Donald Trump’s tariff policies and his aggressive foreign policy approach are straining relationships with traditional US allies. One consequence that is apparent in our Global Fracturing Database is that voting alignment between the US and its allies at the United Nations went from a record high during the Biden administration to a record low in 2025.

But allies’ responses to US tariffs or, indeed, to the seizure of Nicolás Maduro, give no sign that the core alliances of the US bloc are breaking apart. At the geopolitical periphery though there is significant movement. For example, we think that India has moved from a pro-US stance to being unaligned over the past year. Saudi Arabia, by contrast, has shifted away from China and closer to the US.

In all, the alignments of 16 countries have changed within our Global Fracturing framework. The net result is that the unaligned portion of the global economy has swollen in size. Meanwhile, the share of global output generated by China’s bloc continues to fall and the share of global trade that takes place between the US and China blocs has dropped to the lowest since 2006.  

This report presents highlights from our updated Global Fracturing dashboard. The dashboard allows clients to investigate how geopolitical shifts are playing out in terms of the breakdown of global output, trade and investment between geopolitical rivals, and the composition of global financial markets. Users can also download the data from the underlying database. 

The Shape of the Fractured World in 2026

An introduction to our Global Fracturing Dashboard

The global economy has transitioned during the past decade from an era in which globalisation was the key driver of economic and financial relationships into one shaped by geopolitics. Most governments used to believe that closer economic integration would promote long-term prosperity. Now, integration is seen as a source of risk and insecurity.

This shift is at the root of wide-ranging changes in the structure of the global economy that have been termed “global fragmentation” or “global fracturing”. We’ve written extensively about them here.

In this report, we pull out some key messages from our updated Global Fracturing map and dashboard and highlight notable changes over the past year.

The Global Fracturing map and dashboard are intended to provide a framework for examining how geopolitics is affecting the global economy and financial markets across the dimensions of trade, investment and portfolio flows, sectoral activity and financial market composition.

The interactive charts in this report are a small selection of those accessible through the dashboard. Eligible clients are also able to download the data behind the dashboard charts. Contact us if you would like to have access.   

How are allegiances determined? 

The fracturing map starts from a premise that there is a geopolitical divide between a group of Western countries centred on the US and another group centred on China. Our methodology for determining alignment is detailed here. In brief, we assess where countries sit relative to that divide on the basis of economic and political relationships and assign them to one of five categories split between three blocs. 

To assess economic ties, we look at data on trade, investment, aid flows and cross-border borrowing. For political links, we look at voting behaviour at the UN General Assembly, joint security arrangements, military ties, memberships of multinational groupings, and opinion surveys.

The economic and political data provide context rather than a definitive conclusion. Our final judgement of where each country sits depends on the country expertise of more than 70 analysts at Capital Economics and on conversations with clients in businesses and governments around the world. We welcome feedback from anyone with insight into the domestic dynamics of individual countries.

The map below shows our assessment of alignments at the start of 2026 for around 250 countries and territories. Select different years to see changes in the composition of the blocs over time. 

This slump in alignment is not the result of repeated votes on particularly contentious issues. Our dashboard allows users to exclude votes on the Middle East and on more-broadly-defined “Controversial Topics”. Selecting these exclusions does not significantly change the results. 

This collapse in alignment reveals strains in the relationships between the US and traditional allies. But it doesn’t necessarily signal that these countries are no longer behaving as geopolitical allies.

The US State Department each year identifies a subset of “important votes” that it lobbies for support on. It won’t release the “important votes” list covering 2025 votes for a few months. But significant differences are possible: at the previous low-point of alignment in 2006, when allies voted alongside the US only 34% of the time, they still lined up with the US in 82% of “important” votes. Our dashboard allows users to focus on the votes identified by the US State Department as important. We will include the “important vote” data for 2025 once the State Department publishes them.

More generally, voting behaviour should be assessed alongside other measures of alignment. UN General assembly votes are non-binding and don’t have any direct impact on the world outside the UN building so opposing votes aren’t a signal of substantive opposition.

Indeed, another striking development in 2025 was how consistently traditional US allies acquiesced in signing trade deals with the US with little or no resistance. That reflected recognition that, for most, there is no alternative to remaining aligned with the US, given dependence on the US – for security support in particular. Western governments have similarly been reluctant to criticise the US action in Venezuela or Trump's threat to Greenland.  Our judgement is that, despite positions taken at the UN, no countries in the group that we identified a year ago as US allies have broken away.

However, some countries that have weaker ties with – and dependence on – the US have moved from a position of leaning towards the US to being unaligned. And there has been movement too in the other direction: US policies have succeeded in pulling some countries away from China into the unaligned or even the US camp, including Venezuela.

