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It’s easy – and often lazy – to refer to global trade and geopolitical developments as ‘unprecedented,’ but for 2025, this isn’t the usual hype: the knock-on effects on the global trade landscape entering 2026 really does present business leaders with unprecedented complexity and uncertainty.
But there are approaches and strategies to mitigate the risks and optimize opportunities.
President Trump’s return has signaled a new era, anchored by tariff-driven trade policy as the primary lever of statecraft in an Art of the Deal-style approach to foreign policy. Geopolitical tensions are now often addressed bilaterally and transactionally, as seen in Washington’s evolving stance on China and the push for a commercial deal with Russia over its withdrawal from Ukraine.
The Trump administration’s November 2025 National Security Strategy underscores this pivot by declaring economic security fundamental to national security, specifically prioritizing the strategic use of tariffs to reindustrialize the economy and secure critical supply chains, while leveraging favorable commercial treatment to enforce burden-sharing with allies.
This is fundamental realignment. The world’s largest importer (America) has put tariffs on almost every nation in the world. The largest exporter (China) has put export controls on widely used commodities. Trade, in short, has been weaponized in a way the world has never seen in peacetime. Policy and market conditions can shift overnight, forcing companies to be ever-vigilant and resilient.
In this world, agility should be seen as an asset rather than a cost. One thing IMD experts are certain about in 2026 is that trade policies will change, and those changes will produce winners and losers. Companies demonstrating agility in reallocating and reinforcing capacity, entering new markets, and redesigning value chains are positioning themselves to cope with and capitalize on uncertainty.
The key lies not in predicting every policy twist, but in building organizational capabilities that can rapidly adapt to changing conditions, while maintaining competitive advantage. Indeed, evidence from recent trade disruptions suggests that the winners will be those who can move quickly when trade windows open, rather than those who simply fortify against all possible risks.
Three IMD professors offer their perspectives on the critical trends shaping international trade and what business leaders should prioritize in the year ahead. Their insights span supply chain strategy, tariff dynamics, and the need to institutionalize geopolitical intelligence within organizations.
Carlos Cordon, Professor of Strategy and Supply Chain Management
The discourse on global trade has long centered on risk management. Yet evidence suggests that in 2026, the greater advantage will come from capturing opportunities. As trade barriers shift with increasing frequency, companies that can act swiftly – accelerating shipments, reallocating capacity, or entering new channels – will likely outperform those focused solely on stability. When one country suddenly cannot export, others rapidly step in. During the recent US shortage of semaglutide, for example, domestic compounders quickly filled the gap. This capacity for fast reaction – difficult within traditional, elongated supply chains – is now emerging as a critical strategic capability. The companies winning in this environment are those that maintain optionality rather than optimizing a single scenario.
Today’s environment is defined by erratic policy swings, particularly in tariffs, and leading firms are learning to avoid overreaction. When Swiss exporters faced a sudden 39% US tariff in 2025, they largely avoided rash restructuring; many had instead shipped sufficient product to cover demand well into the future. When the tariff later fell to 15%, they preserved margins and sidestepped costly operational upheavals. The pattern is instructive: trade disruptions often reverse faster than supply chains can adapt. Strategic patience, paired with tactical speed, delivers superior results.
Geopolitics, however, remains a decisive force. Suppliers can be blacklisted overnight – as seen with the Dutch semiconductor firm Nexperia – exposing hidden dependencies. Corporate boards now demand not merely dual sourcing, but meaningful geographic and political diversification. While regionalization will continue, its progress will be inherently gradual. Supply chains cannot pivot in a quarter; they evolve over years. The challenge is distinguishing between genuine long-term shifts that warrant major restructuring versus temporary disruptions that call for tactical adjustments. Companies must develop frameworks for rapid assessment that separate signal from noise in an increasingly volatile policy environment.
The global trade system is not collapsing; it is rewiring.
A more profound shift is emerging in how companies structure their value chains. While goods attract tariffs, services largely do not. This disparity incentivizes firms to decouple physical products from their highest-value activities. Engineering, software layers, data services, and performance guarantees can increasingly be priced and delivered separately. By redesigning business models – shifting profit pools into these service components – companies reduce tariff exposure while strengthening customer relationships. This represents not merely a defensive response to tariffs but a strategic repositioning toward higher-margin activities that enhance competitive differentiation.
