention countries are giving to supply chain resilience, the report said. The Belt and Road Initiative (BRI) will continue to be a major instrument of China’s trade policy, it said.