Likelihood, two years: 3Possible; to end-2028
Likelihood, ten years: 4Likely; to end-2036
Systemic impact: 4Severe; global
National impact: 4Severe; typical highly exposed nation
Onset pace: Months
Duration (acute phase): 3 years
Warning time: Months
Scope: Global
Recovery horizon: Years
Capability load: Hard 1/3Soft 2/3Economic 2/3; domains loaded High
Concurrency: Standalone; triggers 7 · triggered by 7
Confidence · movement: medium; new

Rated at Standard Severe. Event reach: global event. Source of scores: model-panel-v0.5.

03Narrative

Dateline: November 2031

The measures arrived in sequence between May and October 2029. The first was a tariff round that took average duties on trade between the two largest economies above 60 per cent. The second was a licensing regime for rare earth magnets, gallium and germanium that in practice approved no shipments to the opposing bloc. The third widened chip and chip-tool controls to cover mature process equipment and cloud computing services, and was matched by restrictions on inward and outward investment. By November 2029, suppliers accounting for about 40 per cent of world supply of permanent magnets, several chip-making tools, a class of power semiconductors and a group of antibiotic ingredients could no longer sell across the divide.

Manufacturers held between four and ten weeks of stock. Vehicle and electrical equipment plants in Europe, Japan, Korea and Mexico began short-time working in the eighth week. Spot prices for the affected inputs had doubled by the end of the year and contract prices followed at renewal. Health ministries in eleven countries placed three antibiotics under allocation.

Countries outside both blocs were also affected. Firms in South East Asia, India, the Gulf and Latin America that re-exported controlled goods were listed by one side or the other, and two banks lost correspondent accounts. Governments were asked to adopt origin audits and end-user certificates under two rule books that could not both be satisfied. Telecommunications equipment and vehicle software certified under one set of standards were refused approval under the other. Customs clearance times for the affected categories doubled.

Trade diverted where it could. Mines and separation plants outside the dominant supplier raised output and magnet recycling expanded, but the first new processing capacity did not reach volume until the autumn of 2031. Governments released strategic stocks to defence and medical users first. Most had no legal basis for allocating industrial inputs among private firms and wrote one during the shortage.

By the middle of 2031, world goods trade volume was 10 per cent below its 2028 level. Inflation ran about one and a half percentage points above target in the bloc economies and about three points above target in economies that imported from both. Employment in export sectors fell in the most exposed manufacturing regions. Exemptions were negotiated product by product and each carried a condition on alignment.

GINC's reading at the two-year mark was that outcomes depended less on which side a country stood with than on what it had prepared. Countries that had mapped their dependence by product, held stocks sized to requalification times and kept working customs and licensing administrations lost output for months. Countries that learned of their exposure only when production lines stopped lost output for years, and several gave up policy positions in order to obtain supply.

The dateline is illustrative, not a forecast. The narrative is hypothetical; the historical anchors below are real events.

04Summary

The largest trading powers impose reciprocal tariffs, export controls and investment restrictions covering industrial inputs, advanced chips and digital services. Within six months, suppliers accounting for 40 per cent of global supply of several critical inputs, among them rare earth magnets, chip-making tools and pharmaceutical ingredients, become inaccessible to the opposing bloc. Prices of the affected inputs double and global trade volumes fall 10 per cent over two years. Neutral countries face secondary restrictions and incompatible standards. Substitution takes at least two years. The test is continuity of essential production and the ability to preserve policy autonomy. In its sharpest form, a single dominant supplier halts exports outright.