Richard Baldwin, Professor of International Economics
Tariffs function as political painkillers for the American middle class – delivering immediate satisfaction but diminishing returns over time. While the initial impact of the April 2025 shock-and-awe tariffs provided political relief, subsequent announcements have generated less enthusiasm as side effects mount. Most significantly, tariffs have driven up the cost of living while uncertainty has slowed job market growth. The political calculus that made tariffs attractive in early 2025 is shifting as voters increasingly connect tariffs to the affordability crisis in America.
The data reveals a nuanced picture. Overall, US inflation has risen, but not by much. The moderate rise, however, masks a clear rise in the cost of goods that Americans buy every week at Walmart, Target, and Amazon. Daily tracking data from Harvard Business School shows clear price jumps for tariffed goods from China, Canada, and Mexico starting in March 2025.
Why have price increases been modest so far? Before July 2025, most nations paid only 10% tariffs with many exemptions, while China paid 45%. This 10% rate constrained Chinese pass-through, as competing exporters from Vietnam, Korea, Japan, and Europe limited China’s pricing power. The situation changed dramatically in July and August 2025 when tariffs on major exporters rose 50-100%. With these rates now locked into law and China’s competitors facing higher duties, expect more robust pass-through of tariff costs to consumers in the coming months.
Meanwhile, US blue-collar job creation has collapsed to historic lows. Apart from the Great Recession and COVID, job creation has never been slower. Manufacturing jobs show negative growth, while construction has stalled. This stems directly from tariffs raising input costs for American manufacturers – reducing their competitiveness – and from uncertainty that makes businesses hesitant to hire. The effective rate of protection for many US manufacturers has actually declined as input tariffs rose faster than output tariffs.
We have reached peak Trumpian tariff leverage. When tariffs hurt his base, he climbs down while declaring victory.
Opinion polls confirm the political damage. Only 40% of Republicans believe tariffs will benefit them and their families, while just 21% of all voters share this view. Consumer sentiment has tanked among Trump’s base, with those holding a high school education or less expecting higher unemployment and slower income growth. With the November 2026 midterm elections only 11 months away, and research showing voters punish incumbents for inflation up to nine months before elections, tariff recalibration needs to come soon – perhaps late winter or early spring 2026.
Simon J Evenett, Professor of Geopolitics and Strategy
Often, companies approach geopolitics as a crisis-management exercise: annual training and binders of protocols outlining what to do when a supply chain breaks down. But the past year has made it clear that geopolitics reaches far within companies and requires a different institutional response. For better or for worse, geopolitics has become central to how a company operates.
As companies face profound disruption from policy volatility, the weaponization of technology and supply chains, and ensuing market and trade fragmentation, leading firms are reviewing how best to inform their line managers, divisional heads, C-suite, and boards about the many steps governments take. There is no one-size-fits-all solution, and organizations must find the operating model that best fits the company’s structure and culture.
Today’s geopolitical landscape presents three distinctive challenges that fundamentally alter how businesses must operate: unprecedented speed of change, broad geographical impact, and extensive sectoral reach. Tariffs can now be imposed with a few hours’ notice. Nearly every country and trading bloc can generate instability. And virtually every industry faces geopolitical pressures – not just traditionally exposed sectors like energy and logistics.
What is crucial is the ability to connect geopolitical developments and translate them into concrete business actions. Geopolitical considerations should be taken on board in (at least) strategic planning, capital allocation, supply chains, logistics, communications, and policymaker outreach.
Forward-looking firms recognize that effective geopolitical intelligence demands both internal capabilities and external validation. While external experts can help fill knowledge gaps and interpret events within broader historical contexts, the vital task of assessing a company’s current and future exposure to geopolitical developments must be executed internally. Third parties simply cannot possess the requisite understanding of your specific business model, operational dependencies, and strategic priorities to properly execute exposure analyses that drive meaningful decision-making.
The focus should not only be on geopolitical risks. By its very nature, geopolitically driven decisions tend to single out particular firms, sectors, or economies. That means unaffected firms are indirectly affected, and some will see their competitive position or opportunities change. If Chinese EVs pay 100% tariffs in the US market, then this could create an opportunity for EVs made in Europe. Of course, the likely durability of any geopolitically-driven policy change is a factor – especially if capital and talent must be redeployed to exploit some commercial advantage. Exploring precedent cases and relevant administrative procedures can shed light on that.
Geopolitical volatility creates substantial opportunities for strategically prepared organizations willing to move decisively when competitors retreat.
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