Which countries have changed alignment?

Looking at the shifts in our map in detail, the alignment of 16 countries and territories has changed over the past year. That compares with 18 changes a year ago, and eight when we refreshed the map at the start of 2024. In 11 of these 16 cases, the country’s realignment has brought it closer to the US. (See Table 1). But the economically and strategically most significant movement is India’s away from the US and into the unaligned camp. Added together, the 11 countries that we judge to have moved closer to the US account for 1.6% of global GDP. The five that have moved towards China generate 4.4% of global GDP.   

In some cases, these moves are the result of efforts by the superpowers and their close allies over several years to improve ties.

Chad, for example, has received large amounts of investment from China in recent years and in 2025 began also to receive military support, having previously asked US and French troops to leave. That would seem to put it firmly in China’s camp.

Tanzania just signed an investment agreement with China to further develop the TAZARA railway (Zambia is the third signatory). Meanwhile, its relationships with Western governments have been strained by the violent state response to demonstration around October’s elections.

By contrast, in Rwanda and the DRC, it is Western engagement that has stepped up, with governments signing mineral investment deals with the US.

We highlighted last year that Australia, New Zealand and the US were making a concerted effort to patch up alliances in the Pacific after years of ceding ground to Chinese involvement. Papua New Guinea and Australia have now concluded a mutual defence treaty that cements PNG’s position in the US bloc.  

Elections in Bolivia and Honduras mark significant breaks that in both cases bring them closer to the US. The tumultuous events in Syria and Lebanon, and the weakening of Iran, have had the same effect.

For the other seven countries, a more or less direct line can be drawn from the return of Donald Trump as US president to their shift in stance.

While much remains uncertain about Venezuela, the US has usurped China (and Russia) as the country’s key partner. We have shifted it from the camp of China allies into the US bloc.

After seizing Venezuela’s President Maduro, President Trump threatened military action against neighbouring Colombia before offering an olive branch and a visit to the White House a few days later. As with Venezuela, a great deal is in flux, and an election is due in Colombia this year. At present though, we think that Colombia has shifted out of the US orbit. The relationship between the government of President Gustavo Petro and the US deteriorated sharply in 2025. Despite the latest rapprochement, Petro has been a staunch critic of President Trump and of US military action in the Caribbean. Colombia joined both the BRICS bank and the Belt and Road Initiative in 2025.

Ecuador’s President Daniel Noboa, by contrast, has courted the Trump administration, offering to work together on immigration and security issues and we think it now makes sense to place Ecuador in the US camp.

Shifting to Asia, Vietnam has been a major beneficiary of US-China strains over the past decade, emerging as the preferred partner for many globally-oriented manufacturers looking to shift operations out of China. Meanwhile, there is a long history of antagonism towards China. But the hostility of US trade policy towards Vietnam appears to have strengthened those in the country who argue that drawing close to either superpower leaves Vietnam exposed. Vietnam’s leadership appears to have reached out to China over the past year to hedge more actively against dependence on the US. President Xi visited in April and, most notably, Vietnam and China conducted their first joint military exercises in July. We now classify Vietnam as unaligned rather than leaning towards the US.  

India’s government always considers itself non-aligned. Our judgement a year ago was that it made sense in practice to think of the country as leaning towards the US. Economic and political relations with the US were strong; India was successfully attracting investment from US multinationals looking for an alternative to China as a place to produce for Western markets. For the US, India was a useful geopolitical counterweight to China in the region and India was able to leverage this position to benefit from security support, including through membership of the Quad. The mutual strategic benefits of a partnership are still clear. But the argument around New Delhi’s willingness to continue buying Russian oil means that the relationship is currently on ice. Meanwhile, policymakers in India have stepped up efforts to improve economic and political ties with China, as demonstrated through Prime Minister Modi’s visit there in September. There are significant barriers to India aligning outright with China – indeed, it still seems far more likely that India leans back towards the US at some point than that it joins China’s camp. For now though, we class India as unaligned. (See here for more on India’s shift.)

Finally, Saudi Arabia is a strategically important country moving in the other direction. Two years ago, increasingly close economic and geopolitical ties with China prompted us to place the Kingdom in the “lean China” camp. China had overtaken the US as the largest buyer of Saudi oil and the two were also developing closer political and security ties. But there has been a marked about-turn recently. Initially, this was linked to caution in Riyadh about becoming overly dependent on China: for example, Saudi has still not accepted an invitation, extended in 2023, to join the BRICS. With Trump’s return though, the relationship with the US once again is being given greater priority, as the US has offered the Kingdom advanced chips and state-of-the-art weaponry. In return, Saudi has agreed to exclude Chinese chips from its AI infrastructure. Saudi is one of a small number of countries with enough leverage to not have to commit fully to either camp – a result of its role in the global energy market and its influence within the Middle East and the wider Islamic world. For now though, with significant inducements on offer, it has planted itself on the US side of the divide. (See here for more on Saudi’s geopolitical position.)

