The norms governing global markets are fundamentally changing — forcing CEOs in many industries to adopt a “geopolitics-first” mindset as the world rapidly realigns.
The bans on Huawei and TikTok, the corporate exodus from Russia since 2022, and the chip wars are only the tip of the iceberg; today even investments in the PGA Tour (golf) and 7-Eleven (retail) are designated as national security matters by the governments involved.
The post-World War II international order of multilateral trade agreements and globalization is disappearing. In its place: a new system of trade with evenly matched blocs of rising, middle-, and high-income nations. Growing competition between nations, combined with public backlash against globalization, is motivating far-reaching government interference in markets, ranging from tariffs to industrial policy.
A new global alignment
Some of these changes have been bubbling since the global financial crisis, but the Ukraine war was a catalyzing moment. Three distinct groups have emerged since early 2022: a US-led coalition enforcing anti-Russia sanctions, a set of challengers opposing them (including Russia and China), and a powerful group of nations maintaining strategic neutrality.
Unlike during the Cold War, today’s blocs interact with one another, are more evenly matched, and are less internally unified. Two-thirds of all nations now have larger trade volumes with China than with the United States, based on UN Comtrade data. And while the US remains the largest source of foreign direct investment globally, according to FDI Intelligence, China is the largest lender, according to Stanford’s Center on China’s Economy and Institutions. Most of those loans go to the majority world, also known as the global south, which comprises 88% of the world’s population, based on UN World Population Prospects. The upshot: Spheres of influence extend far.
Meanwhile, a group of middle- and high-income multi-aligned nations — Brazil, Egypt, India, Indonesia, Mexico, Nigeria, Qatar, Saudi Arabia, Singapore, South Africa, Turkey, the United Arab Emirates, and Vietnam — are reaping benefits from case-by-case international alignment. The group now represents more than one-fifth of global GDP, up from just 8% during the Cold War. Their neutrality over the Ukraine war and US-China tensions is rewiring supply chains and driving commodity trading in their favor. Their growing influence stems from their roles as investors, new manufacturing hubs, holders of vast resource reserves, champions of green tech and semiconductors, and prominent voices in diplomacy. For CEOs, multi-aligned countries provide expansion and diversification opportunities that may hedge against the impacts of global rivalries.
Tariffs and beyond
Seeking economic advantage and national security in this multipolar world, governments are increasingly interfering in markets through tariffs, export controls, bans, and sanctions. All told, such interventions have tripled, with the United States, China, and the European Union accounting for 55% of all such actions. US tariff revenues more than doubled to $100 billion in 2022, from $41 billion in 2018, according to the Congressional Budget Office — a trend poised to continue. For the incoming US administration, tariffs are not just for revenues or to protect industries but to change behaviors. The “small yard, high fence” approach of selective trade restrictions could expand into “large yard, higher fence” over time.
The situation resembles a prisoner’s dilemma in which individual rational responses can produce worse collective outcomes. The potential global impact is large; the International Monetary Fund estimates that if the United States were to impose a blanket 10% tariff on all imports, with China and the euro area retaliating, global GDP would decline by about 0.8% by 2025 and 1.3% by 2026 compared with baseline scenarios.
Government intervention today goes far beyond tariffs. To boost economic self-sufficiency, countries are launching industrial policies to grow strategic sectors such as advanced manufacturing, metal products, chemicals, energy and climate-related industries, semiconductors, and artificial intelligence. In the past two years, there was a twentyfold increase in the number of protectionist industrial policy measures introduced worldwide, with the United States, China, and the European Union accounting for 48% of them, according to Global Trade Alert. These also have a tit-for-tat escalation pattern, with 73.8% of product subsidies matched by other major economies within one year.
These developments, together with the biggest tech transformation since the Industrial Revolution, point to a more transactional set of foreign policies that will bring zero-sum geopolitical questions into business. For example, with most of the world’s AI and defense capabilities concentrated in a small set of countries and companies, nations must decide who to rely on.
What comes next
The way forward for CEOs is to make geopolitics a first consideration rather than an afterthought. Geopolitics is no longer an exogenous shock to be managed tactically; it is a structural shift that requires proactive strategic thinking. Companies should also anticipate and shape government-to-business cooperation, which will rise across strategic sectors. Fully 86% of leaders of large and midsized companies are already planning short-term actions to address geopolitics and protectionism, according to a recent survey of CEOs of New York Stock Exchange-listed companies by the Oliver Wyman Forum and NYSE. In addition, 43% of CEOs of large companies are running scenario-planning, war-gaming, or tabletop exercises around geopolitical events.
There are still critical gaps. Most companies aren’t yet bringing nuanced analysis of geopolitical drivers into long-term decisions on growth strategy, investment portfolios, supply chain footprint and partners, regional operations, talent sourcing, technology stacks, or data management. So far only 24% of large companies are hiring talent with geopolitical expertise, according to the CEO survey.
The “geopolitics-first” approach to business strategy is no longer optional; it’s a prerequisite for business outperformance in a new world in which politics drives markets.
Authors
John Romeo, Ana Kreacic, and Jose Lopez