From Brexit to the dissolution of NATO to the rise of Populism and the U.S. and French Presidential elections, across the globe, the shifts and trends emerging in the geopolitical environment have been huge. While this kind of political change and uncertainty generates both risks and opportunities or businesses, the minutiae of geopolitics are always changing and can prove a difficult landscape to navigate. The geopolitical analysts at the Eurasia Group have compiled a list of the top geopolitical risks, below are several of their predicted risks that global business leaders and investors should be aware as they make future business plans.
Tension between the U.S. and China
As the U.S. backs away from the world leader and focuses on “America first”, it leaves room for other countries to step up to the plate, and China is doing just that. Chinese President Xi Jinping’s recent speeches calling on China to be the new leader of globalization, his attendance at this year’s World Economic Forum (the first ever for a Chinese president), and his unprecedented support for the new UN Secretary general tell of ambitions to step in as a global superpower.
Ian Bremmer and the Eurasia Group predict that “China’s new opportunity to set the rules and the Trump administration’s search for ‘new and better deals’ will also make it more likely that China will collide with U.S. national interests.” They foresee potential confrontation with China over the U.S.’s warming of relations with Taiwan, the growing nuclear threat from North Korea, or through economic tensions on currency and trade deals. Either way, tension between the U.S. and China could rattle foreign investors, international markets, and provoke global economic volatility.
Politicizing Central Banks
Recently, politicians in the U.S., Europe, and the UK have placed blame on central banks for political and economic problems. Theresa May has blamed the Bank of England for low-rate policies that she says have hurt “savers” and increased income inequality. In Germany, Finance Minister Wolfgang Schaeuble has argued that low interest rates have reduced the incentive for peripheral European states to reform their unsustainable economic models. Trump accused the Federal Reserve of supporting Hillary Clinton during the US presidential election campaign.
Scapegoating and politicization of central banks could threaten global markets by upending the bank’s long standing role as an independent institution that provides financial and economic stability. If this trend continues, global economist Dambisa Moya predicts, “the cracks will only widen, generating increasingly powerful political discord.”
The White House vs. Tech Industry
Since Trump took office there has been tension between his administration and the tech industry. Trump’s anti-immigration policies and travel ban enraged many techies, especially in Silicon Valley, where 130 companies signed a legal brief opposing the ban. Companies on the list included Tesla, SpaceX, Apple, Google, Facebook, and Microsoft. While the travel ban is still in limbo, restrictions on immigration and the hiring of H-1B visa holders could make it more difficult for the tech industry to hire the talent it needs.
While the tech industry may agree with Trump’s policies on corporate tax reform and the rollback of government regulations, this may be the only thing they agree on. Trump and the tech industry are also at odds over green energy and automation technology, as well as media and security. In response to a terrorist attack, the Trump administration could seize the opportunity to expand governmental control, inciting more flights like the one between Apple and the FBI over access to the San Bernardino terrorists phones.
