Are Geopolitical Risks Fuelling Trade Protectionism?

Since the onset of the global financial crisis, trade protectionism has endured, with national security emerging as a prominent determinant of trade policy adjustments. This study seeks to investigate the intricate interplay between geopolitical risk and trade protectionism. To this end, the article formulates a trade protection network employing the geopolitical risk index in conjunction with trade protection data gathered from 26 countries. The objective is to scrutinize the impact of geopolitical considerations on trade protectionist measures. Our investigation reveals that the escalation of geopolitical risks amplifies the proclivity of nations to engage in trade interventions. As geopolitical uncertainties spread and disagreements arise among traditional trade partners, countries characterized by superior institutional quality, greater political system heterogeneity, and deeper reliance on foreign trade are increasingly inclined to institute trade restrictions as a safeguard for their industries in response to geopolitical tensions. In light of these findings, it is imperative for countries and regions to proactively respond to peer influence, enhance domestic monitoring capabilities, foster international collaboration, and collaboratively forge new frameworks governing international trade.