Saudi’s move towards the US has been followed by its neighbour Bahrain. The island nation was already host to a key US naval base and joined the Abraham Accords in 2020, but it has further strengthened its ties with the US over the past year after signing agreements in the fields of nuclear energy, aluminium, and AI.

The shape of the blocs

Looking at the three blocs (US, unaligned, China) in terms of membership, the US and unaligned blocs have expanded over the past year at the expense of the China bloc: six countries joined the US bloc and three left; seven joined the unaligned camp and two left; no country joined the China bloc and eight left. Countries that moved between blocs over the past year are in bold text in Table 1.

The resulting shift in GDP tells a different story. The smallest change is to the size of the China bloc: the loss of eight countries has reduced its size by only 1.5% of global GDP. The US bloc has gained three members, but in economic terms it is 2.9% of global GDP smaller. India’s shift into the unaligned camp is the reason.

In turn, India’s move is behind the most significant shift in the geopolitical balance over the past year: the unaligned bloc expanded by 4.4% of global GDP.  

Using our current classifications, the China bloc accounts for half (48%) of the world’s non-Antarctic land mass, compared with 33% for the US bloc (20% is unaligned). The China bloc is home to 42% of the world’s people. But our estimates suggest that the China bloc generated only 23% of the world’s GDP in 2025, compared with 66% from the US bloc.

This is one example of how thinking at the level of geopolitical alliances or blocs is helpful in illuminating patterns that aren’t so evident when focusing on individual countries. The outer ring of the chart above shows that the China’s economy is roughly two-thirds as big as the US economy, when measured at market exchange rates. But the grouping of countries centred on China is only one third as large as the US bloc.

What's more, as the next chart shows, the share of the global economy accounted for by China’s bloc continues to fall – 2025 was the fourth consecutive year of decline.

As discussed above, our assessment is that the China bloc lost members during 2025, with an accompanying net output loss equivalent to 1.5% of global GDP. The decline in the China bloc’s share of global GDP comes on top of that – our charts show what the size of the geopolitical blocs would have been in the past and projections for the future using today’s country alignments. China dominates its bloc and has itself been growing at a slower rate than the global economy in recent years, when measured in dollar terms.

As the forecasts in the following chart show, there is a good chance that the China bloc’s share of the global economy has peaked, unless it attracts large, new members.

The US bloc’s share of the global economy has been edging higher recently. But that may not last. Our previous projections showed the US bloc’s share of global output remaining stable, but economic dynamism has been lost as India has pulled away. On our current projections for individual countries' GDP, and on the basis that the blocs' composition doesn't change, US bloc will diminish from 67% of the global economy now to 61% in 2040 (this would leave it still much bigger than the China bloc’s 22% in our projections in 2040).

India’s move from leaning US to unaligned has expanded the unaligned portion of the world’s population to 35%, making it substantially more populous that the US bloc (23%). Unaligned countries now account for 12% of global output. If alignments don’t change, that share will rise to about 17% of the global economy in 2040 and 22% in 2050 according to our long-run forecasts.

Of course, GDP doesn’t tell the whole story. There are other dimensions to power, not all of them economic. And within the GDP data, the size disparity is much smaller if we focus on capital spending or industrial production. China on its own generates 24% of global industrial output in value-added terms, which is roughly the same as the next three manufacturers – the US, Germany and Japan – combined.

One noteworthy difference between the blocs beyond their economic size is that the US bloc contains countries across a much wider range of incomes, from high to low; China's allies are predominantly at its income level or lower.

The chart below plots countries' GDP per capita (horizontal axis) against aggregate GDP (vertical). Countries in the US bloc span the width of the chart. Those in China’s bloc are skewed to the left, i.e. they tend to have low income per capita.

Similarly, economies in the US bloc encompass a range spanning both high-tech and low-income manufacturers and exporters of both services and commodities. The bloc centred on China has less breadth – apart from China itself, most are commodity producers. 

The greater diversity of the US bloc will, we suspect, make adapting to shifting patterns of trade and financial flows much easier.

Shifting patterns of global trade

As with global GDP, focusing on blocs can highlight important features of patterns in global trade that can be missed by looking at countries on their own. 

In 2024, 134 countries traded more goods with China than they did with the US. The US was the bigger trading partner for only 54 countries. But observations like these can lead to the size of China’s role in global trade being overstated.

