What happened at Davos this year was not simply a message for presidents and prime ministers. It was a warning for chief executives. The World Economic Forum has long served as a venue for diplomatic signaling, but this time the implications landed squarely in the boardroom.
At Davos, Canadian prime minister Mark Carney warned that the “post–Cold War rules-based international order” is no longer holding, and that countries must “take on the world as it is, not the world we wish to see.” That admonition applies even more forcefully to CEOs. Their corporate strategies built for yesterday’s order are now exposed to risks they no longer control.
For three decades, American multinationals operated on a quiet assumption: that geopolitics would remain largely external to commercial decision-making. That assumption survived the 1990s and 2000s even as cracks appeared in the global trading system. Today, it is not merely outdated but dangerous. What companies are experiencing is not a sudden rupture, but the accumulated effect of trends that have been visible for years. What is striking is how many firms remain organised as if those trends never mattered.
Davos crystallised a shift that can no longer be dismissed as diplomatic theatre. Europe and Canada are deepening economic engagement with China, and China is actively reciprocating. This is happening as the United States uses tariffs, industrial policy and explicit reciprocity to make clear that economic alignment will no longer be inherited by default. It will be negotiated, enforced and revisited.
Our allies are not rejecting the United States. They’re hedging. Their response 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 accident. Under Xi Jinping, Beijing has systematically reduced its dependence on Western goodwill while building asymmetric leverage across industrial capacity, critical inputs and market access. Europe and Canada were not treated as adversaries; they were treated as strategic options. Once Washington stopped pretending the old system still functioned, those options became more valuable.
The data reinforces what the rhetoric now confirms. More than half of America’s goods trade deficit is with allies, not China. China, meanwhile, remains Europe’s largest or second-largest trading partner, with bilateral trade measured in the hundreds of billions of dollars. These patterns are not transitional. They are structural. Allies moving closer to China are not engaging a neutral market actor; they are engaging a mercantilist system designed to absorb demand while exporting overcapacity. For American companies, the consequence is not only competitive pressure abroad but a steady erosion of industrial strength at home.
The central challenge for CEOs is not tariffs or export controls in isolation. It is 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 organisational structures, incentive systems and growth targets continue to assume it does. Strategy, in too many firms, remains backward-looking — anchored in nostalgia rather than feasibility.
Western multinational corporations must now redesign for a world in which alignment is fluid, currencies are volatile and allies do not move in lockstep. That requires decisions that many firms have deferred for too long.
First, CEOs must build scenarios that assume some allies will continue edging toward China’s economic orbit. This is no longer an academic exercise. Leaders must model both growth opportunities and structural risks as trade patterns realign: competing across many smaller markets rather than a handful of scale markets; detecting Chinese export pressure in fragmented quantities where subsidies and price aggression are hardest to see; operating across multiple volatile currencies rather than relying on dollar-centric assumptions; and redesigning organisations so unfiltered market intelligence reaches the top. Above all, it demands relentless focus on cost, productivity and relevance. Products must compete with Chinese offerings after accounting for currency depreciation and state support, not before.
Second, companies must decide clearly where to play — and where not to play. With Xi exercising direct control over China’s supply chains, ambiguity is no longer a strategy. Selectivity is. Firms that delay hard choices will be outmanoeuvred by those that make them early.
Third, CEOs must reset goals to what is feasible rather than familiar. Growth targets built on yesterday’s assumptions will destroy capital tomorrow. Discipline now matters more than optimism.
Fourth, capital generation and allocation must be reconsidered from first principles. In which currencies will profits be earned? What buffers are required against political and financial shocks? These are no longer technical questions for finance teams alone; they are core strategic judgements.
Fifth, sunk costs must be confronted honestly. Footprints will shrink. Facilities will close. Delay only raises the eventual price.
Finally, geopolitical judgement must move out of government-affairs 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 corporate valuation. It is strategy.
Many allies accumulating reserves today do so on the back of open American markets. That openness is no longer unconditional, nor is it infinite. Davos made that clear — not just to governments, but to anyone responsible for allocating capital and setting direction.
My argument is not about ideology. It is an argument about adaptation. The companies that decide to do so now will continue to grow. Those that do not will discover that alignment risk compounds faster than financial risk ever did.
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