INTERNATIONALBUSINESS

TheGeopoliticalForcesShapingBusinessin

2026

By

AparnaBharadwaj

,

MarcGilbert

,ThomasGratowski,

NikolausLang

,

KaseyMaggard

,andClaudiaWilson

ARTICLEDECEMBER11,202512MINREAD

Intheeconomyandbusiness,asinpolitics,uncertainty,complexity,andturmoilaremanifestingthemselveswithacceleratingspeed.TheparadigmsandmodelsthatCEOs,boards,andpolicy

makershavelongreliedonaregivingwaytonewmultipolarities,alliances,andsourcesofcompetitionanddisruption.

Overthelastfewyears,BCGhasperiodicallyexaminedtheforcesshapingtheworld’s

movetoward

multipolarity

.Manyoftheseforcesarecoalescingintonewpatternsandtrendsthata?ectglobal

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trade,regulatoryframeworks,geopoliticalalliances,securityarrangements,andclimatepolicies.Theseshisdemandthatcompaniesreassesseverythingfromwheretheymanufactureand

markettohowquicklytheycanadapttochangeandprotectorgaincompetitiveadvantage.

Aswemoveintoanewyear,weexaminethegeopoliticalforcesshapingtheglobalenvironmentandhowtheywilla?ectbusinessesandpolicy.

MultipolarGeopolitics

Theoverarchingtrendisaglobalshitowardincreasingmultipolarityasmoregeopoliticalactorsvietoshapetheglobalenvironmentforbusinesses.

TheUSandChinaaretheleadingpowers.Theirevolvingrelationshipisreverberatingthroughouttheglobaleconomy,butEuropeandemergingnationsoftheGlobalSoutharealsowieldingmajorin?uence.(See“LeadingPowersandTheirPriorities.”)Collidingintereststranslateintorising

competitionandrivalrybutalsonewcollaborations,aseachpowerpursuesitsowninterestsandstrategies.Longstandingrulesandnormsarechanging,anda?uidpatchworkofnewrulesand

powerdynamicsappearstobeemerging.

LeadingPowersandTheirPriorities

Majorpowersarepursuingdi?erentinterestsandstrategiesthata?ect

relationshipswithothernationsandblocs.

AbolderChina,bolsteredbyitsprogressinreducingcriticaldependencieson

foreignpowersandmanagingtradenegotiationswiththeUS,appearssetto

continuedevelopingitsmanufacturingandtechsectorsinitsnext?ve-yearplan.ChinanowaccountsformorethanaquarterofmajorindustrialR&Dspending

andhalfofallpatentpublicationsintechnologyproducts.ItisdeepeningtraderelationswiththeGlobalSouthandisnowthebiggesttradingpartnerofmore

than90countries.ButChinaisalsodealingwithdomesticeconomicchallenges,suchasde?ation,asluggishpropertysector,consumeruncertainty,andfalling

growthprospects.

AstheUSpursuesitsAmericaFirstagendaandreshapesitselfinternally,itisalsoreshapingtheworldaroundit.Deregulation,unconventionalgovernment

interventions,andimmigrationrestrictions,someaimedatrebuildingAmericanindustry,arehallmarksofitsapproach.Inforeignpolicy,theadministrationis

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leveragingforcefuleconomictoolsforeconomicandgeopoliticalaims.Tari?s,its

mostpreferredlever,haveincreasedmorethansixfoldoverthelast12months.

Therehasalsobeenabigpushtoattractforeigndirectinvestmentaspartof

tradedeals.The2026midtermelectionswilltestpublicsupportfortheserapid

changes.

Europeisconstrainedfromtakingquickandboldstepsasitconfrontsgeopolitical

headwinds,economicsluggishness,andinternaldivisionwithintheEU.Atitsown

paceandre?ectingdi?eringviewsandinterests,Europeisadjustingitseconomic

strategyandpreparingtoplayabiggergeopoliticalrole.Itismakingtradedeals

withcountriesandblocsintheGlobalSouth—notablyMercosur,Indonesia,and

(prospectively)India—thatwillopenmarketsfurther,toabout2billioncustomers,

whilenarrowingitsdefensespendinggapwiththeUSbytheendofthedecade.

