Geopolitics, trade wars, and the rise of friendshoring: Evidence from APEC economies

This study investigates the rise of friendshoring and its effects on international trade within APEC economies, emphasizing trade reorientation rather than large-scale production relocation under geopolitical tensions. Using data from 21 APEC members—including the United States and China—this research classifies economies into (i) U.S.- and China-aligned partners, (ii) countries sharing institutional and political values, and (iii) economies with high integration in global value chains (GVCs). Employing pooled, fixed-effects, random-effects, and mixed-effects panel models, the analysis identifies robust associations between the U.S.–China trade war and bilateral export patterns, while carefully accounting for heterogeneity across countries and sectors. Results indicate that friendshoring has intensified since 2018 primarily through trade rerouting, with economies exhibiting stronger GVC integration—such as Vietnam—capturing the largest gains. By disentangling the effects of geopolitical alignment from GVC participation, this study clarifies the distributional consequences of friendshoring and offers policy-relevant evidence for developing economies seeking to capitalize on trade reconfiguration without engaging in extensive production relocation. These findings contribute to understanding how global value chains adapt under geopolitical shocks and inform strategies for resilient and politically aligned trade networks.