What happened in Davos this year was not just a message for presidents and prime ministers. It was a warning to CEOs. The World Economic Forum has long served as a venue for diplomatic signalling, but this time the implications went straight to the boardroom.
In Davos, Canadian Prime Minister Mark Carney warned that the “post-Cold War rules-based international order” no longer holds and that countries must “take on the world as it is, not the world we want to see”. This warning applies even more strongly to CEOs. Their corporate strategies built to order yesterday are now exposed to risks they no longer control.
For three decades, US multinationals have operated on a quiet assumption: that geopolitics will remain largely external to business decision-making. This assumption survived the 1990s and 2000s, even as cracks appeared in the global trading system. Today, it is not only outdated, but also dangerous. What companies are facing is not a sudden rupture, but the cumulative effect of trends that have been visible for years. What is striking is how many firms remain organized as if those trends never mattered.
Davos crystallized a change that can no longer be dismissed as diplomatic theater. Europe and Canada are deepening their economic engagement with China, and China is actively changing. This comes as the United States uses tariffs, industrial policy, and explicit reciprocity to make clear that economic alignment will no longer be implicitly inherited. It will be negotiated, enforced and reviewed.
Our allies do not reject the United States. It covers itself. Their response is a rational adaptation to a world in which trade, technology, and capital are explicit instruments of state power. China did not get to this position by accident. Under the leadership of Xi Jinping, Beijing has systematically reduced its dependence on Western goodwill while creating asymmetric leverage in terms of industrial capacity, critical inputs and market access. Europe and Canada were not treated as adversaries; were treated as strategic options. Once Washington stopped pretending the old system still worked, those options became more valuable.
The data reinforces what the rhetoric now confirms. More than half of America’s merchandise 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 transient. They are structural. Allies approaching China are not hiring a neutral market actor; they employ a mercantilist system designed to absorb demand while exporting overcapacity. For American companies, the consequence is not only competitive pressure abroad, but also a steady erosion of industrial strength at home.
The central challenge for CEOs is not tariffs or export controls in isolation. It’s a strategic mismatch. Most US 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 assume that it does. Strategy, in too many firms, lags behind—anchored in nostalgia rather than feasibility.
Western multinational corporations must now redesign for a world where alignment is fluid, currencies are volatile, and allies don’t move in step. This requires decisions that many firms have put off for too long.
First, CEOs must construct scenarios that assume some allies will continue to move into China’s economic orbit. This is no longer an academic exercise. Leaders must shape both growth opportunities and structural risks as business models realign: competing in many smaller markets rather than a handful of markets at scale; detecting Chinese export pressure in fragmented quantities where subsidies and price gouging are hardest to see; operate in multiple volatile currencies rather than relying on dollar-centric assumptions; and redesigning organizations so that unfiltered market intelligence reaches the top. Above all, it requires a relentless focus on cost, productivity and relevance. Products must compete with Chinese offerings after factoring in currency depreciation and state support, not before.
Second, companies must clearly decide 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 making tough choices will be overtaken by those that make them early.
Third, CEOs must reset goals to what is feasible rather than familiar. Growth targets based 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 made? What buffers are needed against political and financial shocks? These are no longer just technical questions for finance teams; they are basic strategic judgments.
Fifth, sunk costs must be addressed honestly. Footprints will shrink. Facilities will close. Delay only raises the eventual price.
Finally, geopolitical judgment must move out of the silos of government affairs and into the CEO’s office and boardroom. This requires a genuine war room mentality. Geopolitical exposure now shapes growth trajectories, margin sustainability and corporate valuation. It’s a strategy.
Many allies accumulating reserves are doing so behind open American markets. That openness is no longer unconditional or infinite. Davos made this 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. Companies that decide to do this now will continue to grow. Those who don’t will find that alignment risk compounds faster than financial risk.
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