We’d like to introduce you to a real-life set of connectors. That’s our name for a group of countries emerging as important links in a global economy that’s fragmenting into rival blocs. Listen to the rhetoric coming out of Washington and Beijing today, and you’ll hear a lot of “either you’re with us or against us” kind of talk. But not everyone is picking sides.

In collaboration with Bloomberg Economics, Bloomberg Businessweek took a dive into trade and investment data and found five nations straddling the new geopolitical fault lines: Vietnam, Poland, Mexico, Morocco and Indonesia. As a group, these countries logged $4 trillion in economic output in 2022—more than India and almost as much as Germany or Japan. Despite their very different politics and pasts, they share an opportunistic desire to seize the economic windfall to be had by positioning themselves as new links between the US and China—or China, Europe and other Asian economies.

Picking Winners: How We Found Our Five

The five are by no means the only economies straddling divides, but their geographic location and ability to grease trade has set them up as crucial middle grounds. These guys punch above their weight: They represent 4% of global gross domestic product, yet they’ve attracted slightly over 10%, or $550 billion, of all so-called greenfield investment since 2017. (The term describes outlays for new plants, offices and other facilities by a foreign company establishing or expanding operations in another country.) All have seen their trade with the world accelerate above trend in the past five years, according to an analysis by Bloomberg Economics.

Economists at the Bank of International Settlements looked at data from more than 25,000 companies and found supply chains lengthening as other countries, especially in Asia, became additional stops in trade between China and the US. Companies shifting supply chains away from China are often moving production to countries whose economies are already highly integrated with China’s, such as Vietnam. Mexico, where investment by Chinese manufacturers has ticked up noticeably in recent years, is also becoming an important link in US-China trade. So it’s not so much that the US and Chinese economies are decoupling—they’re just coupling in different places.

That doesn’t mean all is well. Even if there are winners in this new era, economists warn the overall hit to global growth from the disruption to flow of investment and trade will be negative, with poor nations suffering more than rich ones. For consumers and central banks, one unpleasant side effect will be more expensive goods—hence more persistent inflation—as the shuffling of supply chains drives up production costs.

Still, the connectors are proof that talk of the end of globalization is overwrought. Goods and capital still move across borders—even more of them, in fact. —Enda Curran, Shawn Donnan and Maeva Cousin

VIETNAM: A Delicate Balance
Vietnam’s role as a connector economy has been supercharged in the years since former US President Donald Trump placed tariffs on Chinese goods and the pandemic sharpened scrutiny of supply chains.

One example: A $1 billion Foxconn Technology Group factory complex that will churn out Apple Inc. MacBooks is rising in what used to be rice fields in northern Vietnam. Just across the Cau River, GoerTek Inc., a Chinese company that makes AirPods, is building a plant on a site rimmed by banana trees, lotus ponds and grazing buffalo.

With its combination of low labor costs, improving infrastructure and an expanding roster of trade agreements, Vietnam has attracted a host of Apple suppliers, including Luxshare Precision Industry Co. and Pegatron Corp.

The trend of giant electronics manufacturers relocating some production from the Chinese mainland to Vietnam goes back about a decade, but it has accelerated in recent years.

The US is the destination for about a third of Vietnam’s exports, while China is the biggest supplier of materials for Vietnamese producers, from machinery to material for garments.

Vietnam

Vietnam formally upgraded ties with the US in September, shifting the relationship to a “comprehensive strategic partnership”—a diplomatic status previously reserved for a select few, including China and India. The US also announced a partnership in September to help Vietnam develop its nascent semiconductor industry. Vietnam is also a member of the Regional Comprehensive Economic Partnership, a three-year-old free-trade agreement spearheaded by China.

The electronics industry contributed 32% of all exports in 2022, about twice as much as a decade ago. The sector employed 1.3 million workers as of June 2022. Vietnamese officials are confident those figures are headed higher. “There are plans for even more factory expansions,” says Nguyen Dinh Vinh, who sits on the management board overseeing industrial parks in Bac Ninh province, where GoerTek is building another factory. —Nguyen Dieu Tu Uyen and Nguyen Xuan Quynh

POLAND: Battery Powerhouse
When Poland’s government announced last year that the country would be building its own brand of electric vehicles, called Izera, it was a clear signal that a nation that once boasted several of its own marques had bigger ambitions than being a production hub for Western European automakers. State-owned ElectroMobility Poland signed an agreement with China’s Geely Holding Group in 2022 to supply the technology for the project. Production of a hatchback model and an SUV is scheduled to begin at the end of 2025 at a plant located in the coal mining heartland of Silesia.

