Strategic Analysis of Geopolitical Impact on American Businesses
As President Calvin Coolidge said, in so many words, “The business of America is business.” One hundred years later, his words still ring true, as American businesses have a profound impact on American lives and livelihoods. American businesses employ roughly 83 percent of the US labor force, equivalent to about 136 million jobs—nearly half of which belong to small businesses with fewer than 500 employees. And of course, all Americans depend on commerce to supply the goods and services needed for daily life.
Introduction
For roughly the past 30 years, geopolitics has taken a back seat relative to macroeconomic, strategic, and technological concerns for businesses. But today, a new hurdle looms: 900 executives tell McKinsey that they see geopolitics as the greatest risk to economic growth.
Impact of Geopolitical Shifts on Business
They’re not wrong. Business leaders understand that a reconfiguration of global trade is underway. Consider that the China tariffs imposed by President Trump were expanded by President Biden, and most of China’s retaliatory tariffs remain in place. The uncertainty about the tariffs and possible retaliations or negotiations have created one of the greatest levels of peacetime uncertainty for US businesses. The facts speak for themselves: American business is in a new era of geopolitics, with significant implications.
Ten drivers of geopolitical change
As the United States seeks to update the rules of trade, economics, and security, and other nations react, we inevitably face profound uncertainty. Yet, even in the face of this change, business leaders need to seek understanding and act. As US policymakers reconsider and adjust across ten major drivers of geopolitical change (exhibit), US businesses can bound the uncertainty by understanding the principles guiding potential US policies.
American Businesses Adaptation to Geopolitical Realignment
American business has adapted before, and has been central to the United States’s successful navigation of prior eras of geopolitical realignment. The post–World War II years saw the emergence of American products, and their cultural influence helped promote values of democracy and capitalism around the world.
An agenda for US business
Accelerating growth
By analyzing a range of growth scenarios across the ten value drivers presented in the exhibit, businesses can find opportunities for commercial acceleration and portfolio rebalancing.
Strategic Recommendations for Businesses
Optimizing core operations
Business leaders can boost organizational resilience and improve cost-effectiveness with moves across operations, supplier relationships, global talent capabilities, and technology infrastructure.
Building geopolitical capabilities and strategies
To take effective action, companies need a globally conscious corporate strategy, modern legal structures, and the right teams and processes in place to respond to geopolitical events.
FAQ
What are the main challenges American businesses face due to geopolitical shifts?
American businesses are facing challenges such as uncertainty in trade policies, geopolitical tensions impacting supply chains, and the need to navigate changing regulations in different regions.
Conclusion
American businesses are known for taking advantage of disruption and being resilient when the ground shifts beneath them. As the world enters a new period of dislocation, it’s time to rediscover the habits and practices that have led to success.
At the time of publishing, countries worldwide are actively revising tariff and trade policies. Final outcomes and implications for government, business, and individuals are highly uncertain.
