Amidst the ongoing tariff conflicts, the Organization for Economic Cooperation and Development (OECD) has once again emphasized the importance of free trade. In its latest report, the organization cautions that efforts to relocate supply chains might prove costly for the global economy and may fail to provide protection against unforeseen disturbances. Implicitly referencing the protectionist wave triggered by the US under Donald Trump's administration, the OECD supports its stance with figures: it estimates that such relocations could slash international trade by over 18% and result in a reduction of up to 5% in global GDP, a figure that could double depending on each economy's openness level.

The OECD's defense of free trade serves as a beacon in a period of high uncertainty. Trump's unpredictable geopolitical and commercial decisions—like his recent announcement to increase tariffs on steel and aluminum while courts debate the legality of these measures—are causing global unease and are beginning to impact the US economy, the OECD's main partner and the world's largest power.

"Certain initiatives aimed at bringing value chains closer to national territories [relocation] may prove costly and won't necessarily guarantee greater stability against shocks," the organization argues in its report titled OECD Supply Chain Resilience Review, published ahead of its annual ministerial meeting. The report details that the economic impact could range from 1.1% to 12.2% of GDP, depending on the degree and nature of each country's integration into supply chains.

While acknowledging recent events like the pandemic and the Ukraine war have triggered alarms and questioned the high level of market interconnection, the OECD notes that the number of products imported from a limited group of suppliers has surged by 50% compared to early-century data, particularly favoring China. The Asian giant's role in this concentration has increased from 5% to 30% since the late 1990s, whereas the combined contribution of traditional suppliers—United States, Germany, and Japan—decreased from 30% to 15%.

Despite this, the Paris-based entity downplays the concentration of trade flows. It points out that only 30% of exchanged goods show "high" concentration levels, advocating for increased international diversification rather than bringing production processes back within national borders. The trend toward concentration has mainly affected low-income and emerging economies. Countries like Brazil, India, Indonesia, Russia, and South Africa are heavily reliant on China, with China becoming their primary trading partner, capturing 60% of imports compared to 9% in the 1990s. The impact is less pronounced in OECD countries, where the proportion rose from 5% to 22%.

The report further adds that in over half of the cases studied, localized systems have led to decreased "GDP stability." Therefore, it argues that "opening up and geographically diversifying" supply sources for the economy and exports offers "significant adaptation opportunities" in response to disruptions and shocks.

"Responses to concerns about supply security and market concentration, as well as the long-term transformation of trade flows, risk causing undesirable distortions. For trade to continue as the foundation of our shared prosperity and to meet the expectations of our citizens, we must work together to enhance the reliability and resilience of our supply chains," summarized the organization's secretary-general, Mathias Cormann. These recommendations align with the report's suggestions, which invite governments to create a stable regulatory framework for international trade, remove barriers for critical service sectors, and promote multilateral trade agreements and supply chain alliances.