The future of the global economic order

The external economic environment for German companies has deteriorated significantly. This is because support for global rules-based free trade is rapidly declining. Numerous countries, such as the United States and China, are calling for alternatives, thereby undermining the foundations of the global economic order.

This poses risks for German and Bavarian companies, as they are closely integrated into the global economy.

The ties with the US and China are particularly strong: around 20 percent of Bavarian exports and 46 percent of Bavarian direct investments abroad go to the US or China.

Against this backdrop, we have examined various scenarios for the Bavarian Business Association (vbw – Vereinigung der Bayerischen Wirtschaft) to determine how the global economy could develop in the future and what options the EU has to shape this development.

Scenarios for a new global economic order

The current world economic order no longer works: the Western community of nations has lost its global economic significance. At the same time, geopolitical rivalries have intensified. These two factors will change the structure of the global economy in the future.

The study outlines three scenarios with different consequences for the German and Bavarian economies:

1. The EU is open and concludes more free trade agreements with neutral states: This limits the foreign trade shock caused by the end of the current world trade order.
2. The EU is protectionist and isolates itself: As a result, an important business foundation for many German and Bavarian companies erodes.
3. There is a geopolitical escalation with a trade breakdown between the West and China: The decoupling of global economic areas leads to considerable economic upheaval.

EU can strengthen the single market and promote free trade agreements

Despite its limited geopolitical influence, the EU is well placed to take control of its own external economic relations. Although the EU’s relations with both the US and China will weaken in the coming years, the EU remains an attractive partner for economies that continue to have a strong interest in rules-based, liberalised economic cooperation and wish to remain as neutral as possible in the geopolitical conflict between the US and China.

The EU can conclude free trade agreements with countries such as Canada, Japan, South Korea, India and Australia, or with groups of countries such as the ASEAN states, the Mercosur group or the Gulf states, or expand existing agreements. It can also deepen its own internal market by removing the remaining trade barriers in the goods sector and the numerous barriers to trade in services.

The future will be more unstable

It is still unclear what the future global economic order will look like. However, three conditions are likely to apply in all scenarios:

• The global regulatory framework will be significantly more unstable than before. This will severely hamper medium and long-term planning for companies and lead to a significant increase in trade barriers.
• Countries with less political power will have to accept disadvantages. The guidelines for the future global economic order will be set by the US and China, both of which pursue their own economic and geopolitical interests without regard for third parties.
• National defence and corporate resilience measures will become more important compared to the current status quo.

Our approach

The study first examines the current discussion on alternative structures for the global economy and the key drivers of this development.

It then outlines various scenarios illustrating the possible range within which such alternative structural models could take shape.

Building on this, the study uses examples to show what effects the assumed changes are likely to have on the German economy – and what strategies are available to stakeholders in Europe, Germany and Bavaria to position themselves as securely and independently as possible in a future world that is likely to be significantly more volatile.

Links and downloads

To the study (PDF, in German)

More information (vbw website, in German)

Project team: Silvia Golm, Philipp Kreuzer, Johann Weiß

Last update: 07.05.2025