In a context of persistent conflicts and failed global governance, international tensions are intensifying. In the face of Trump's possible re-election, three experts analyse, during our last Country Risk Symposium, the transformation of international relations, the global geopolitical reconfiguration and its impact on business strategies.
It seems like another case of déjà vu. Donald Trump's second inauguration as President of the United States on 20 January might have sent observers back eight years, but the world has changed profoundly since then. “First, two major conflicts erupted between Trump 1 and Trump 2: Russia's large-scale invasion of Ukraine in February 2022 and the militarised terrorism of Hamas in October 2023, Israel's reaction to which sparked a recomposition of the Middle East. Then came the acceleration of environmental degradation on one hand, and the spread of technology on the other”, explained Thomas Gomart, director of IFRI, the French Institute for International Relations. While all these events have already begun to reshuffle the geopolitical deck, it is likely that the new Trump administration's decision to establish a transactional approach as the driver of its policy to “make America great again” will further damage the existing framework. “After several decades in a world dominated by the US and in which geopolitical cooperation was the linchpin, we have entered a new era of globalisation that is much more multipolar and volatile”, added Famke Krumbmüller, EMEIA Leader at EY's Geostrategic Business Group.
The US alone against the rest of the world ?
Although the experts are not ruling out the possibility that Trump's strategy could have a positive impact in resolving the two major ongoing conflicts, US threats to introduce tariffs and the prevailing desire to coerce the countries concerned into reaching agreements favourable to the US are likely to cause existing alliances to implode. “In this context, it is interesting to note that there has been a lot of pushback from southern countries – Brazil, India and Turkey, among others – which are beginning to launch investigations or file complaints with the World Trade Organisation, in particular”, pointed out Andrew Bishop, Senior Partner and Managing Director of Policy Research at Signum Global Advisors. In his view, the world's largest economic power is playing a risky game “by forcing countries to decide whether they are with the US or against it”. The expert added that “by withdrawing and alienating the whole world, the US is paving the way for other countries [to exercise their leadership], especially China”. Under these circumstances, a new Cold War seems highly plausible and is one of the scenarios envisaged by the EY Geostrategic Business Group. “We're talking about a world divided into blocs: one dominated by the US, another by China, and a third by some other power”, said Famke Krumbmüller. It would then be up to the rest of the world to position themselves in one of these blocs. If a third bloc were to emerge, India would be an ideal candidate to lead it. “The country is growing strongly and will be able to use its demographic dividend over the next two decades in the face of an ageing China”, said Thomas Gomart.
Opportunities for China
In the short term, US-China rivalry is nonetheless likely to remain the main driver of the current geopolitical transformation, as is already the case in the field of generative artificial intelligence. On that score, some experts expect the trade war to escalate between the two powers, which could prompt both sides to impose more substantial tariff increases in a few months’ time than is the case at present. The US recently announced a further 10% tariff increase which China responded to by hiking its tariffs by 15% for selected products. Faced with such a prospect, China would be unable to accept the status quo. “Even if it does not admit it, China is dealing with a situation of overcapacity and must now export as a matter of urgency”, explained Thomas Gomart. If it sees the North American market closing, it will have to find new outlets while strengthening ties with its partners.
One must not forget that strategic understanding of China continues to hinge on a lack of information about the country that is partly controlled by the single party governing it. That said, experts agree on China's current priorities, in particular its massive investments in nuclear energy and naval military capacity which are essential to control trade.
A weakened Europe
Caught between these two blocs, the European Union is by all accounts in a considerably weakened position for four reasons. First, because its main driving force, the Franco-German duo, is depleted on both the economic and domestic policy fronts. Second, because according to Famke Krumbmüller, the EU historical modus operandi of “projecting its power around the world through standards and regulations – wielding soft power – simply no longer works”. Third, because its policies are sometimes insufficiently coordinated. In this respect, Thomas Gomart pointed out that the diametrically opposed choices made by France and Germany have led to vast differences in thinking between the two neighbours. More dependent on Russian gas than the French who have reinstated the nuclear option, the Germans tend to expect more from a hypothetical post-war Ukraine. Last, Europe is adversely affected by decades of underinvestment in defence at a time when the unity required between member states to address these changes is being undermined by the rise of extreme and Eurosceptic parties in an increasing number of countries in the region.
Despite these pitfalls, Europe could respond quickly even in the face of Donald Trump’s threat to impose new tariffs. Thomas Gomart believes that “as trade policy is an exclusive competence of the European Union, we can expect some form of common stance in the event of such a scenario”. That said, there is no doubt that what would become the second major transatlantic stand-off since the war in Iraq in 2003 could harm US-European relations. To the point of upsetting the geographical balance? “Ideally, we would need a strong Europe that does not need to attach itself to or rely on a partner, but that is not the case”, said Andrews Bishop. “Under Plan B, the EU would have to rely on one of the two partners – either the US or China – but I do not think that Europe would necessarily decide to rely on China if the US were to become an enemy. Therefore, we could end up with a catastrophic Plan C, in which Europe finds itself between the two, in a position of weakness.”
With regard to the possibility of a stronger alliance between the EU and China, Thomas Gomart pointed out that a report by the US National Intelligence Council released in 2021 mentions a possible Sino-European rapprochement on ecological grounds. “We need to keep this in mind”, he concluded. It is true that China has invested massively in the energy transition, which puts it at odds with Trump's new agenda.
Companies: rethinking strategies
In this changing and uncertain landscape, companies are finding it difficult to know which strategy to adopt. “Even if they are gradually beginning to take account of this new, volatile geopolitical situation, I have to say they should have done it sooner and they are too slow”, said Famke Krumbmüller, who calls for a more proactive approach.
To find out more about world trade, download our full study.
Also watch the replay of the round table of the 29th Country Risk 2025 Symposium -> https://youtu.be/Y28xlFQNP9I?si=I3TlEosml42Gejqx