05Historical anchors

Event	Date	What happened	Calibrates
US 'Liberation Day' tariff package	2 April 2025	A 10 per cent baseline tariff on most imports with higher rates by country. Duties between the United States and China reached 145 and 125 per cent within two weeks, before a truce agreed in Geneva on 12 May cut them for 90 days. The US effective tariff rate rose to its highest level since the 1930s.	The speed at which reciprocal tariffs can reach prohibitive levels and the pattern of escalation followed by truce that keeps the two-year likelihood at band 3.
China rare earth export controls	4 April and 9 October 2025	From 4 April China required licences for exports of seven medium and heavy rare earths and the magnets made from them. Magnet shipments fell sharply in the following two months, and carmakers and suppliers in Europe, the United States and Japan reduced or stopped some lines. On 9 October the regime was extended to products made abroad with Chinese material or technology; the extension was suspended for a year after the 30 October leaders' meeting.	Export licensing as the instrument that makes supply inaccessible, the weeks of stock that manufacturers hold and the reach of controls into third countries.
China rare earth embargo on Japan	September 2010	After a collision near the Senkaku Islands, rare earth shipments from China to Japan stopped for about two months. Prices of several rare earth oxides rose severalfold over the following year. Japan then invested in overseas mines, stockpiles, recycling and substitution, and reduced its dependence on Chinese supply from about 90 per cent to about 60 per cent over the following decade.	Substitution time. A well-resourced importer needed years, not months, to reduce a concentrated dependence, and did not remove it.
Nexperia export halt	October 2025	The Netherlands took control of decisions at Nexperia, a Chinese-owned maker of basic automotive chips, under its Goods Availability Act. China then barred exports of Nexperia products from its plants in China, where a large share of the company's output is assembled and tested. Carmakers in Europe, Japan and North America warned of stoppages within weeks and some cut production. Exports resumed in part in November and the Dutch order was suspended.	The single-supplier halt, the sharpest form of the rupture: a low-value component with one dominant source can stop high-value production within weeks.
US advanced chip export controls	7 October 2022	The United States restricted exports to China of advanced computing chips and of the equipment used to make advanced semiconductors, and barred US persons from supporting advanced fabrication there. Japan and the Netherlands adopted aligned controls on chip-making equipment in 2023, and the US rules were widened in 2023 and 2024. China introduced export licensing for gallium and germanium in August 2023.	The technology side of the rupture: controls that begin with one product class widen by stages, draw in allied suppliers and meet retaliation in materials.
Global financial crisis trade collapse	2008–2009	World merchandise trade volume fell by about 12 per cent in 2009, the largest fall since the Second World War, and recovered most of the loss in 2010 as demand and trade finance returned.	The scale of the trade fall. The scenario assumes a fall of similar size, 10 per cent, but spread over two years and without a rapid recovery, because the cause is policy and not demand.

06Parameters

Shown at their preset values. Parameters are not adjustable in this release and nothing on this page is computed from them. Custom settings run (Phase B) but are labelled 'non-standard run' and excluded from comparisons.

Common variables at Standard Severe · read-only

1. Severity: major
severe (Standard Severe)
extreme
2. Duration (acute phase): 30 days
90 days
1 year
3 years (Standard Severe)
5 years
3. Onset pace: days
weeks
months (Standard Severe)
years
4. Warning time: none
days
months (Standard Severe)
5. Scope: national
regional
global (Standard Severe)
6. Origin: natural
accidental
adversarial (great power / neighbour / non-state) (Standard Severe)
negotiated
Standard Severe: adversarial (great power)
7. External support: full
partial (Standard Severe)
none
8. Concurrency: standalone (Standard Severe)
plus one named scenario
plus two
9. Policy response assumed: none (pure exposure)
current plans executed (Standard Severe)
best practice
10. Recovery horizon: months
years (Standard Severe)
structural

Scenario-specific parameters · read-only

Parameter	Default	Range or options	Note
Share of global supply of each affected input made inaccessible to the opposing bloc	40 per cent	20 to 70	Applies to several inputs at once, among them rare earth magnets, chip-making tools, basic semiconductors and pharmaceutical ingredients. Reached within six months.
Price rise of affected inputs	100 per cent	50 to 300	Spot prices first; contract prices follow at renewal.
Fall in global trade volume	10 per cent over two years	5 to 20	Goods and services, measured against the pre-event level.
Minimum time to substitute lost supply	2 years	1 to 5	Time for new mines, processing plants and qualified suppliers to reach volume. Longer for chip-making tools.
Secondary restrictions on neutral countries	partial	none to full	Partial means measures against named firms and banks that supply or clear for the opposing bloc. Full, at Extreme, means measures against whole jurisdictions.
Single-supplier halt	no	no or yes	Yes sets one dominant supplier of one input to a complete export halt to all buyers, with onset in days. This is the sharpest form of the event.
Financial services and payment systems included	no	no or yes	Yes at Extreme.