Two thirds (63%) of global goods exports come from countries in the US bloc. And, despite the barriers the Trump administration has erected, it remains the case that half of global goods trade happens entirely between countries that we class as members of the US bloc. By contrast, only 8% of trade takes place entirely within the China bloc.

Perhaps most striking in the context of global fracturing, the share of trade that takes place between the two blocs is now materially lower than it was before the pandemic and is the lowest it has been since 2006.

Our Fracturing Dashboard also allows users to focus on individual countries’ trade with the blocs, which reveals some striking imbalances. For Germany, for example, commonly thought of as one of the Western economies most closely dependent on demand from China, only 8% of its goods exports last year went to the China bloc. 89% of Germany’s goods exports went to other parts of the US bloc, mostly to economies that we class as close US allies. Use the drop-down menu in the chart below to investigate other countries. 

We can track how these shifting relationships are evolving. In the bubble chart below, countries above the 45-degree line export more to the US and its allies than to China and its allies. Press the play button under the chart to follow their movement since the 1990s. Many countries were drifting towards that line in the early 2000s, but the drift slowed or stalled around a decade ago. Today, few large economies are below the 45-degree line: one notable exception is Taiwan, the large blue dot in the pink section of the chart in 2025. Australia in 2025 sits on the dividing line: its exports to the US bloc and to the China bloc are roughly in balance. Try clicking on any dot to show that country's trajectory over the past thirty years. 

The China bloc plays a much bigger global role as a producer of goods that other countries import. Still, most large economies are above the 45-degree line in the bubble chart below: the US and allies are a bigger source of imports than China and its allies. But a sizeable minority of countries import more from the China bloc – and they are predominantly members of the China bloc themselves. More than two thirds of those below the line in the chart in 2025 are countries in the China bloc.

This isn’t true for China itself though: it is the large red dot above the line in 2025. That has implications that challenge a common assumption: most major countries in the US bloc source their imports predominantly from others in the same bloc. But China depends more on countries in the rival US bloc than on its own allies. This helps explain why China’s leadership is pushing hard to boost self-sufficiency even at the cost of lower productivity.

Patterns of direct investment flows

Our dashboard allows us to conduct similar analysis on direct investment activity within and between the blocs (we can look at both investment stocks and flows).

Historically, nearly all direct investment was both sourced from and invested within the US bloc. That started to change around 2010, with the China bloc rising both as a source of investment (mostly from China itself) and as a recipient of investment. More recently though, these two aspects have diverged. The China bloc countries (primarily China still) continue gradually to rise in importance as sources of global investment. But the value of direct investment into China bloc countries has fallen as a share of the global total. With the share going to US bloc countries stable, it is unaligned countries that have recently been gaining in global investment share.

For most countries, even those with strong economic ties with China such as Brazil, investment ties with the US bloc remain stronger. Use the drop-down menu in the chart below to see the sources of a country's stock of FDI.

Weaker financial links

Our dashboard allows us to map global cross-border portfolio investment flows in the same way we did with trade flows above. Here though, flows between the blocs are much more imbalanced.

In 2024, the only country that had greater portfolio investment in the “China and allies” bloc than in the “US and allies” was Bangladesh. The value of China’s portfolio investments in the US bloc is higher than in its own close allies.

Similarly, the only territories for whom “China and allies” were a greater source of portfolio investment were Hong Kong and Macao. All other countries had both invested more in, and received more portfolio investment from, the US and its allies – in most cases substantially more so. Nearly 90% of the stock of cross-border portfolio investment globally is in and from a country in the US and allies bloc. 

That in large part reflects the extent to which global financial markets are concentrated in the Western economies. The US bloc accounts for 75% of global equity market capitalisation, about the same as a decade ago. The US on its own is 47%. The China bloc makes up just 15% of the global total – almost entirely China and Hong Kong.

The China bloc’s share of outstanding debt securities is smaller still – 18% of the global total, compared with 78% for the US bloc. One particular challenge for the People's Bank as it looks to reduce its foreign reserve asset exposure to the US and US allies is that countries that we place in the China bloc, other than China itself, have issued a negligible share of debt securities outstanding globally; unaligned countries contributed only 4%.

Global currency usage

Finally, we can drill into how currencies are used globally. The RMB’s share of global foreign exchange reserves stabilised in 2024 but fell back again in 2025 to under 2% of the total.

The renminbi is the fifth most commonly-used currency to settle trade using SWIFT’s platform and the Hong Kong dollar is eighth. But the bigger picture is that globally-used currencies are overwhelmingly those of countries in the US camp.