The Global Risk Implications

Analyzing Geopolitical Impact: Trump's Leadership and the Threat to Global Stability
based on Trevor Treharne's article, November 7, 2024

• Indra Wardhana SE MSc-HSEaud

Donald Trump's return to the White House has sparked widespread speculation regarding its implications for global stability, geopolitical dynamics, and the world economy. With a track record of controversial policies and unorthodox leadership during his first term, his reelection has become a focal point, especially for global risk managers bracing for the potential upheavals to come.

A Wild Card for Business

As Control Risks stated, U.S. elections often represent the most significant geopolitical event, with ripple effects felt worldwide. Trump's victory, however, introduces a new layer of uncertainty. His "America First" approach previously resulted in protectionism, trade wars, and tariff increases, which not only disrupted global supply chains but also fueled inflation that eroded consumer purchasing power.

Many believe that Trump's second term could be bolder than his first, given that it will be his final chance to leave a legacy in U.S. politics. His unilateral policies and sudden regulatory changes not only stymied international trade but also restricted global innovation. For instance, Trump's proposed flat 10% tariff on U.S. imports is expected to burden businesses ranging from small enterprises to multinational corporations.

Global Relations and Diplomatic Tensions

Trump's confrontational style of diplomacy is likely to exacerbate existing geopolitical tensions. His preference for relationships with authoritarian leaders like Kim Jong-un and Vladimir Putin, while undermining traditional alliances such as NATO, has highlighted the instability in U.S. foreign policy strategies. This has raised concerns about America's potential isolation on the international stage.

The case of South Korea serves as a concrete example. Trump bluntly referred to this key U.S. ally as a "money machine," implying that diplomatic relations are merely transactional. Such an approach could damage alliances built over decades, leaving U.S. allies uncertain and creating opportunities for countries like China and Russia to expand their influence.

Supply Chain Disruptions and Economic Stability

Risk managers worldwide now face significant threats to the stability of global supply chains. Trump's protectionist policies have altered market dynamics, forcing businesses to seek alternative sourcing or even reduce dependence on global networks. This not only increases costs but also risks slowing down innovation in industries reliant on imported materials.

According to the Trump Risk Index released by the Economist Intelligence Unit, higher tariffs will likely target sensitive sectors like steel, significantly increasing production costs. Given such policies, business leaders are challenged to mitigate risks by diversifying their supply chains, though this is neither an easy nor inexpensive solution.

Regulatory Changes and Environmental Risks

Trump's deregulatory approach provides immediate benefits for certain industries, such as energy, which has long been burdened by environmental regulations. However, it poses significant environmental risks and long-term sustainability challenges. In sectors like healthcare and finance, erratic deregulation could create a business environment that is increasingly unstable.

This regulatory uncertainty creates challenges for organizations that must quickly adapt to unforeseen changes. Without adequate preparation, many businesses may fail to respond effectively, incurring substantial losses in the process.

Social Tensions and Reputational Risks

Trump's divisive leadership style could intensify social and political tensions in the U.S. and abroad. As polarization increases, companies face significant reputational risks if they fail to navigate these issues wisely. For example, political divides in the U.S. could spark civil unrest and property damage, as highlighted by Sam Wilkin of WTW.

To mitigate these risks, companies need to adopt sensitive communication approaches and promote inclusivity across all operations. Failing to do so could harm their public image, erode consumer trust, and even threaten their business sustainability.

Preparing for Uncertainty

Trump's presidency has always been a puzzle for the world, and his second term is unlikely to be any different. With an unpredictable approach, the risks to the global economy, diplomacy, and social stability become increasingly apparent. Organizations must strengthen their risk management strategies, employ scenario analysis, and build flexibility to navigate what could be one of the most volatile periods in modern political history.

In facing these challenges, one critical question remains: is the world ready to confront this new era of geopolitical "wild cards"? The answer to this question may determine the trajectory of global stability for years to come.