07Transmission channels

1
The largest trading powers impose reciprocal tariffs, export licensing and investment restrictions in sequence over six months.
2
Suppliers of about 40 per cent of several critical inputs can no longer sell to the opposing bloc; manufacturers run down stocks within weeks.
3
Prices of the affected inputs double; plants that cannot requalify alternative suppliers reduce or stop production.
4
Secondary restrictions reach firms and banks in neutral countries that supply or clear payments for the opposing bloc.
5
Technical standards and certification regimes diverge, so products approved in one bloc are refused in the other.
6
Global trade volume falls 10 per cent over two years; export earnings, investment and employment fall in trade-dependent economies.
7
Higher import prices raise inflation while output falls, which limits the monetary and fiscal response.
8
Supply and exemptions are offered in return for alignment, narrowing the policy autonomy of states that depend on both blocs.

08Capability loading

High: capability band shifts expected under current plans. Medium: band shifts under 'none' policy response only. Low: strain without band shift. Loads are judgement-based until the Atlas connects. Domains link to the Atlas.

Domain	Load	Channel
Hard
Critical technology	High	loss of access to controlled chips, chip-making tools, magnets and materials; incompatible standards
Defence and security	Medium	defence production short of magnets and components; friction within alliances over alignment
Strategic infrastructure	Medium	ports and customs handle origin audits; grid, telecommunications and transport equipment delayed
Soft
Government effectiveness	High	licensing, customs, sanctions compliance, allocation of scarce inputs and industrial policy under time pressure
Influence and cohesion	High	pressure to align; exemptions traded for policy concessions; diplomatic capacity stretched
Human capital	Medium	export-sector job losses, shortages of medicine ingredients and limits on researcher mobility
Economic
Industry, trade and supply	High	input shortages stop production; export volumes fall; diversion and requalification costs
Macro-financial	High	inflation with falling output; currency pressure; investment restrictions and loss of correspondent banking
Energy and resources	Medium	critical mineral export restrictions; delays to energy equipment; commodity price volatility

09Stakeholders

Government: Exposure
Dependence on inputs, markets and standards from both blocs; legal powers to allocate scarce inputs; capacity of customs and licensing administrations.
Actions
Map import dependence by product and supplier country for critical inputs
Hold stocks sized to the time needed to requalify alternative suppliers
Legislate in advance for the allocation of scarce inputs to essential users
Watch
Export licence approval rates for controlled inputs
Listings of domestic firms and banks under either bloc's restrictions
Divergence between the blocs in product certification requirements
Technology: Exposure
Controlled chips, tools, materials and cloud services; products certified under one bloc's standards.
Actions
Qualify a second supplier in a different jurisdiction for each controlled input
Design product lines that can be certified under either set of standards
Hold component stocks above the lead time for requalification
Watch
Scope of export controls on chips, tools and computing services
Lead times and spot prices for magnets and basic semiconductors
Data localisation and cloud access rules
Investors: Exposure
Earnings of manufacturers with supply chains that cross the blocs; currencies and sovereign spreads of trade-dependent economies; assets subject to forced divestment.
Actions
Test portfolios against a 10 per cent fall in trade volume and a doubling of critical input prices
Identify holdings that rely on a single jurisdiction for a critical input
Review exposure to forced divestment under investment screening
Watch
Tariff and export-control announcements
Inventory cover reported by vehicle and electronics manufacturers
Currencies and sovereign spreads of trade-dependent middle powers
Public: Exposure
Employment in export manufacturing; prices of vehicles, electronics and appliances; availability of some medicines.
Actions
Local government identifies employers that depend on inputs from the opposing bloc
Health services plan substitutes for medicines with concentrated ingredient supply
Media and civil society report shortages and allocation decisions accurately
Watch
Short-time working and redundancies in export sectors
Consumer prices for durable goods
Medicine shortage notices

