Most large-scale communication networks, such as the Internet, consist of interconnected administrative domains. While source (or selfish) routing, where transmission follows the least cost path for each source, is reasonable across domains, service providers typically engage in traffic engineering to improve operating performance within their own network. Motivated by this observation, we develop and analyze a model of partially optimal routing, where optimal routing within subnetworks is overlaid with selfish routing across domains. We demonstrate that optimal routing within a subnetwork does not necessarily improve the performance of the overall network. In particular, when Braess' paradox occurs in the network, partially optimal routing may lead to worse overall network performance. We provide bounds on the worst-case loss of efficiency that can occur due to partially optimal routing. For example, when all congestion costs can be represented by affine latency functions and all administrative domains have a single entry and exit point, the worst-case loss of efficiency is no worse than 25% relative to the optimal solution. In the presence of administrative domains incorporating multiple entry and/or exit points, however, the performance of partially optimal routing can be arbitrarily inefficient even with linear latencies. We also provide conditions for traffic engineering to be individually optimal for service providers.