The surprisingly steep decline in world trade.

In November, I met with an executive at one of China’s new private equity firms. He talked up the firm’s investments in energy software and mobile communications. But companies that export? He wouldn’t touch them.

The fact that China’s smart money is now looking inward and avoiding the sector that brought it so much growth in recent years highlights a surprising and spreading new trend: deglobalization. For the last few decades, goods, services, and people have been whizzing around the world at ever-greater speeds and over ever-greater distances. The presumption was that globalization was the most efficient way to organize the world’s economic affairs. But now comes the backlash, motivated by economics, politics, and the shift of wealth from West to East.

In the months after September 2008, pretty much every metric that testified to the growing interconnectedness of the global economy collapsed. Between April 2008 and April 2009, foreign currency trading volumes in London were down 25 percent.

The Inter-American Development Bank in August reported that remittances from Latin America and Caribbean expats would fall 11 percent in 2009, back to the level of 2006. The International Monetary Fund projects that the volume of world trade in goods and services will plummet nearly 12 percent this year.

Of course, you’d expect such developments when the global economy shrinks, as it did in 2009 for the first time since 1944. But the decline in trade was far larger than the quite small drop in global economic output. It turns out that many aspects of globalization were overleveraged. Exports, currency trading, and cross-border investment were fueled by debt and credit. In the United States, consumption of imports was stoked by borrowing and the booming housing market.

While trade has rebounded from its lows, the volume is nowhere near its peak. In September, the combined total of U.S. imports and exports was 24 percent below the level of July 2008. Countries stung by the sudden drop-off in demand from foreign buyers have realized that they can no longer simply export their way to prosperity. China’s exports fell 23 percent between August 2008 and August 2009. Smart investors are channeling resources to companies that produce domestic goods for domestic markets.

There’s also a greater appreciation on the part of Western firms that cheap labor isn’t the be-all and end-all. Businesses have learned in the past two years that the longer the supply chain, the more possibilities there are for disruptions—from flu viruses, geopolitical disturbances, and spikes in energy prices. While China is still the world’s factory, in an age of volatile demand, some companies have realized that manufacturing closer to home is more efficient, even if production costs are higher. In March U.S. Block Windows, an acrylic block window manufacturer based in Pensacola, Fla., bought competitor Hy-lite, a division of Fortune Brands. Hy-Lite was outsourcing the molding of acrylic blocks to China. “It became very evident to us, that we could do it cheaper in-house, because we had the facilities, and we were operating at less than capacity,” said Roger Murphy, president of U.S. Block Windows. More significantly, manufacturing in China had its downsides. U.S. Block Windows ships orders within four days of receipt. But the lead time in production from China was 12 to 16 weeks. In a period where it’s difficult to forecast demand far out into the future, “it’s very difficult to match those two things up,” said Murphy. In September, U.S. Block Windows moved Hy-Lite’s molding work from China to Florida.

Politics is also playing a role in deglobalization. The plunge into recession triggered a predictable set of protectionist responses. Developed economies in Asia, Europe, and North America have erected new tariffs, offered subsidies to exporters, stipulated that stimulus funds be spent locally, and provided special support to home-grown banks and automakers. This trend has led American and foreign companies alike to reconsider the way they’ve approached the vast U.S. market, especially in areas that are getting a boost from the government: energy, finance, automaking. For example, Suzlon and Vestas, Indian and Danish wind-turbine makers, respectively, are making massive investments in U.S. manufacturing not only because it’s expensive to ship turbines long distances but also in order to be perceived as “American” to state and federal officials involved in green purchasing.

In November, Ted Strickland, the governor of Ohio, one of the states hit hardest by globalization, showed up at a corporate campus in Milford, a suburb of Cincinnati, to celebrate the fact that Tata Consultancy Services, the Indian outsourcing giant, now employed 300 workers at its North America Domestic Delivery Center. The outsourcer has become an in-sourcer. Perhaps we’re not seeing deglobalization, but rather, reglobalization.

A version of this article also appears in international editions of this week’s Newsweek.