Geopolitics has returned to the top of international business concerns, exacerbated by Donald Trump’s return to the White House. The President’s on-again, off-again confrontational trade policy is a case in point. “Liberation Day” on 2 April will be hard to forget. Despite its intensity and relevance for business leaders, geopolitics’ re-emergence is widely misunderstood and treated as a continuation of traditional political or country risk. That is a mistake. Geopolitics introduces a different logic, one with sharper edges, deeper implications, and longer shelf life.
For companies engaged in international commerce, recognizing this shift and its differentiating factors is essential to understanding the structural forces now shaping market access, supply chain design, team management, and commercial footprint. Without this understanding, companies are more likely to be tripped up by geopolitical risks and less likely to seize the commercial opportunities that often arise from uncertainty. Corporate playbooks need revision for globalization’s next chapter.
To grasp how geopolitics departs from conventional risk categories, it is useful to begin with what those categories typically involve. Political risk refers to government actions that may affect commercial operations, such as tax changes, regulatory shifts, expropriation, and civil unrest. Country risk assesses macroeconomic, legal, and institutional stability. It includes factors like debt sustainability, inflation, or contract enforcement. In both cases, the general assumption is that, for governments, absolute performance enhancement is key.
By contrast, geopolitics concerns the pursuit of national advantage in a contested international environment where relative performance matters most for government. While all states are motivated by survival instincts, the most powerful states care deeply about their regional or global primacy and capacity to preserve or exert influence. The “geo” in geopolitics means its motivation and effects are inherently cross-border. They alter the logic of international cooperation and frequently treat markets not as neutral arenas for exchange but as theaters for power projection.
Most critically, the metrics for success in geopolitics diverge from those driving domestic economic and regulatory policy. Relative performance only matters for the latter within countries (for example, do the poor benefit more than the rich?). Geopolitical strategy, however, is often judged by relative outcomes across geographies; steps that harm a rival more than they harm themselves count as a win. More thoughtful or perhaps more honest defenders of export controls on critical technologies invoke this “win through greater harm” argument.
With the return of geopolitics, what hasn’t changed is that presidents and prime ministers typically manage different constituencies within their governing coalition. The result is mixed messaging that leads business executives at home and abroad to surmise a policy’s “real” objective. We see that now with the rollout of the America First Trade Policy. Parts appeal to different groups (protectionists/isolationists, those seeking to revive US manufacturing, those seeking to contain China, etc.) Mixed messaging raises the premium on companies’ geopolitical radars and related capabilities.
The evolution of US trade policy in recent years offers a revealing case. Tariffs, long associated with protecting domestic industries or generating negotiating leverage, have taken on a new role in US strategic thinking – one rooted in the deliberate imposition of costs on a rival power.
From this vantage point, a tariff that harms both sides can be deemed successful if it is expected to impose disproportionate damage on the other. Consider US-Canada trade. Regardless of what President Trump says publicly, no one in his inner circle doubts that imposing tariffs on Canada will hurt US businesses, consumers, and the economy. However, the US accounts for 78% of Canadian exports, while Canada represents only 14% of US imports. The logic isn’t to maximize net benefits but to weaken a rival’s capabilities, slowing its industrial and technological progress and disrupting its ambitions. It reflects a shift from mutual gain to managed confrontation. In one of his last acts as Canadian prime minister, Justin Trudeau called out what he views as motivating US tariffs: “What [Trump] wants is to see a total collapse of the Canadian economy because that’ll make it easier to annex us.”
This approach underpins a growing suite of policy tools, such as export controls and technology bans, deployed to constrain adversaries rather than secure commercial benefits. In this framework, markets are not insulated from geopolitics; they are shaped and, at times, weaponized by it. By extension, companies operating in those markets may become pawns in a global web of competing state interests.
This change in US posture is not abstract. It is targeted above all at China. In recent years, the bipartisan consensus within US national security circles has hardened. China is no longer seen as merely a competitor within the liberal international economic order but as the principal actor capable of reshaping or displacing that order. In short, China is seen as a threat to a century of American primacy.