Dynamicpowersinthe

GlobalSouth

,fromIndiatoBraziltoSouthAfrica,are

seekingtoprioritizegrowthbytakingindependentcoursesfrommajor-power

competition,buttheyarefacingmoretradeo?sthanpreviously.Theywillneedto

navigateandperhapsaccommodatepressureswhilemaintainingasmuchroom

formaneuverandindependenceaspossible.Thiscouldgeneratesomeshort-term

headwinds,buttheoveralldirectionisclear.Bytheendofthedecade,theGlobal

Southwillaccountforabouthalfofglobaleconomicgrowth.

Atthesametime,theworld’seconomiesremainheavilyinterconnectedthrough?owsintrade,investment,people,andinformation.Thisexposesbusinessesandgovernmentstofracturing

dynamics.Governments’increasingfocusonnational-andeconomic-securityissuesisthrowingnewcomplicationsintostrategicdecisionmakingforbusiness.

SixArenasofCompetition

Themultipolardynamicsarecreatingeconomiccompetitioninareasthatpromisealasting

strategicadvantageforsomeandbigheadachesforothers.Weseesixemergingarenasof

competitionforbusinessthatarecenteredaroundglobalmarketsandsupplychain

security

,as

wellasthedevelopmentof,oraccessto,industrial,technological,andhumancapabilities.(Seethe

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exhibit.)Sincethesearenascanbesourcesofbothopportunityandrisk,organizationsneedtonavigatethemwithforesight,strategicadjustments,andpreemptive

riskmanagement

.

RealignmentinTradeandForeignDirectInvestment.Globaltraderemainsresilient,but

patternsandpartnershipsareundergoingamajormetamorphosis.UStari?hikesandbilateral

dealswithavarietyoftradingpartnersthatincludeotherfeatures,suchasprovisionsfordirect

investment,arecreatinga

patchworkofnewagreements

,rules,andbarriersthatarereplacingthelongstanding,relativelyopenglobalmarketplacebasedonWTOnorms.Theseagreementshave

bigrami?cationsforbusiness,whichoenarecalledupontoful?llthecommitmentsmadebygovernments.

Sofar,mostofthedealsinvolvephysicalgoods,but

services,

especiallydigitalservices,aremovingtothefrontlineofglobalpowerstrugglesasgovernmentstoughenregulationsoncontentandtheuseandstorageofdata,imposetaxesoncross-borderdigitalservices,andscreeninvestments.TheUS,whichaccountsfor13%ofcross-borderexportsofcommercialservices,isseekingtoopennewmarkets.Companiesandcountrieshavelittlechoicebuttodeterminehowtoadapt.

Morethan85%ofglobaltradeinmerchandisedoesnotinvolvetheUS.PartlyinreactiontoUS

tari?s,othercountriesarepursuingnewtradedealsandformsofpartnership,suchasEUfree-

tradeagreementsandcloserintegrationwithinAsia.Theyareseekingtodiversifytheirtrade

relationshipsandmaintainanopeneconomicorder.Geopoliticaluncertaintyremainshigh,andafracturingglobaltradelandscapemeansthatalonger-termscenarioofdistinctgroupsofcountriestradingmoreamongthemselvesthanwitheachotherisarealprospect.

Thisnewlandscapeforcescompaniestoreassessglobalsupplychains,

manufacturing

footprints,anddirect-investmentplans,allofwhicharein?uencedbypoliciesbeyondtrade,suchastaxesandimmigration.SomecompaniesandcountrieshavestruckdealswiththeUSadministrationthat

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involvetari?reliefinreturnfornewdirectinvestment.Moresuchdealsappearpossible.

Managementteamsneedtoplancomprehensivelyforpotentialtraderestrictions,includingtari?sandnontari?measures.Theyshouldbuildallthenecessarycapabilitiesintotheir

tari?andtrade

responseunits

.Usingscenariosandsimulationstoanticipatetradeandotherrisksrelatedto

geopoliticalshisandregionaltensions—fortheircompetitorsaswellasthemselves—isakeyelementinregulatorypreparedness.Companiesneedtoplannotonlyfortheirownoperationsand

supplychains

butforthoseoftheirsuppliersaswell.

