In an investment commentary, the US-headquartered firm talks about the decisions that asset allocators should consider as patterns of global trade change, and not just because of the impact of rising tariffs.

Investors should increase exposure to countries that are likely to benefit from the “nearshoring” of manufacturing and other activities in a world partly moving away from globalisation and open trade, according to PGIM, part of US-listed Prudential Financial Inc.

In the Americas, Chile and Peru are important suppliers of sought-after minerals such as lithium and copper, and Brazil is expanding its mining for minerals. In Asia-Pacific, Australia has important ranges of metals and minerals, and Vietnam has a low-cost manufacturing capability in clothing and electronics. Turning to Europe, the Middle East and Africa, Poland and the Czech Republic are becoming “nearshoring hubs,” PGIM said, for European Union manufacturers competing with Western Europe’s higher production costs. In Morocco, it is attracting pharma and auto supply chain operations located closer to Europe.

While globalisation is unwinding in some ways, it is going ahead rapidly elsewhere, hence a targeted approach is needed to understand what the investment impact is, the firm, which oversees $1.38 trillion in AuM, said in a note.

For investors, this “dual-track” world offers new opportunities and risks across countries and industries such as AI, high-end semiconductors, 5G telecommunication networks, critical minerals, fossil fuels, electric vehicles and military technology, highlighting the need for stress-testing portfolios and managing strategic investments within a dynamic and fragmenting global economy, PGIM said. 

The A New Era of Globalization report said that despite recent tariff activity and the prospect of a prolonged trade war, around 75 per cent of the global economy remains on the “fast track” of globalisation – reliant on efficient global supply chains and not reined in by national security concerns.

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

PGIM said investors shouldn’t ignore industries on the decelerating track of globalisation 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.