This assessment is not limited to economic concerns. It spans military capability, technological leadership, and ideological competition. Recent official US documents describe China as:
Such language is not diplomatic positioning – it reflects a strategic reframing. The perception that China is pursuing a distinct model for global order, backed by growing economic weight, partnerships, and coercive tools, has triggered a profound rethink of US economic engagement. No longer is interdependence assumed to be benign. Instead, it is seen as a potential liability that rivals could exploit or “weaponize”, as Abraham Newman and Henry Farrell noted in a recent influential book, Underground Empire.
China’s trajectory has reinforced these concerns. Over the past two decades, it has moved from being the world’s low-cost manufacturer to a technological contender with global aspirations. Its firms lead in sectors from telecommunications to electric vehicles. Its “Belt and Road” infrastructure development initiative extends economic influence across more than 150 countries in Asia, Africa, and parts of Europe. Its political leadership has signaled a willingness to use state resources to achieve strategic aims.
In this context, the rise of China is not simply a shift in market shares or trade flows – it is a systemic challenge. That framing accounts for the transformation of US policy.
Other traditional and emerging powers eye China’s rise with a more nuanced, pragmatic caution rather than the confrontational rhetoric the Trump administration expresses. The European Union describes China as a “partner for cooperation, an economic competitor, and a systemic rival.” India and Japan remain wary of their regional rival. However, a recent meeting between Indian Prime Minister Narendra Modi and Chinese President Xi Jinping appeared to signal a thawing in relations. In addition, China, Japan, and South Korea have restarted their tripartite economic dialogue.
The implications of this strategic reorientation are now visible in US initiatives that cut across trade, defense, and technology. The guiding logic is to reduce dependence on China, prevent the transfer of critical capabilities, and build resilient networks of trusted partners, all of which have involved rethinking longstanding doctrines. The assumption that global commerce is most secure or beneficial for the US when universally open has given way to a more selective and security-driven calculus. Allies are urged to “friendshore” supply chains, sensitive technologies are shielded from foreign acquisition, and defense partnerships are fused with industrial policy.
For trade, this manifests as a retreat from universalist agreements and a rise in pacts among smaller numbers of like-minded nations . For defense, it means integrating regulatory tools, such as export controls or digital standards, into broader strategic frameworks. The line between economic diplomacy and national security has blurred.
Importantly, this is not a uniquely American dynamic. Other advanced economies are making similar calculations. The EU has introduced a toolbox to screen foreign investments, regulate outbound technology flows, and investigate dependencies in critical sectors. Japan, South Korea, and Australia have adopted variants of the same playbook. The resulting environment is one of converging policy instincts, even if tactics and priorities differ.
These developments have direct implications for the global business community. Multinational firms are accustomed to managing political risk at the country level. However, they now face systemic geopolitical risks that cut across jurisdictions and redefine the terms of engagement. Three dimensions merit consideration:
Fragmented integration. Under this scenario, the world does not split into closed blocs, but the global trading system becomes increasingly compartmentalized. Dual supply chains emerge, one geared to Western standards and alliances and the other to Chinese-led networks. Firms must navigate divergent rules, standards, and expectations, often with duplicated operational structures.
Deliberate containment. Here, the emphasis is on stalling or reversing rival influence. Governments compete to shape regulatory norms, subsidize strategic sectors, and enforce export curbs. Cross-border flows remain, but they are increasingly politicized. Companies are required to signal alignment as well as compliance with the strategic priorities of key jurisdictions.
Sectoral decoupling. In this more extreme outcome, interdependence in key sectors – semiconductors, artificial intelligence, quantum computing, and biotechnology – is deliberately unwound. Trade in these domains becomes highly restricted. Whether they liked it or not, global firms would have to choose sides; neutrality becomes increasingly untenable.
Each aspect entails a high degree of uncertainty, and transitions in focus may be sudden. The default assumption of a single, rules-based trading system is clearly no longer valid. The global economy is being reshaped not by market forces but increasingly by strategic and political intent.
Global businesses can no longer rely on reactive measures or outdated risk-management playbooks. Strategic deliberation must now revisit operational design, executive accountability, and even which customer segments to target. To navigate a world where geopolitical calculation increasingly overrides classic commercial logic, companies must adapt at the level of business model, mindset, and organizational capability. This calls for a deliberate, systemic response that turns geopolitical exposure into a source of strategic advantage rather than vulnerability.
