Globalization began retreating before President Donald Trump shocked the world with his aggressive trade war earlier this year.

But his tariffs accelerated the trend, prompting allies to question the U.S. role in the world with European Commission President Ursula von der Leyen even declaring in April that, “The West as we knew it no longer exists.”

While Trump pulled back from his highest rates, tariffs in some form don’t look like they are going away anytime soon. On Thursday, he suggested the U.S. will unilaterally impose tariffs as high as 70% in the coming days.

In a note last month, economists at Wells Fargo sketched out a hypothetical scenario where the world is divided into three trading blocs led by the U.S., China, and the EU.

The U.S. bloc includes most of the Western Hemisphere plus traditional allies in Asia and the Middle East. China’s bloc includes Russia, much of East Asia and Central Asia, the top economies in Africa, as well as a few countries in Latin America and the Mideast. The EU bloc is the smallest group, encompassing the European Union, the United Kingdom, Iceland, Norway, Switzerland, Turkey and Ukraine.

“Deglobalization has had its roots in the geopolitical and economic competition between the United States and China,” Wells Fargo said. “Recent events raise the possibility of further cleaving of the global economic order. Specifically, the possibility that the European Union goes in its own geopolitical and economic direction is no longer unfathomable.”

Economic impacts of deglobalization

Wells Fargo assumes legal challenges to Trump’s tariffs will eventually fail, with the effective rate settling at around 14%. While that’s well below some of the steepest rates Trump unveiled on “Liberation Day,” it still marks a sharp increase from the 2.3% effective rate at the end of 2024.

For its analysis, the bank looked at 100 countries that account for 97% of global GDP and 93% of global exports, then split them into the three blocs.

The U.S. bloc had about half of global GDP in 2023, while the EU and China blocs each represented roughly a quarter of global GDP.

In a tripolar world where each bloc imposes a 15% across-the-board tariff on the other blocs, Wells Fargo used the Oxford Global Economic Model to estimate global real GDP would grow 9.1% between 2025 and 2029, instead of the 11% rate under a baseline scenario where trade is essentially free.

That translates to the world missing out on about $3.8 trillion in GDP during that span, or roughly $1,800 for a typical household of four.

“The growth-reducing effects of the levies are felt in the first two years after imposition, but the level of global GDP never returns to baseline, at least not during the forecast period we consider,” Wells Fargo said.