NEW YORK / Content Syndication Services / — The World Economic Forum said geoeconomic fragmentation now costs the global economy $213 billion to $307 billion each year. The estimate appears in its new report, Deepening Divides: The Cost of a More Fragmented Financial System. The report said current trade and financial policies also add 0.2 to 0.3 percentage points to global inflation.
The report, prepared with Oliver Wyman, tracks the impact of tariffs, investment limits, sanctions and other economic measures. It said fragmentation accelerated through 2025 and early 2026. The trend now affects trade, finance and investment systems across major economies. The report described the period as a turning point for global trade and finance.
The analysis said restrictions increasingly reach economies that traditionally maintain close trade and financial ties. It cited the United States, the European Union, Canada, Japan and South Korea among affected markets. These measures raise costs for companies and add uncertainty to cross-border trade. They also affect capital flows and payment systems.
Costs spread across trade and finance
The report estimated that current fragmentation policies reduce output and lift prices across most economies. It said households feel the impact through weaker purchasing power. In the United States, the report estimated real wage effects at 0.33% for low-skilled workers. It put the impact at 0.49% for medium-skilled workers and 0.66% for high-skilled workers.
The report also examined a severe fragmentation scenario. Under that model, global losses could reach $6.9 trillion, or 6.4% of global gross domestic product. The report said that figure would exceed the size of every national economy except the United States and China. Its modelling covered output, inflation, trade flows and wages.
Emerging economies face greater exposure
Emerging markets and developing economies face the sharpest exposure, the report said. Countries outside major geopolitical blocs could face output losses of 10.7% in the severe scenario. The report linked this exposure to shallower capital markets and greater reliance on international capital. It also said a less integrated financial system can make development finance more costly.
WEF said the analysis updates its 2025 work on financial fragmentation. It includes revised assumptions on tariffs, countermeasures, pass-through rates and restrictions on services trade. The report also draws on input from business leaders, policymakers and financial-sector experts. Its policy areas include financial guardrails, economic statecraft rules, payment system interoperability and regional integration.