Wells Fargo Warns U.S.-China Rivalry Is Fueling a 'Second Era of Deglobalization'

• Wells Fargo analysts assert the global economy is fracturing into U.S.- and China-led blocs, reducing cross-bloc trade and capital flows.
• Most G10 nations are aligning with the U.S., while parts of Asia and Africa lean toward China, with Latin America emerging as a key battleground for influence.
• While bloc formation has been underway for years, the firm notes that a state of full economic fragmentation remains a distant, though plausible, outcome.

The intensifying strategic competition between the United States and China is systematically dismantling decades of economic integration, pushing the world into a "second era of deglobalization," according to a new analysis from Wells Fargo. The report concludes that the global economy is fragmenting into rival spheres of influence, a shift that is already beginning to constrict the flow of capital, goods, and technology between the emerging blocs.

This realignment is seeing most advanced economies within the G10 solidify their economic and financial ties with the U.S., a trend accelerated by shared security concerns and policies like foreign direct investment screening. Conversely, China is deepening its economic cooperation with a number of emerging markets across Asia and Africa. The analysis singles out Latin America as a particularly critical and contested region, where split allegiances force countries to navigate a complex web of competing offers for investment and influence.

"We are witnessing a fundamental rewiring of global economic relationships," said a source familiar with the matter, summarizing the bank's findings. "The drive for strategic autonomy and reduced dependency is now a primary force shaping corporate investment and government policy, overriding pure efficiency considerations."

The implications for multinational corporations are profound, necessitating a rethink of supply chains that are suddenly vulnerable to geopolitical shocks. Companies are increasingly facing higher costs, disrupted logistics, and the complex task of complying with divergent regulatory standards across the two blocs. For global financial institutions like Wells Fargo, this new environment demands sophisticated risk management frameworks to navigate increased regulatory and geopolitical hazards.

Despite the clear trend, Wells Fargo cautions that the path to a fully bifurcated world economy is long and uncertain. Deep-seated global interdependencies, particularly in raw materials and foundational technology standards, are proving difficult to unravel completely. The report suggests the most likely outcome is a prolonged period of selective decoupling in critical sectors, rather than a complete and immediate separation of the two economic superpowers.