INTERCONNECTED MEGATRENDS AMPLIFY BUSINESS UNCERTAINTY

On balance, businesses like certainty and stability, especially in policy, regulation and governance. In environments where things change from one day to the next, it’s hard for leaders to plan, especially when they are already under pressure from megatrends ranging from the consequences of climate change and declining biodiversity to unprecedented technological change to demographic shifts, global migration and armed conflict.

For businesses, who are not here to play in the political arena, leaders cannot use these geopolitical shifts or trends as an excuse for poor performance and are under the same pressure to run their companies at optimal levels. Given these massive headwinds, business leaders seek a stable commercial environment, including alignment with governments, to support their operations.

What businesses want from the government is openness, transparency and lead time so they can plan for changes. Unfortunately, we’ve seen a high degree of uncertainty – including a change in approach that is upending many of the norms leaders have relied on in managing these trends – spread from the U.S. to Europe and around the world which is challenging businesses working to plan for the near- and long-term.

Businesses also prefer a level playing field when it comes to their governance. They want their consumer to make their choice but want it to be a fair competition within their industry. That requires clear, transparent rules; independent regulators, courts and judges; and no political interference. There is a perception in Europe that this level playing field is changing in the U.S. This can increase the cost of doing business in the U.S., most obviously in the stock and bond markets where we see uncertainty reflected.

NO TIME TO WAIT OUT THE STORM

Businesses cannot afford to sit back and wait for stability given the present geopolitical situation – especially since it doesn’t seem like leaders will gain any kind of certainty in the near term. Some governments, industries and businesses are already changing their approaches given this shifting environment. For example, leaders of European countries have concluded they cannot rely on the U.S. anymore for security and defense. The whole relationship is being recalculated as Europe looks inward for defense spending. Even Germany has changed its fiscal rules to spend more on defense.

For businesses, that means three trends: European governments will spend more on defense, there will be a reconsideration of where that spend occurs and, with the increase in defense spending, cuts will be made elsewhere. These cuts could come from welfare, social support and health spending – where governments will look for more efficiencies.

That leads to opportunities for businesses to capitalize on this disruption. For example, if the U.K. has less to spend on healthcare, they will look for companies that have unique ways of supporting healthcare at lower costs, such as using AI for preventative care or diagnostics.

Some of these initiatives are already in play on the continent, with the European Union co-funding the European Institute of Innovation and Technology (EIT) Health, a collaboration between business, research and education to fight healthcare challenges. Especially following the COVID-19 pandemic, this group realized the benefit of investing in digital health applications to support everything from chronic disease management to mental health access to enabling better healthcare delivery

It will also mean an opportunity for European defense companies to compete for new contracts, which spurs innovation in non-U.S. NATO countries. Similar to healthcare, this innovation is already happening, given an estimated 500% increase in investment in European defense technology startups from 2021-24.

RESHORING WITH THE BOTTOM LINE IN MIND

One of the big changes that has continued from the pandemic is a stronger desire for governments and businesses to see shorter supply chains and greater national supply chain resilience. In 2020, many governments, businesses and individuals felt vulnerable when they realized they needed things they didn’t have and that they couldn’t produce close to home.

As an example, investment in reshoring in the U.S. has been concentrated in key areas including semiconductor and electronics manufacturing, with an estimated $395 billion of private investment pledged as of 2024. This focus, which also includes public initiatives like the CHIPS Act, was in direct response to the U.S.’s heavy reliance on Taiwan and a desire to protect against geopolitical risk given instability in the region.

That trend has picked up on an international scale with the race for technology applications, particularly AI, as governments and businesses realize they are too reliant on U.S. technology giants. In Europe, for example, the European Commission announced a €200 billion AI initiative to support innovation on the continent.

For some types of products – pandemic response items, defense products and more – it is absolutely the case that products manufactured at home are better than products manufactured abroad. It is easy to argue that AI investment, to ensure AI data is held close to home, or semiconductor manufacturing would fall into these categories. Other than those exceptions, though, we’ve seen that free trade for nearly every other product is better for all parties – but that hasn’t stopped the trend toward reshoring.

That’s because supply chain trends have developed a more purely economic lean with the idea that anything that is manufactured at home is better than products manufactured abroad, which led to the global tariffs announced by the U.S. administration in the spring of 2025.

While businesses must contend with shifting their supply chains locally to contain the impacts of these tariffs, companies that can reshore products into their home countries have a lot more incentives to do so now. This shift also enables them to take advantage of innovating their models and streamlining their operations.

The companies in the better positions are the ones that most likely offshored for cheaper labor costs. To the extent that production can be replaced by robotics (which, in many cases, it can with AI and better data), companies can reshore without incurring higher local labor costs since automation and digitization can make workers more efficient. This augmentation can have other benefits, especially as companies are tasked with adapting to fewer immigrants, both legal and irregular, available to fill different roles.

As a result, all kinds of businesses and roles, from manufacturing to surgery, can benefit. That includes firms that can build factories or custom robotics quickly and that offer AI solutions for different business requirements. Leaders need to ask themselves how they can use advanced manufacturing, robotics, training and logistics to improve their workers’ efficiency in making products, especially as the cost of industrial robotics has decreased massively in the last two decades.

OVERTAKING NATIONALISM WITH A LOCAL APPROACH

Rising nationalism across the globe also means that rising nationalism in one country will feed others. For example, U.S. policy has led to animosity toward Canada, leading to anti-Americanism in Canada as well. For businesses, that means they’re not just facing a “let’s buy Canadian” problem, but also a sentiment of “let’s not buy American.”

To state the obvious, those companies with a clear national identity could suffer. In this environment where nationalism and economic barriers are on the rise, consumers in their respective countries will tend to favor domestic products.

Businesses can counteract this trend by demonstrating local links. For example, if a company sources locally or is a significant employer in a region, it might motivate consumers to see their products or services as being local.

While strategies are evolving – especially given deliberate boycotts of iconic brands – other brands manage to be perceived as local by being local. For example, Trader Joe’s in the U.S. is owned by Aldi but is tailored to an American audience.

Multinational CPGs, from Unilever to P&G and beyond, know this lesson well and for years have successfully launched, acquired or grown brands tailored to local markets. Nestlé, for instance, owns Perrier, San Pelligrino and Acqua Panna and dozens of other water brands that serve different markets.

OVERCOMING UNCERTAINTY TO EXCEL

Major geopolitical events – whether urgent quakes or slow burns – have been in play for many years. Despite the scope and scale of present disruptions, leaders still have a responsibility to deliver strong performance.

While leaders seek certainty and a level playing field, they can still act nimbly to respond to major changes in international commercial practices. Geopolitical instability is forcing businesses to innovate – which is not a bad thing and, for those who can seize the opportunity, can lead to growth.