Poland already has well-established links to the European auto industry, and such giants as Volkswagen AG and Mercedes-Benz Group AG are setting up plants to manufacture electric vehicles in the country. But foreign investment has surged in recent years, with a significant portion of the $125.1 billion in greenfield investment it has attracted since 2017 coming from farther afield.

Poland sits behind only China in global battery production rankings, hosting the likes of LG Chem Ltd., Northvolt AB, SK Innovation Co. and Umicore SA Shipments of made-in-Poland lithium-ion batteries totaled 38 billion zloty ($8.9 billion) last year, equivalent to 2.4% of all exports, according to official data.

The proliferation of battery plants has been accompanied by a jump in imports of raw materials, such as graphite, from China. The value of China’s exports to Poland have risen 112% since 2017, to $38.2 billion last year.

The dependence on Chinese inputs is widely seen as a potential vulnerability for Europe’s nascent EV industry, which is also under assault from a tide of imports of generally lower-priced Chinese plug-in cars. Yet in places such as Poland, longer-term geostrategic concerns carry less weight than the immediate economic boost that the new plants can provide.

Poland

LG Energy Solution Ltd.’s 5-year-old lithium-ion battery plant in Wroclaw, in the southwestern part of the country, is the largest facility of its kind in Europe, employing more than 7,000 people. Once a €500 million ($529 million) expansion is completed in 2025, the factory will turn out enough batteries annually to power 1 million plug-in cars.

About an hour’s drive south from Wroclaw, in Nysa, a joint venture between Belgium’s Umicore and Volkswagen will sink €1.7 billion into a plant that will manufacture cathode material, a key component in batteries. Mercedes is building an electric vehicle plant nearby, at a cost of more than €1 billion. —Maciej Martewicz

MEXICO: A Side Door Into the US
This year, Mexico eclipsed China as the biggest exporter of goods to the US. But that doesn’t tell the whole story of how its economic relationship with the colossus next door—and the rest of the world—is changing. Since 2017, the value of Mexico’s imports from China has been growing faster in nominal terms than that of its exports to the US.

That’s because many of the manufacturers opening plants in Mexico’s border states these days are Chinese companies, selling everything from car parts to furniture, with a focus on the US market. The Mexican Association of Private Industrial Parks surveyed its members earlier this year and learned that they expect that over the next two years, one in five of the new businesses setting up shop will be Chinese.

In April, TDI Manufacturing Mexico, an offshoot of Zhejiang Yinlun Machinery Co., a Chinese supplier of cooling systems for cars and heavy machinery, opened a 152,000-square-foot facility in Hofusan Industrial Park, a facility near Monterrey where all the tenants are Chinese.

Yinlun TDI LLC, the California-based subsidiary of the Chinese manufacturer, had been watching labor costs tick up in the US and the cost of importing goods from China increase as well, according to its president and chief executive officer, Scott Chen. So to service clients that include Caterpillar, General Motors and John Deere, the company decided in 2021 to invest $20 million to build the plant in Mexico.

The bet has already paid off. In February 2023, about one year after Yinlun bought the land, the Mexican government announced Tesla Inc. would be opening a Gigafactory to make electric cars in the same state, Nuevo León.

Yinlun’s initial $20 million investment in its first Mexican factory is going to be small, says Chen. But he’s already leased a second larger plant and is thinking about a third.

Meanwhile, he’s working to staff up the new facility by offering bonuses of as much as 80% of base pay to lure technicians and engineers employed by Yinlun’s corporate parent in China to Mexico. Eventually, Chen hopes to replace all but a few of the Chinese workers he has imported with local employees. “Every month, we get more Mexican staff coming on, and the China staff going back to China,” he says. “In two years, we think it’ll be almost all Mexican local staff.”

