Trade Wars in a Multipolar World: How Politics is Reshaping Global Business
- Prof Batsakis
- Mar 28
- 5 min read
In an era marked by rising tariffs, sanctions, and heated rhetoric on both sides of the Atlantic and Pacific, the concept of free trade is suddenly up for debate again. Since 2016, following Donald Trump’s election as President of the United States, trade disputes have frequently made front-page news. Although many expected these tensions to wane, global developments, especially from China–U.S. tariff hikes to sanctions on Russia, show how deeply politics and economics have become intertwined.
Now, with Donald Trump’s re-election and with him in the Oval Office since January 2025, trade tensions are once again in the spotlight, this time involving nations that were once trade allies rather than enemies (i.e., Canada and Mexico).
A new landscape of trade tensions
Trade wars are a phenomenon that dates back to centuries. But international trade experts argue we are now seeing a shift. According to International Business scholars Sjoerd Beugelsdijk and Yadong Luo (2024), the relationship between governments and multinational corporations has taken on an unprecedented political character. Once, companies mostly worried about tariffs or red tape at the border; today, they must also grapple with geopolitical blocs, technology bans, and even debates about national identity that shape whether a deal can go forward.
The Trump administration’s use of tariffs on steel and aluminum imports, alongside punitive duties on Chinese exports, sparked retaliatory measures from partners and competitors worldwide. While the United States justified these moves under national security provisions, countries such as China, Canada, and members of the European Union enacted their own counter-tariffs, triggering waves of price fluctuations and supply-chain disruptions. Additionally, the Biden administration's four-year tenure saw the most vigorous and extensive application of international trade tools than any previous U.S. administration.
Its final acts were some of the most influential among these initiatives. Figures 1 and 2 illustrate the significant increase in the number of individuals added to the US and EU sanctions lists over the past four to six years. In addition, the U.S. and its allies have sought to block exports of certain high-tech components to rival nations.[1] These measures are aimed at protecting strategic industries, but unsurprisingly, these have spilled over into countless business relationships across the globe.
Why is business now “politicized”?
In their article “The politicized nature of international business,” Beugelsdijk and Luo (2024) stress that national governments have reasserted themselves as key players in cross-border trade. In the past decades, the general direction was toward globalization and deregulation. Today, from Washington to Brussels to Beijing, governments increasingly assert influence over the flow of goods and investments, citing security and economic sovereignty. It is not surprising that the trade deficit between the US and China has hit its lowest point since 2010.
This shift has repercussions beyond higher consumer prices. Companies now face what the authors describe as “fault lines” shaped by a potent mix of nationalism, populism, and technological rivalry. Instead of simply measuring “distance” between countries in terms of language or culture, many corporations must now factor in political or ideological alignment before deciding where to build factories, open subsidiaries, or invest in research and development.
A multipolar world and “loose coupling”
In their recent article published in the premier International Business journal, Journal of International Business Studies, scholars, Yadong Luo and Rosalie Tung (2025), argue that we are entering a “multipolar” environment, where multiple power blocs, such as a) the United States and its allies, b) China, c) the European Union, and d) emerging economies, are each charting different trade and investment rules. Their article “A multipolar geo-strategy for international business” suggests that, rather than adopting a single global approach, companies may soon deploy differentiated strategies for each major bloc.
This approach involves a principle they term “loose coupling.” Within each geopolitical zone, an organization might integrate its operations as tightly as possible, maximizing local market share, employing region-specific technologies, or establishing local R&D centers. However, between blocs, the same company’s units and supply chains are only loosely connected to limit risks if relations deteriorate between countries. For instance, a European electronics firm might treat the US market as one “pole” and build robust, integrated operations there, while creating separate, relatively stand-alone networks in China or Southeast Asia. Cross-border collaboration still exists on less sensitive products or services, but anything assessed as strategically risky, such as advanced semiconductor technology, might be kept confined within each bloc. By doing so, companies are hoping to stay resilient even if tensions intensify. This is an unprecedented strategic approach signifying the need of multinational corporations to adjust to the increasing tensions between countries on the political forefront.
So, what lies ahead?
For many businesses, the Trump-era tariffs were a wake-up call about the fragility of global supply chains. Additionally, the sanctions imposed by the Biden administration increased the need for multinational corporations to strategize in a ‘loose coupling’ manner. Now, with ongoing debates about “friend-shoring” and “de-risking,” leaders in both the public and private sectors are wondering whether global commerce has reached a turning point. On one hand, efforts to bring key industries back home or to politically “friendly” nations may increase national security and safeguard critical sectors. On the other hand, such moves risk curtailing the economies of scale that global integration once provided.
If there is a silver lining, Luo and Tung (2025) note, it may lie in the emergence of strategic flexibility. While old models assumed the world was converging into one seamless marketplace, a multi-polar approach is more agile and realistic in an era of shifting alliances. Companies building stand-alone structures in different blocs might lose some scale in the short term but gain protection against political shocks.
The way forward is likely a balancing act. Policymakers must weigh short-term gains in security or local jobs against the long-term benefits of international collaboration. Businesses, for their part, need to adapt to an evolving policy climate, where a single executive order or tariff-hike threat can disrupt operations worldwide. As Beugelsdijk and Luo (2024) remind us, politics is no longer a background factor in cross-border business activities. It is central, shaping strategies and outcomes in real time. The coming years will reveal whether, alongside these dynamic tensions, a more adaptable and perhaps more equitable global trading system can emerge.
References for Further Reading
[1] https://www.nytimes.com/2023/07/12/magazine/semiconductor-chips-us-china.html
Beugelsdijk, S., & Luo, Y. (2024). The politicized nature of international business. Journal of International Business Studies, 55(2), 281–284.
Luo, Y., & Tung, R. (2025). A multipolar geo-strategy for international business. Journal of International Business Studies.