TechandAIRace.

AIcapabilities

haveemergedasade?ningattributeofgeopoliticalcompetition,withimplicationsforbotheconomicandnationalsecurity.TheUSandChinaareleadingtheraceandhavebuiltsubstantialadvantageintheirlarge-scalecommercialization.Techcompaniesfromthesetwo

GenAI

superpowershavecreated59%and26%,respectively,ofthetop-performinglargelanguagemodels(LLMs).Still,whiletheUSandChinaareonpacetocontrolthesupplyofAI

technology

,asmallgroupofcountriesinEurope,Asia,andtheMiddleEast—the“GenAImiddlepowers”—isemerging.Eachhasdistinctstrengthsthatmayenableittocompeteasatechnologysupplieronaregionalandevenaglobalscaleastheraceexpandstoencompasshardware,

infrastructure,andtechnologyadoption.

ForcorporateleadersthatareintegratingGenAIintotheirproductsandservices,relyingsolelyontechnologysuppliedbycompaniesintheUSorChinaposesseriouschallenges.Localregulations,datarequirements,andtheavailabilityofLLMsareallsubjecttoshisingovernmentpolicy.

AlthoughamoremultipolarsupplyofGenAIincreasescomplexity,italsogivescompaniesmoreoptions.

Inadditiontoendusers,the

AI

racehassigni?cantimplicationsforcompaniesinenablingsectors,suchassemiconductordesignandmanufacturing,powergeneration(tomeetexplodingdemandfromdatacenters),andmining(forrareearthminerals).

Othertechnologyracesarebeingrunaswell.

Quantumcomputing

,wheretheUSandChinaalsocompete?ercely,willmakeitspresenceknown,perhapsassoonasthenextdecade.Thisradicaltechnologywillhaveabigimpacton

cryptography

,drugdesign,?nance,andmaterialsscience,amongotherareas.Batteries,renewableenergy,biotech,anddual-usetechnologyareadditionalareasoftechcompetition.

TalentScramble.Acorollarytothetechnologyraceandthecompetitiontorebuildindustriesis

securingaccesstotalent

.Technologyadvancesrapidlychange

corporateskillneeds

andlearningmodels.Developingorotherwisegainingaccesstonecessaryskillsisessentialtocapturingthe

productivitygainsandpursuingthe

innovation

potentialoftechnologiessuchasAIandquantumcomputing.

The

competitionamongnations

,especiallywiththeintensifyingAIraceanddemographicshis,isbecomingmoreintenseandcomplex.TheUSremainstheleadingdestinationfortoptalent,

attractinganet460,000highlyskilledpeopleinthe12monthstoAugust2025,accordingtoBCG’s

TopTalentTracke

r,followedbytheUK,withcloseto190,000.Otherpowersarelookingtoholdontotheirowntalentandtoattractskilledimmigrants.TheGulfstates,ledbytheUAEandSaudi

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Arabia,arepushingtoimprovetheirattractivenessandhavebecomepopulardestinationsthatcompetewithEurope,Asia,andtheEnglish-speakingworld.India,longaglobalproviderofpeoplewithtechnicalskills,sentmorethan250,000highlyskilledpeopleabroadduringtheabove-

mentionedperiod.ItistheprincipalsourceofinternationallymobileSTEMandAItalent.

Governmentsandbusinessesalikeneedtoprioritizeskillsdevelopmentandeducationalmodels,notonlyatthetopend,butacrossawiderangeoftalent.Whileeducationandimmigrationpolicyarekeystrategicconsiderationsforgovernments,theyarealsopoliticallysensitive,especiallyasmigrationhasbecomeapolarizingissueinmanycountries,notablyatelectiontime.For

businesses,thetalentissuehasbigimplicationsinmultipleareas,includinghiringand

intracompanytransfers.Othersincludecompensationandincentives,trainingandupskillingofexistingsta?,andpartnershipsandecosystemparticipationtoaccessexternalsourcesoftalentandknowledge.