One of the biggest draws for Yinlun and other Chinese companies setting up shop in Mexico is the country’s 30-year-old free-trade agreement with the US and Canada. Trump successfully pushed for a renegotiation of the original pact with the goal of bolstering manufacturing in North America and reducing US reliance on Chinese imports. He didn’t count on Chinese companies finding in Mexico a side door into the US, one that allowed them to evade the tariffs he levied on US imports from China.

Mexico

The result is that investment announcements by Chinese companies jumped nearly 50% in 2022, to $2.5 billion, according to the Latin America and Caribbean Network on China. The momentum has carried into this year. Lingong Heavy Machinery Co. announced in October that it will build an industrial park in Nuevo León that state officials say will lead to $5 billion in industrial investment and some 7,000 jobs.

“Chinese companies have entered a new phase of global configuration,” with Mexico a key link in that process, said Zhang Run, China’s ambassador to the country, at an event hosted by a commission of the Mexican Senate in October. —Maya Averbuch

MOROCCO: Free-Trade Pacts Pay Off
Morocco, home to the world’s largest reserves of phosphate, is becoming an important player in the global car industry’s transformation. The mineral is a key ingredient in lithium-iron-phosphate (LFP) batteries, a fast-growing variety of rechargeable cells used in EVs.

The country already has a burgeoning auto sector, with plants owned by Renault SA and Stellantis NV churning out thousands of cars a day, supported by dozens of established American suppliers. They include Southfield, Michigan-based Lear Corp. and Commercial Vehicle Group Inc. of New Albany, Ohio, which announced expansion plans this year.

Now an EV battery supply chain is taking root. Morocco’s strong trade relations with Europe and the US, along with its welcoming attitude toward foreign direct investment, make it a meeting place where companies aligned on either side of the growing US-China divide can compete or collaborate.

In 2022, Morocco saw the announcement of $15.3 billion in new greenfield factory projects funded by foreign investors, almost as much as the five previous years combined. And the trend shows no signs of slowing.

Morocco

In May, China’s Gotion High-Tech Co. signed a deal with the kingdom to build a $6.4 billion battery factory, which would be one of the world’s largest. In September, CNGR Advanced Material Co., a Chinese maker of battery components, announced what may become a $2 billion project to produce enough LFP batteries to eventually equip 1 million vehicles a year. CNGR Europe CEO Thorsten Lahrs says Morocco sits in a “sweet spot” for delivering the car batteries of the future.

Yet minerals and market access are only part of the story: US industrial policy is also having an impact. In September, South Korea’s LM Chem and Youyshan, a subsidiary of Huayou Group of China, announced plans to make Morocco their global base in the LFP market, with mass production planned for 2026. In the announcement, the partners were explicit about the economic rationale: The choice of Morocco was influenced by the terms of the US Inflation Reduction Act. The 2022 law offers tax rebates on sales of EVs whose content meet made-in-America thresholds. Parts, and also minerals, sourced from countries that have free-trade agreements with the US count toward those requirements. —Brendan Murray and Annie Lee

INDONESIA: In Search of a Counterweight
Indonesia is actively courting companies from both the US and China to deliver on President Joko Widodo’s vision of building out an entire electric vehicle supply chain. Tesla and Volkswagen have been invited to invest, with an eye to balancing Chinese companies’ dominance in refining nickel and making batteries. That’s already yielded unique corporate marriages across geopolitical blocs. In March, Ford Motor Co. signed a deal with China’s Zhejiang Huayou Cobalt Co. and Brazil’s Vale SA to lock down supplies of nickel, a metal used in the production of EV batteries.

With an abundance of natural resources and a 270-million-strong population, Indonesia is betting that it is too important to be forced to choose between the world’s two largest economies.

Batang Industrial Park in Central Java is home to a number of US companies, including some that have relocated from China, such as solar lamp maker Alpan Lighting Products Inc. Meanwhile, Morowali Industrial Park, on the island of Sulawesi, is dominated by Chinese investment, mainly in nickel processing.

Indonesia

Still, the balance of US and Chinese investment has grown increasingly lopsided over the years, with Chinese foreign direct investment in the first half of 2023 worth twice that of the US. This prompted Senior Minister Luhut Panjaitan to call out American companies earlier this year for staying on the sidelines. “We can’t keep begging and begging from you,” he said. “You may be angry at us for trading with other countries, but we have to survive.”