What happened in Davos this year was not just a message to presidents and prime ministers. It was a wake-up call for executive directors. The World Economic Forum has long served as a stage for diplomatic signaling, but this time the implications fell squarely on the boardroom.
In Davos, Canadian Prime Minister Mark Carney warned that the “post-Cold War rules-based international order” is no longer sustainable and that countries need to “face the world as it is, not as we would like it to be”. This warning applies even more forcefully to CEOs. Corporate strategies built to yesterday’s order are now exposed to risks they no longer control.
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For three decades, American multinationals operated under a silent assumption: that geopolitics would remain largely external to business decisions. This assumption survived into the 1990s and 2000s, even as cracks began to appear in the global trading system.
Today, it is not only outdated, but dangerous. What companies are experiencing is not a sudden disruption, but rather the accumulated effect of trends that have been visible for years. What’s impressive is how many companies still remain organized as if these trends never mattered.
Davos crystallized a change that can no longer be dismissed as diplomatic theater. Europe and Canada are deepening economic engagement with China, and China is actively reciprocating.
This comes at the same time as the United States turns to tariffs, industrial policy, and explicit reciprocity to make clear that economic alignment will no longer be inherited by default. It will be negotiated, imposed and revisited.
Our allies are not rejecting the United States. They are hedging. His answer is a rational adjustment to a world in which trade, technology and capital are explicit instruments of state power.
China did not arrive at this position by chance. Under Xi Jinping, Beijing has systematically reduced its dependence on Western goodwill while building asymmetric leverage in industrial capacity, critical inputs and access to markets.
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Europe and Canada were not treated as adversaries; were treated as strategic options. When Washington stopped pretending that the old system still worked, these options became more valuable.
The data reinforces what the rhetoric now confirms. More than half of the United States’ goods trade deficit is with allies, not China. China, in turn, remains Europe’s largest or second largest trading partner, with bilateral trade measured in hundreds of billions of dollars.
These patterns are not transitory. They are structural. Allies approaching China are not engaging with a market-neutral actor; they are engaging with a mercantilist system designed to absorb demand while exporting excess capacity.
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For American companies, the consequence is not just competitive pressure abroad, but a steady erosion of industrial strength at home.
The central challenge for CEOs is not tariffs or export controls alone. It’s a strategic mismatch. Most American multinationals are still designed for a world of stable alliances, predictable currencies, and relatively frictionless capital flows.
That world no longer exists. Yet organizational structures, incentive systems, and growth targets continue to presuppose it. The strategy in many companies continues to look backwards — anchored in nostalgia, not viability.
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Western multinationals now need to redesign themselves for a world in which alignment is fluid, currencies are volatile and allies do not move as a block. This requires decisions that many companies have postponed for too long.
First, CEOs need to construct scenarios that assume that some allies will continue to move closer to China’s economic orbit. This is no longer an academic exercise.
Leaders need to model both growth opportunities and structural risks as trade patterns realign: compete in many smaller markets rather than a few scale markets; detect pressure from Chinese exports in fragmented quantities, where subsidies and aggressive pricing are more difficult to see; operate in multiple volatile currencies rather than relying on dollar-centric assumptions; and redesign organizations so that unfiltered market information reaches the top.
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Above all, this requires relentless focus on costs, productivity and relevance. Products need to compete with Chinese offerings after currency depreciation and state support are taken into account, not before.
Second, companies need to clearly decide where to play — and where not to play. With Xi exerting direct control over China’s supply chains, ambiguity is no longer a strategy. Selectivity is. Companies that delay difficult choices will be outmaneuvered by those that make them early.
Third, CEOs need to recalibrate goals to what is feasible rather than what is familiar. Growth targets based on yesterday’s assumptions will destroy capital tomorrow. Discipline now matters more than optimism.
Fourth, capital generation and allocation need to be rethought from first principles. In which currencies will profits be made? What buffers are needed against political and financial shocks? These are no longer technical questions just for finance teams; they are central strategic judgments.
Fifth, costs that cannot be recovered need to be faced honestly. Presences will shrink. Facilities will close. Postponing only increases the final price.
Ultimately, geopolitical judgment needs to move out of government relations silos and into the CEO’s office and the boardroom. This requires a genuine war room mentality. Geopolitical exposure now shapes growth trajectories, margin durability and company market value. This is strategy.
Many allies who accumulate reserves today do so on the basis of open American markets. This openness is no longer unconditional, nor infinite. Davos made this clear — not just to governments, but to anyone responsible for allocating capital and setting direction.
My argument is not ideological. It’s an argument about adaptation. Companies that decide to do so now will continue to grow. Those that don’t will find that alignment risk accumulates faster than financial risk ever accumulated.
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