Shifts in trade and national security priorities split globalization into two tracks, PGIM research findsShiftsintradeandnationalsecurityprioritiessplitglobalizationintotwotracks,PGIMresearchfinds

“Rising geopolitical tensions and expanding trade restrictions may appear to signal the globalization pendulum has swung hard in the opposite direction, pitting national interests against a shared global good. Yet the reality is far more nuanced,” said Shehriyar Antia, head of Thematic Research at PGIM. “Even if America’s ‘small yard’ of protected industries grows larger, roughly 80% of global trade happens beyond U.S. borders, and companies in most industries will still seek out the benefits of free trade and competitive advantage.”

Investment opportunities exist despite new risks in trade and supply chains

Investors shouldn’t ignore industries on the decelerating track of globalization simply because of the presence of tariffs and industrial policy. Instead, they should consider the structural advantages that specific companies and parts of the value chain may have over others:

Artificial intelligence and advanced semiconductors – The great power rivalry between China and the U.S. is creating a more fragmented market for the advanced computer chips critical to AI applications. However, industry leaders like TSMC (Taiwan Semiconductor Manufacturing Company) have customers across multiple segments and have already begun diversifying their geographic footprint to address regional risks.

Electric vehicles – Manufacturers such as Tesla and China’s BYD have taken an early lead as the world shifts to EVs. Despite facing steep tariffs in Europe and the U.S., BYD has growth opportunities in Southeast Asia, Latin America and the Middle East, and is stepping into the luxury market. Tesla is leaning into self-driving taxis with mass-market potential.

U.S.-Mexico border industrial real estate – Despite a dynamic and unsettled environment around trade between the two nations, near-shoring momentum creates a tailwind for industrial real estate along the U.S.-Mexico border, with steady demand from large multinational manufacturers and requirements to re-freight cargo that arrives on U.S. soil.

Metals and minerals – Projected long-term demand for metals like copper, critical to several major industries, currently exceeds supply. Two pure-play copper miners — Ivanhoe Mines and Ero Copper — may offer solid growth prospects, while Southern Copper and Freeport-McMoRan are large diversified producers with economies of scale.

Identifying national winners

Investors may find attractive opportunities in countries well-positioned to become near-shoring candidates — with existing manufacturing capabilities, privileged access to free-trade zones or comparative advantages in their business environment and labor costs:

Americas:

• Chile and Peru as key suppliers of high-demand minerals such as lithium and copper.
• Brazil for rapidly ramping up its mining of critical minerals, going from zero exports to becoming the world’s fifth-largest exporter of lithium in less than two years.

Asia Pacific:

• Australia for broad metals and minerals.
• India for scaling advanced electronics and pharmaceuticals.
• Vietnam for its low-cost manufacturing base in apparel and electronics.

Europe, Middle East and Africa:

• Poland and Czechia as near-shoring hubs for EU manufacturers competing with Western Europe’s higher production costs.
• Morocco for pharma and auto supply chain operations relocated closer to Europe.

“Protectionist trade policies and industrial policies are firmly back in fashion and creating real turbulence in global markets,” said Taimur Hyat, PGIM’s chief operating officer. “Over the long term, however, producing goods where they can be made most inexpensively and efficiently remains a compelling force for firms and their investors, making it likely that globalization will prevail for industries making up the majority of the global economy that do not easily fit into a national security narrative.”

For more, read “A New Era of Globalization: Shifting Opportunities in a Dual-Track World,” or visit pgim.com/megatrends for additional insights for investors.

ABOUT PGIM

PGIM is the global asset management business of Prudential Financial, Inc. (NYSE: PRU). In 41 offices across 19 countries,* our more than 1,450 investment professionals serve both retail and institutional clients around the world.

As a leading global asset manager with $1.38 trillion in assets under management,* PGIM is built on a foundation of strength, stability, and disciplined risk management. Our multi-affiliate model allows us to deliver specialized expertise across key asset classes with a focused investment approach. This gives our clients a diversified suite of investment strategies and solutions with global depth and scale across public and private asset classes, including fixed income, equities, real estate, private credit, and other alternatives. For more information visit pgim.com.

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*As of Dec. 31, 2024.