Abstract
Abstract Geopolitical rivalries create mistrust between trading partners. These try to guard themselves against the opportunistic abuse of trade policy by de-risking and de-coupling. Indeed, first empirical evidence points towards an increasing division of the world economy into an US-centered and a China-centered block. Western sanctions against Russia have strongly accel-erated this tendency. Increased fragmentation disincentivizes corporate strategies based on serving foreign markets by exports and favors local-for-local models. This endangers value-added creation in small, open economies such as Austria. Countermeasures must include deepening the European Single Market, striking trade agreements with aligned and neutral countries, and promoting cost efficiency of European production.
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