Mission-CriticalSectors.Supplychainsusedtobeaboutscale,speed,andcost,andthose

prioritiesstillmatter.Butthelogicofaworldinwhichpoweristhede?ningfeaturemeans

dependenciesareusedasleverageingeopoliticalrelationships,increasingtheimportanceof

securityandresilience.Securitynowencompassesnotonlymilitarycapabilitiesbutmanyareasoftheeconomy,whichpromptsmorestateintervention.Globally,industrial-policyinterventions

motivatedbyconsiderationsofnationalandeconomicsecurity,includingtari?s,direct-equitystakes,andexportcontrols,haverisenmorethansixfoldsince2021.Governmentsusesucheconomicstatecratoactivelydirect,orcompel,capitalintosectorsthattheydeemmissioncritical.

Thefocusofinterventionsisoenonproductsorsupplychainchokepoints,wheredependenciesgainstrategicimportance.TheevolvingrelationshipbetweenChinaandtheUSisillustrative.WithamanufacturingsectornowdoublethesizeofthatoftheUS,Chinaispresentinmanyglobal

supplychains.Italsocontrolsabout80%oftheminingand85%oftheprocessingofrareearthelements.Atthesame,Chinaremainsdependentonaccesstotechnologycomponents,andUScompaniesdesignmorethan90%ofadvancedchipsandaretheleadingdevelopersofcritical

soware.

Bothpowers(aswellasothers)leveragesuchcriticaldependenciesforgeostrategicadvantageandtoreducedependenceonothers.Therangeofindustriesa?ectedhasbroadened,andgroupsof

countries,oenledbytheUS,arejoiningformalorinformal“clubs”tocollaborateonmeasuressuchasexportcontrols.Theyseektopreventcriticalproductsandtechnologiesfromcrossing

geopoliticaldividesortojointlyreducecriticaldependencies.

Asmoreindustriestakeongreatergeopoliticalimportance,individualcompaniesneedrobust

supplychains,sometimesincludingstockpilesandemergencyinventorytoprotectagainstcuto?s.Businessesmustpreparetheirsupplychainsforavarietyofscenarios.Manycompaniesare

diversifyingtheirmanufacturingandsourcingfootprintsbydevelopingmoregeographicoptions.

Theyshouldconsidera“

costofresilience

”operatingmodelthatdeliversbothcost

competitivenessandagilitybybuildingmanufacturingandsourcingnetworksthatcanbe?exibleinresponsetodisruptionwithouterodingmarginormarketshare.

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ClimateDivergence.

Climatechange

remainsaconcernformanygovernments,populations,andcompanies,butthenarrativeandfocusareshiing.Energysecurity(andcost)isoenovertakingdecarbonizationasthemostimportantfactordrivingthesupportforanddeploymentof

renewable-energytechnologies.Chinahasbecometheleaderinlow-carbontechnologyproductssuchaselectricvehicles,batteries,andsolarpanelsandinrenewable-energyinvestment(atyear-end2024,ithadinstalled887gigawattsofsolar-powercapacity,almostdoublethatoftheUSandEuropecombined).Meanwhile,othercountries,includingtheUS,continuetofocustheirenergy

strategiesonconventionalsources.Insomemarkets,suchastheUS,incentivesforclimate-

favorableproducts,suchaselectricvehicles,aredryingup,leadingtowidelyvaryingnationalorregionalmarketdynamicsinindustriessuchasautos.

Thisdivergenceinnationalenergypolicies,andthedeepeningpoliticaldividesregardingclimatechange,area?ectinginternationalcoordination.Cooperationisin?ux,movingtowardsmaller,

issue-focusedclubs.Theconsequenceisafragmentedlandscapeforrulesaroundcarbonmarkets,taxes,andcross-borderlevies.

Theresponseofindividualcompaniesmaydependonwheretheymanufactureandmarket.In

WesternEurope,being“green”isstillseenasanimportantcorporateattribute.(Insomecountries,carbonemissiontargetsarethelawoftheland.)TheUSmayseeasplitinclimate-relatedpolicy

betweenmoreclimate-focusedstatesontheonehandandlessfocusedstatesandthefederalgovernmentontheother.ForChinaandsomecountriesoftheGlobalSouth,renewable-energysourcesmeetcommercialaswellasenergysecurityobjectives.Companiesthatdonotstay

attunedtochangingclimate-relatedpoliciesmayfacestrategicchallengesor

compliance

risks.

