Playing with Blocs: Quantifying Decoupling
IMF Working Papers, December 12, 2025
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- Playing with Blocs: Quantifying Decoupling
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Bibliographic details
- Authors: Barthélémy Bonadio, Zhen Huo, Elliot Kang, Andrei A Levchenko, Nitya Pandalai-Nayar, Hiroshi Toma, Petia Topalova
- Published: December 12, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229034029.001
Research question and approach
- Adopt a data-driven approach to measure trade decoupling over 2015-2023.
- Classify countries into three groups according to changes in their data-inferred trade costs with the US and China:
- those shifting toward the US bloc,
- those shifting toward the China bloc,
- those with no change in alignment.
Empirical findings on trade costs and alignment
- Cross-bloc trade costs rose over 2015-2023.
- Within-bloc trade costs fell over the same period.
- Average trade costs fell marginally, consistent with "global trade resilience."
- The analysis documents a modest amount of bloc misalignment: the median country would be better off switching blocs.
Quantitative model and simulated real income effects
- Use a quantitative model to compute real income effects of the observed reconfiguration of trade costs.
- Model simulations suggest:
- Real income in the median country in the world rose by 0.4-0.6%.
- Real income in the median country within each bloc rose by 0.4-0.6%.
Policy-relevant interpretation
- The documented pattern—rising cross-bloc trade costs combined with falling within-bloc trade costs and marginally lower average trade costs—implies that trade decoupling may not follow trade-driven economic interests.
- The finding that the median country would be better off switching blocs points to a modest degree of bloc misalignment relative to countries' trade-driven welfare incentives.
Publication and metadata
- Authors: Barthélémy Bonadio, Zhen Huo, Elliot Kang, Andrei A Levchenko, Nitya Pandalai-Nayar, Hiroshi Toma, Petia Topalova
- Date: December 12, 2025
- Series: IMF Working Papers, Working Paper No. 2025/263
- Pages: 48
- DOI: https://doi.org/10.5089/9798229034029.001
- ISBN: 9798229034029
- ISSN: 1018-5941
- Subjects: Income, International trade, National accounts, Plurilateral trade, Trade agreements, Trade balance
- Keywords: Baltics, bloc misalignment, decoupling, fragmentation, Global, global value chains, IMF working papers, Income, Plurilateral trade, switching bloc, Trade agreements, Trade balance, trade cost, trade costs
Source: IMF Working Paper "Playing with Blocs: Quantifying Decoupling", December 12, 2025.
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