10Regional exposure

Region	Exposure	Rationale
North America	High	A principal in the rupture. Depends on the opposing bloc for processed rare earths, magnets and medicine ingredients.
Europe	High	Export-dependent manufacturing buys inputs from one bloc and sells to both. Little domestic processing of critical materials.
China	High	A principal in the rupture. Loses access to advanced chips, chip-making tools and its largest export markets.
Indo-Pacific	High	Assembles for both blocs. Plants in Japan, Korea, Taiwan and ASEAN depend on inputs and tools from each side.
South Asia	Medium	Gains diverted orders, but its pharmaceutical and electronics industries depend on imported ingredients and components.
Gulf and Middle East	Medium	Energy sales continue to both blocs. Technology purchases, re-export hubs and investment funds face secondary restrictions.
Africa	Medium	Mineral exporters gain bargaining power. Importers face higher prices, tied finance and pressure over standards.
Latin America and Caribbean	Medium	Commodity exporters sell to both blocs. Mexico's manufacturing is bound to one, and lithium and copper attract rival offers.
Russia and Eurasia	High	Already under sanctions and reliant on one bloc for technology and markets. Central Asian transit states face secondary restrictions.

11Early-warning indicators

Indicator	Source	Threshold
Average tariff rates on trade between the United States and China	Peterson Institute for International Economics tariff tracker; Yale Budget Lab	Average rates above 60 per cent in both directions
New export-control rules and entity listings	US Bureau of Industry and Security; China Ministry of Commerce	Controls extended to mature process equipment, basic semiconductors or cloud services
Harmful trade and investment interventions in force	Global Trade Alert	—
Chinese exports of rare earth magnets, gallium and germanium	China General Administration of Customs	Monthly shipments below half the level of a year earlier
Global Supply Chain Pressure Index	Federal Reserve Bank of New York	More than two standard deviations above its average
Goods Trade Barometer	WTO	Below 100 for two consecutive readings
Investment screening measures and blocked transactions	UNCTAD Investment Policy Monitor	—

12Compounds

Triggers: S02 Global funding seizure · Lost earnings in technology and manufacturing reprice assets; investment restrictions and currency pressure strain funding.
S03 Regional war spillover · Less trade between the blocs lowers the economic cost of military confrontation near contested sea routes.
S04 Hybrid coercion · Rivalry extends to deniable pressure on the infrastructure of states that resist alignment.
S06 Breadbasket failure · Export controls and bloc restrictions on fertiliser and farm inputs reduce harvests and make food export restrictions more likely.
S09 Cryptographic trust break · Technology rivalry accelerates state quantum programmes and reduces disclosure of progress.
S12 Market access opening · Economies outside the rival blocs open to each other in response
S13 Great-power détente · The cost of divided trade creates the incentive to negotiate
Triggered by: S03 Regional war spillover · A regional war involving a major power brings sanctions and export controls between the blocs.
S04 Hybrid coercion · An infrastructure attack attributed to a rival state brings economic retaliation.
S09 Cryptographic trust break · A demonstrated attack on cryptography brings bans on the adversary's digital services and equipment.
S02 Global funding seizure · Governments respond to the recession with tariffs, capital restrictions and preference for domestic suppliers.
S10 Severe pandemic · Export restrictions on medical goods harden into lasting trade barriers.
S12 Market access opening · Excluded powers may answer a compact they read as a bloc with restrictions of their own
S15 Clean power threshold · Competition for minerals, cells and grid equipment
Amplified by: S06 Breadbasket failure · Food and fertiliser export restrictions add to controls on industrial inputs.
S10 Severe pandemic · Export restrictions on medical goods deepen shortages of pharmaceutical ingredients.
Amplifying trends: Export controls & economic coercionCritical input supplier concentrationTrade & investment fragmentationEconomic security policyTechnical standards competitionRare earth processing concentrationLithography & chip-tool chokepointsPharmaceutical input concentration
Key trends: Great-power competitionCritical Export controls & economic coercionCritical Trade & investment fragmentationCritical Critical input supplier concentrationCritical Rare earth processing concentrationCritical Industrial policy competitionVery high Economic security policyVery high Tariff barrier normalisationVery high Lithography & chip-tool chokepointsVery high
From GINC Trends: the trends rated Very high or Critical for this scenario, of 250. All S01 trend scores.