ExpandingCon?icts.Anespeciallyworryingtrendisthatarmedcon?ictsareexpandingand

spillingoverintoneighboringregionsorotherpartsoftheworld.Withabout60ongoinginterstateandcivilwarsworldwide(includingUkraineandSudan),aswellasnumeroussimmeringdisputes(suchasIndia–PakistanandCambodia–Thailand),state-basedcon?ictsareattheirhighestlevelsinceWorldWarII.Disruptiontobusinessoperationsandsupplychainsareeconomice?ectsthataddtohumansu?ering.

Somecon?ictsaremakinguncertainprogresstowardpotentialresolution.ButthewarinUkrainegoeson,andtensionsintheMiddleEastremainhigh.Grey-zoneoperations,forinstancebypro-RussianactorsinEurope,continuetoa?ectcriticalinfrastructureandsecurity-related

installations.Con?ictsarealsofoughtinnewdomains,suchasspaceandundersea.Digital

domainshavebecometargets,withcyberattacksa?ectingawiderangeofbusinessesand

organizations,notablyIT?rms,researchinstitutions,andgovernmentagencies.AIopens

new

vulnerabilities

.

Givenunderlyingsocialtensionsinmanycountries,protests,unrest,andviolencecanerupt

quicklyanda?ectbusinessoperations.Thereisgrowingpressureonlocalmanagers,especiallyin

lessstableregions,todevelopsensitivepoliticalandsocialantennaeandtohaveplansinplacefordisruptionsshouldtheyoccur.Companiesalsoneedtomanagetheanxietiesoftheiremployees,aswellasactualthreatstothem.

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Inturmoilcanlieopportunity.AsEuropeboostsits

defense

spendinginthecomingyears,a

cumulative

marketfornondefensecontractors

isexpectedtoreachasmuchas€500billionfrom2026through2029,including€220billioninnewdemandforsoware,aerospace,automotive,

electronics,telecom,andlogisticscompaniesthatareoutsideexistingdefensevaluechains.

WhatThisMeansforLeaders

Multipolarity,nationalpolicy,andstateinterventionarenowfactsofbusinesslife.Companiesmustpositionthemselvesfordisruptionandadvantageinaworldofuncertaintyand?ux.Thismeans:

.Buildinggeopoliticalmuscle:thecapabilitytofactorgeopoliticsintostrategicandcapitalallocationdecisionsandadjustglobaloperatingmodelstoamultipolarworld

·KeepingcostsundertightcontrolthroughtechnologiessuchasAI,investingin

supplychain

resilience

intheeventofgeopoliticaldisruption,and,wherepossible,seizingopportunitiesfromcompetitioninstrategicsectors

.Enhancingnavigationofcross-borderbarriersandidentifyinggrowthopportunitiesinnewpartnerships,tradedeals,andregions

·

Adjustingorganizationalstructures

togeopoliticalrealitiestoallowfortheseizingofgrowthopportunitiesacrossawiderangeofjurisdictions

.Upgradingtechnologysystems(andtherelatedtalent)toensurecontinuityintheeventofgeopoliticaltensionsortheinterventionofmalignactors

TherewasabriefperiodattheendofthelastcenturywhenmanythoughttheendoftheColdWarwouldbringabouta“peacedividend.”Thathopewasshort-lived.Uncertainty,complexity,and

turmoilappearlikelytobewithusforsometimetocome.

AboutBCG’sCenterforGeopolitics

BCG’sCenterforGeopoliticsbringsclaritytotheshiingcomplexitiesofglobalpowerdynamics,unlockingopportunitiesforgrowthand

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collaborationworldwide.Byintegratingdeepgeopoliticalexpertisewith

BCG’srenownedanalyticalcapabilities,wedeliverbusiness-focusedand

actionableinsightsthatfosteropendialogueandequiptheworld’stop

organizationsandtheirleaderswithtoolstonavigateuncertainty