Meeting this challenge requires more than vigilance; it may amount to the next transformation of forward-looking business. The following 10 imperatives offer a roadmap for executives seeking to future-proof their organization against geopolitical disruption. These are not theoretical recommendations but actionable shifts in leadership orientation, organizational structure, and strategic focus. Embracing them can help firms evolve from passive observers of geopolitical events to proactive shapers of their destiny in a fractious world.
The era with a stable, predictable global business environment is over. Geopolitical uncertainty, supply chain disruptions, and regulatory fragmentation are not temporary challenges to overcome but permanent features of the operating landscape. Organizations must shift from seeking stability to building capabilities that thrive in recurring volatility.
Instead of traditional risk mitigation approaches that seek to mitigate uncertainty, design business models that exploit volatility as a core feature. Build uncertainty into strategic planning as an opportunity generator, create organizational structures that benefit from market disruptions, and develop competitive strategies that turn competitors’ risk aversion into your market advantage.
So many previously successful formulas for creating value were based on scaling globally intellectual property, brands, or tech. As trade barriers, nationalistic regulations, and tribal industrial policies spread, worldwide scale isn’t realistically on the table for firms operating in sensitive sectors. That’s the bad news. The good news is that there are other ways to create value, particularly charging premiums after adapting product offerings to deliver the enhanced security that firms and governments crave as fears about geopolitical rivals intensify.
Without dedicated senior leadership attention, geopolitical considerations will fragment across departments and lose strategic coherence. Assign clear C-level accountability for geopolitical strategy integration, or watch competitors exploit opportunities while your organization delays.
Geopolitical pressures are driving a fundamental shift away from lean, centrally managed multinationals toward more diversified business portfolios and decentralized structures. Consider expanding into broader ranges of business activities to build resilience by diversifying and reducing dependence on any one sector or geography. Stakeholder management and customer relations imperatives will push international firms toward greater decentralization, with regional units gaining autonomy to respond to local imperatives.
Geopolitical tensions threaten to fracture internal teams along national lines, undermining organizational effectiveness. Proactively manage how global events impact internal workforce dynamics, from addressing diverse perspectives on international conflicts to preventing talent flight when geopolitical tensions affect specific employee populations. Build deliberate management practices that maintain professional unity while acknowledging legitimate personal concerns about geopolitical developments affecting employees’ home countries or communities.
External stakeholders – investors, customers, regulators, suppliers, and local communities – increasingly hold conflicting expectations shaped by their geopolitical mileu. Develop sophisticated external engagement strategies that satisfy divergent demands without compromising core business objectives. This requires moving beyond universal messaging to contextualized relationship management tailored to each stakeholder group’s geopolitical reality.
Navigating geopolitical risk is no longer the sole job of strategy or government affairs –it’s a shared obligation across the executive team. Functional heads will be expected to comment insightfully on proposals from senior colleagues to address geopolitical factors, even if only part of their day-to-day responsibilities are implicated. As to the latter, finance directors need to understand the impact of sanctions, HR leaders must navigate talent mobility restrictions, and operations executives require supply chain resilience strategies. This isn’t optional expertise – it’s table stakes for leadership credibility.
Combine systematic early warning capabilities (geopolitical radar) with deep organizational expertise to create sustainable competitive advantage. Deploy geopolitical intelligence systems that trigger specific business responses while developing internal fluency programs that reduce reliance on third parties. Establish centers of excellence that merge regional expertise with functional knowledge, creating career pathways that reward geopolitical competence alongside technical skills.
Traditional business continuity planning assumes discrete, temporary disruptions. Geopolitical volatility demands continuous adaptation protocols that treat disruption as the new normal. Develop dynamic continuity frameworks that can manage multiple interconnected geopolitical pressures while maintaining operational effectiveness. This requires moving from crisis response to sustained proactive vigilience.
The reassertion of geopolitics is not a transient shock but a structural transformation of the global business environment. It is dismantling long-standing assumptions about the even-handedness of trade policy, the permanence of market access, and the applicability of efficiency-driven models that can be scaled globally. The firms that will thrive in this new era are those that recognize geopolitics not as a peripheral concern but as a central pillar of competitive strategy.
Successfully navigating this environment demands a reorientation of the executive mindset. Resilience, agility, and geopolitical fluency are becoming as critical to success as innovation and scale. By embedding these imperatives across the enterprise, companies can withstand unanticipated shocks and seize opportunities born of disruption. Geopolitics is now a defining variable in international business. The question is no longer whether and when firms should respond but how they will do so decisively.
