Industrial Policy in the era of geopolitical fragmentation

This paper examines how emerging market economies are adjusting their development and trade strategies as industrial policy becomes a central tool of geopolitical competition. With the United States, China and the European Union increasingly deploying subsidies, tariffs and technology controls, emerging markets face growing exposure to market distortions and strategic pressure.

The authors argue that neither blanket protectionism nor passive openness provides a viable path forward. While broad trade restrictions can weaken incentives to innovate and compete, inaction can leave domestic industries vulnerable to heavily subsidised foreign competitors. Instead, the paper highlights the importance of targeted, transparent, and time-limited trade measures that address specific distortions while preserving the benefits of international competition.

Drawing on examples from Brazil and ASEAN, the analysis shows how regional integration, South–South cooperation and continued engagement with multilateral institutions can strengthen resilience without forcing alignment with any single major power. The paper concludes with practical guidance for policymakers seeking to balance openness, competitiveness, and development in an increasingly fragmented global trading system.

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About the authors

Douglas C. Lippoldt is a non-resident Senior Fellow with the Centre for International Governance Innovation (CIGI, Canada) and an international trade economist based in Claremont, California. He served as Chief Trade Economist at HSBC Global Research from 2014 to 2020. Previously, he held various roles as a Senior Economist at the Organisation for Economic Co-operation and Development (OECD) in Paris, France, during a tenure of 22 years. 

Carlos A. Primo Braga is an Adjunct Professor at Fundação Dom Cabral, Brazil, and a Visiting Professor at El Colegio de México. He was a Professor of International Political Economy and Director of the Evian Group, IMD, Switzerland (2012-15). Previously he was with the World Bank Group and his functions included: Special Representative and Director for Europe, External Affairs (2011-12).

The views expressed here are the author’s, and do not necessarily represent the views of the Institute for International Trade.