Our goal is to define the principles required to protect the global financial system amidst rising geopolitical complexity
The initiative assesses the qualitative and quantitative risks of violating these principles by sizing the potential costs in economic and financial market terms, and engages with various stakeholders.
$6.9tn
Potential cost to the world economy of fragmentation
$213b - $307b
Current cost of fragmentation to the world economy
13%
Decline in the dollar share of global reserves since 1999
80%
Of major economies in recent OECD report which have implemented investment screening
Deployment of geo-economic statecraft measures
Ongoing geopolitical conflicts have caused disruptions throughout the global financial system and could create further turbulence as states engage in geo-economic statecraft, the use of economic and financial tools to advance foreign policy priorities.
Pursuit of economic resilience
Global disruptions like COVID-19 supply chain breakages and climate change have led states to pursue a dual strategy to bolster domestic resiliency: strengthen domestic production capacities and reduce reliance on global supply chains.
2025 - 2026
Turning Point in the Global Financial System
US imposes sweeping tariffs worldwide including on allies; China retaliates with tariffs over 100%, first-of-their-kind export controls on rare earths, and tighter restrictions on Chinese US listings; War in Iran drives a sharp rise in oil and commodity prices
Early 2020s
Fragmentation accelerates
UK formally withdraws from the EU; COVID-19 spurs supply chain restructuring in push for resilience; US and EU expand sanctions on Russia following invasion of Ukraine; ongoing tariff escalation
2010s
Fragmentation pressures
China announces Belt and Road Initiative; US and EU sanction Russia following occupation of Crimea and eastern Ukraine; Brexit referendum and resulting negotiations; initiation of US-China trade conflict
2000s
Continued integration and crisis
China joins WTO; US uses financial system as counter-terrorism tool after 9/11; global financial crisis halts rapid financial sector expansion; Financial Stability Board created; Basel III developed
1990s
Financial globalization and new technologies
Collapse of the USSR; broader adoption of real-time settlement systems; establishment of the WTO; introduction of the Euro; rise of internet-based finance and electronic trading platforms
1980s
Global deregulation and integration
Easing of foreign exchange controls; expansion of derivatives markets; EMDEs increasingly shift from import-substitution approach toward export-led growth strategies
1970s
Foundation of the modern global financial system
End of Bretton Woods system delinks USD and gold; oil crises create turbulence and reinforce USD dominance; institutional changes at the Federal Reserve begin long-term disinflation
Macroeconomic impact
Our analysis uses four scenarios to quantify the potential impact of financial system fragmentation on different blocs of countries (East, West, and Neutrals) and on the world as a whole. We find that fragmentation is currently having a negative impact on the global economy of between $213 billion and $307 billion, and could have a negative impact on the global economy of up to $6.9 trillion in the worst-case scenario, greater than the impact of the Great Recession or the COVID-19 pandemic.
Scenario 1:
Existing Fragmentation
The economic cost of current trade and financial policies. Assumes a global 15% Section 122 tariff rate to reflect signalling from the US.
Scenario 2:
Moderate Fragmentation
Modest escalation in global restrictions, including a higher degree of retaliation by countries against the US.
Scenario 3:
High Fragmentation
Escalation in East–West tensions. Neutrals continue to have ties to both sides, but partially align with the bloc of their largest trading partner.
Scenario 4:
Very High Fragmentation
Division of the world into two fully severed blocs, with Neutrals forced to choose a bloc
Counterparty risk
Credit risk
Currency risk
Investment execution risk
Market access risk/opportunity costs
Liquidity and solvency risk
Regulatory requirements
Reputational risk
Risk management
Valuation risk
Steering Committee
Select World Economic Forum partner organization chief executives and chairpersons are invited to the Steering Committee to shape the initiative's agenda and offer strategic guidance.
Working Group
Steering Committee members are encouraged to nominate a representative to join the initiative’s Working Group, which executes and delivers on the vision and strategy of the Steering Committee.
Navigating Global Financial System Fragmentation
A World Economic Forum Initiative