In conjunction with the World Economic Forum and Boston Consulting Group, we have been exploring how companies can most effectively scan, anticipate, and respond to geopolitical risks through radar techniques to detect state acts and events, and sonar techniques to surface root causes. Too heavy a focus on the cut and thrust of acts and events can result in a lack of attention paid to potentially more materially significant trends and drivers shaping the future.
Based on interviews with executives from 25 major companies, our most recent white paper, From Blind Spots to Insights: Enhancing Geopolitical Radar to Guide Global Business, highlights six commercial benefits of developing these capabilities.
Our interviews identified more than 80 geopolitical risks that executives viewed as relevant to their businesses, from the US-China tensions to the configuration of supply chains. Our next round of interviews will explore how executives and organizations are developing their own geopolitical muscle.
Whatever happened to the architect of the rules-based global trade system? The answer is not as simple as “Donald Trump” and lies in a much longer story.
The American Dream was underpinned by Franklin D. Roosevelt’s New Deal policies: government should help people navigate hardship and build better lives. In the 1980s, Reagan recast government as a barrier to growth, not the guardian of fairness. The national narrative shifted from “help the little guys” to “the little guys have to help themselves”.
And then came globalization and automation. While other advanced economies pulled policy levers to protect their people, US workers faced those shocks alone: a three-pincher middle-class squeeze. Automation replaced them, globalization undercut them, and offshoring displaced them. Wages fell, millions of jobs disappeared, and factory towns wasted away.
The shockwaves tore through America’s social fabric: school shootings, an opioid crisis, an obesity epidemic, medical bankruptcies, high maternal mortality rates, alarming suicide rates, massive student debt, the highest incarceration rate in the developed world, old-age poverty, and homelessness. The rich pulled away from the middle class, and the poor caught up. No other advanced economy shared this scale of social pain.
While a backlash and the election of a populist seems understandable in these circumstances, why has the US become so anti-trade? It’s because of the beliefs of its populist president: in the 1980s, Trump took out newspaper advertisements against US tariff liberalization. He has channeled middle-class rage into anti-globalism: what we can call the “Grievance Doctrine”.
This doctrine says foreigners won because they cheated, not because they were better. China is the cheater-in-chief, a predatory state that weaponized the rules-based multilateral system. American leaders were in on the betrayal, too. They sold out the middle class and worshipped at the altar of multilateralism and Wall Street while Main Street withered.
Under this doctrine, trade policy and tariffs punish this betrayal and right wrongs through coercion and disruption. Loyalty and submission replace rules. Countries who want access to the US must earn it.
China is more than a manufacturing heavyweight; it is the only manufacturing superpower. When it comes to gross production, China’s share is three times that of the US, six times Japan’s, and nine times Germany’s. China’s industrialization is unprecedented. The last time the global manufacturing crown changed hands was when the US overtook Britain before the First World War. That transition took the better part of a century, while China dethroned the US in 15 to 20 years.
China’s rapid rise began with a strategy of joining global supply chains by opening up on the import and export sides to become the workshop of the world. It welcomed foreign firms – mainly from the G7 – to set up operations that slotted into global production networks. It made China attractive to foreign direct investors, and G7 firms did the rest. G7 firms brought the technology, capital, and know-how. China provided the labor, infrastructure, and policy stability. Demand came from exports. Inputs came from imports. China plugged into the world economy at both ends: importing intermediates and exporting final goods.
But joining wasn’t the end of the story. After 2005, China began to shift. It started producing more of the parts it had been importing. The government began nudging firms to localize inputs, investing in infrastructure, talent, and financing. The country started exporting parts and relying less on foreign demand. Over two decades of patient, whole-of-government strategy, China built the largest industrial base in the world.
China used tariffs and subsidies but didn’t build its industrial might by blocking imports. It was built by mastering exports, first joining and then building. The irony? Much of this was made possible by G7 firms. In trying to cut costs, they helped create their most formidable competitor.
China’s share of global manufacturing is close to that of the next 10 countries combined. No nation in history has industrialized faster or on a larger scale. This helps explain the intensity of US-China trade tensions. This is what real industrial strategy – patient, strategic, and state-supported – can accomplish. This is not something that spray-and-pray tariffs can match.
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