13Rating rationale

Rating	Band or level	Why
Likelihood, two years	3Possible	Every instrument in the scenario was used in 2025: duties above 100 per cent between the United States and China in April and extraterritorial rare earth licensing in October. Each escalation was followed by a truce within weeks, and the widest controls were suspended for a year. A rupture that holds for six months and removes 40 per cent of several inputs at once requires those truces to fail together. That is possible but not the central case.
Likelihood, ten years	4Likely	The conditions persist across the decade: processing of rare earths, chip tools and medicine ingredients stays concentrated, export-control regimes are now standing law on both sides and industrial policy is competitive. Ten years spans several political cycles and repeated tests over Taiwan. Both sides have so far retreated when costs became visible, which keeps the rating below band 5.
Systemic impact	4Severe	IMF staff estimates published in 2023 put the long-run output cost of trade fragmentation between 0.2 and 7 per cent of global GDP, depending on its depth. A 10 per cent fall in trade volume is close to the 2009 fall of about 12 per cent but lasts longer, and input shortages stop production that tariffs alone would only make dearer. That places the event at 2.5 to 5 per cent of global output over five years.
National impact	4Severe	The typical highly exposed nation is a trade-dependent manufacturer that buys inputs from one bloc and sells to the other. The 2021 chip shortage and the 2025 magnet and Nexperia stoppages showed that one missing component halts vehicle lines within weeks. Here several inputs are lost for two years, with secondary restrictions and pressure to align. Economic damage and international position reach Severe; essential services continue, so the level is not Catastrophic.
Confidence	medium	The instruments and their effects are well documented from 2018 to 2025. The scale assumed, 40 per cent of several inputs lost at once for two years, has no complete precedent, and the panel members differed on likelihood.

Source of scores: model-panel-v0.5. Confidence refers to the rating, not the scenario. Calibration sources are listed with the anchors above and on the scenario methodology page.

14Open questions

Contested assumptions for the panel to resolve.

Whether one record can hold both the division into blocs, with onset in months, and the single-supplier halt, with onset in days, or whether the halt needs its own preset.
How to score nations that gain orders from diversion. The record treats them as exposed, but some would rise on several capability groups.
Whether the 40 per cent threshold should be set on global supply, as here, or on each nation's own import share, which differs widely by input.
Whether financial services and payment systems belong in Standard Severe. They are excluded here and included only at Extreme.

15Commentary

No signed commentary in this build.

16Version and citation

Version: 0.5.0 · active · trade-bloc-rupture
Change log: 0.5.0 · 9 October 2026 · Rebuilt in the second pass from Geoeconomic confrontation: narrowed to critical inputs, with the single-supplier cut-off folded in; onset moved from weeks to months, the trade fall set at 10 per cent and both likelihood bands lowered by one.
Full change log

Rating history

One row per edition. Each edition page is frozen at release; corrections are published as errata.

Edition	Rank	L2y	L10y	Systemic	National	Confidence	Edition view
2027	1	3Possible	4Likely	4Severe	4Severe	medium	Open

Versions

Version	Date	Change
0.5.0	9 October 2026	Rebuilt in the second pass from Geoeconomic confrontation: narrowed to critical inputs, with the single-supplier cut-off folded in; onset moved from weeks to months, the trade fall set at 10 per cent and both likelihood bands lowered by one.

Citation and downloads

Cite as

GINC (2027). Scenario S01 Critical trade divides into rival blocs, Scenario Library v0.5. scenarios.ginc.org/scenarios/trade-bloc-rupture

Content and data are published under CC BY 4.0.

Download JSON Download CSV