Post-Globalization: 5 Steps For Business Leaders Outside The US

The recent US election sent shock waves of uncertainty through boardrooms around the world. CEOs are now grappling with the implications of a potentially seismic shift in the geopolitical and economic landscape. How will this affect your industry and your business? What steps should you take to stay ahead?

US policy: ripples or shock waves?

The first topic of discussion in boardrooms is usually trade and tariffs, areas in which executives expect increased volatility. For export-driven industries, especially those tied to US demand, the stakes are high. China and Western Europe, which rely heavily on US markets, are likely to face headwinds.

To some extent, this was reflected in financial markets’ reaction to the election results: US markets climbed while other global markets—especially Chinese, Japanese, and emerging markets—showed caution. Between November 4 and 22, the S&P 500 rose 4% while China’s Hang Seng dropped 7%, the MSCI Emerging Markets Index fell 4%, and major Mexican and Japanese indexes both declined 1%.

In addition to the incoming administration’s shift toward protectionism, there are structural risks that could further complicate the economic outlook. These include rising US debt and the potential for higher tariffs and deficits to reaccelerate inflation.

Sustainability, specifically the dual challenge of energy provision and decarbonization, may be headed toward similar uncertainty. US demand for low-carbon solutions and green energy might slow given the new administration’s skepticism on climate change. For global companies, however, this could present an opportunity to lead, cut costs, and expand market share. Companies like China’s electric vehicle manufacturer BYD are already setting the pace.

A post-globalization world

The election results are part of a tidal shift reshaping geopolitics and global markets: the end of globalization as we know it. The post–World War II consensus on free-flowing goods, capital, and people has given way to a renewed focus on nation-states over global alliances, note my colleagues in Bain & Company’s Macro Trends Group.

That does not necessarily mean there will be a full embrace of isolationism, but for business leaders, this shift isn’t theoretical. It’s reshaping supply chains, sourcing strategies, and investment decisions.

At a recent business conference in Paris, for example, leaders described the election as a “wake-up call” for Europe. The threat of increased tariffs seems to be galvanizing a “Europe first” effort that’s likely to increase EU investment in areas like defense, technology, and green energy. There’s also an intention to loosen regulations and strengthen the trade bloc with common debt and a single capital market. This focus on self-reliance is just the beginning of a broader recalibration.

The Covid-19 pandemic has already stretched supply chains, and they now face further disruption. Tax hikes on imports from Mexico, Canada, and China—promised for “Day 1”—will force many companies to rethink their suppliers and routes to key markets.

As they always do, disruptions will create both challenges and opportunities. For example, the strong US push to cut reliance on China for key materials, technologies, and products will create new openings for many businesses.

The CEO of a large industrial company recently told me about a transformative investment opportunity in North America that will help secure its supply of strategically essential materials, an investment now made possible by the strong US push to reduce dependence on China.

What should CEOs do now?

For CEOs ready to act, this is a chance to reimagine strategies and secure a competitive edge. You can begin assessing the impact on your industry and business by considering the following questions:

• How much of our profits are at risk?
• What is our plan of action if the worst-case scenario unfolds?
• Can we gain an advantage over our competitors by acting quickly on certain key opportunities?
• Do recent events necessitate changes in our 10-year strategy?

Those answers can then become the basis for a series of steps that will set the path forward.

Tactically, leaders can take two actions immediately:

• Map trade risks. This will give you an understanding of your supply chain’s adaptability and resilience. Identify your suppliers, buyers, and production centers with the greatest vulnerability to changes in tariffs.
• Develop strategies for different scenarios. Quantify the impact of different tariff scenarios, closely track developments, and build sourcing, pricing, and supply chain contingency plans.

Strategically, it’s also important to prepare for what’s next and position your business for longer-term success:

• Test if your operating model is ready for what’s ahead. Evaluate what your central team handles vs. local teams, assess local capabilities, and prepare teams to manage transitions. Are you ready for more autonomous regional or country operations if that’s needed? Are there joint ventures, partnerships, or mergers or acquisitions you should be considering?
• Optimize your capital structure. Review your cost of capital and use it wisely. What are the implications of different scenarios for your longer-term investments? Are there opportunities to tap local sources of capital?
• Stay cost competitive. Analyze how you measure up against foreign (especially US) competitors in research, sourcing, and production. Review your operations to keep costs competitive with goods imported into your home markets.

Every company’s path will differ, but the mandate is clear: Act decisively and maintain strategic clarity. Those that can move quickly while maintaining strategic agility will reap the benefits.