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.
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.
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. And in April 2025, new base and reciprocal tariffs are scheduled to take effect on US trading partners. 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.
The United States has long been the lynchpin of the global economy. Its economic preeminence in the years and decades to come will rest on a philosophical and opportunistic alignment between government and business, working in parallel to navigate shifts in global politics, economics, trade, and security.
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. Some shifts are intended to encourage a rewiring of the industrial base for national security or reindustrialization, while others are meant to build leverage in negotiations. Understanding the distinction can ensure long-term realignment of corporate investments and operations with government policies, instead of mere tactical, near-term moves to mitigate risks.
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. For example, Coca-Cola rapidly expanded its operations in Europe, Asia, and Latin America, and a bottle of Coke quickly became an icon of American culture. Joseph Stalin banned Coca-Cola in 1946 in the Soviet Union, fearing widespread American cultural influence. Coca-Cola finally entered the Soviet market in 1979, and the company handed out sodas at the fall of the Berlin Wall in 1989. Likewise, the entry of McDonald’s into China in 1990 helped grow Western consumption trends in the country and promoted American values abroad, with the foreign outlets dubbed as “embassies” or “consulates” of American culture.
In more recent years, American businesses have continued to adapt to American policy and economic interests. The rapid exit of American businesses from Russia in the wake of the invasion of Ukraine was done for several business reasons, but it also helped reiterate American values abroad and significantly undermined Russia. The war in Ukraine has also seen American liquefied natural gas (LNG) producers rapidly expand their export capacity, with supplies to European markets tripling since 2021 and US foreign policy aiming to wean European countries off Russian energy. Another example from Ukraine: SpaceX’s Starlink capabilities provided the government, military, and civilians with a communications channel that proved vital to sustained humanitarian and military operations. The move was in line with the US foreign policy of supporting Ukraine’s defense and was renewed through a $23 million contract with the US Department of Defense for continued Starlink support of satellite communication services across the country.
An agenda for US business
So, what should American businesses do today? In our view, leaders should be proactive and shift their mindsets from near-term risk mitigation to long-term value creation. Such an approach requires three actions: accelerating growth, optimizing core operations, and developing new capabilities (see sidebar, “A checklist for executives”).
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.
Commercial acceleration. Companies have been able to gain market share or improve margins through moves based on recent geopolitical dynamics, as illustrated by the following examples:
- Nucor redeployed its capital expenditures in response to tariffs imposed in 2018 on nearly all imported steel, tripling profits and allowing it to invest $3.2 billion in building new plants in the United States, including a $1.3 billion steel plate mill in the Midwest, fueling organic growth and boosting domestic production.
- Apple shifted its operations from China to India to avoid US consumer electronics import tariffs and potential supply chain disruptions. Interestingly, by setting up operations in India, Apple was able to grow its market share in India to 23 percent.
- O9 Solutions and SAP are committing to digital twins that can improve transparency across tiers in the supply chain and help clients mitigate geopolitical risks.
Portfolio rebalancing. Geopolitical shocks can cause even stable, growing businesses to falter— and can also make overlooked areas more favorable. Adjusting to geopolitical disruptions through M&A, partnerships, and divestments should be part of companies’ dynamic capital reallocation. Some examples include the following:
- Infosys acquired InSemi Technology Services, a semiconductor design company, to bolster its engineering R&D and develop new chips for artificial intelligence, 5G, and quantum computing. This move aligns with the US government’s goal of onshoring semiconductor manufacturing.
- A US private equity firm is shifting its portfolio away from regions with shrinking profits due to conflict; it is specifically moving the manufacturing of dual-use civilian–military products into regions with fewer restrictions.
- GE Aerospace announced plans to commit roughly $1 billion to enhance its US manufacturing and supply chain, nearly doubling its investment from the previous year. This includes $500 million dedicated to expanding engine production capacity, with a focus on the narrowbody CFM LEAP engine, which powers Boeing 737 MAX and Airbus A320neo jets.
Portfolio rebalancing is often a response to changes in industrial policy and the tax incentives and subsidies at the center of these policies. New US policy on manufacturing is a leading example. China surpassed the United States in gross value added (GVA) in production in 2008, and manufacturing in other countries has also risen. In response, the US government is investing more in its domestic industrial base to decrease reliance on other countries for critical goods (such as high-end manufacturing equipment, defense systems, and semiconductors) and improve supply chain resilience. These investments can help the United States capture more of the value-added portion of the manufacturing value chain.
More specifically, the United States has provided enormous stimulus toward manufacturing through legislation such as the Inflation Reduction Act (IRA), the Bipartisan Infrastructure Law, and the CHIPS Act. In 2023–24, the United States provided approximately $100 billion in subsidies for onshore manufacturing through these policies. Many US companies have capitalized.
The new US industrial policy for digital and green technologies is another example. These same laws have encouraged companies to double their investment in new manufacturing plants from 2022 to 2023, spending an average of $16.2 billion per month. Real investment in the semiconductor and green-energy industries is projected to reach $458 billion by 2028 and create 10,000-plus jobs in 2024–25. One beneficiary is US solar-panel manufacturer First Solar, which sold $700 million in IRA tax credits in 2023 and increased its revenue by 27 percent in 2024.
Defense is another example. Geopolitical dynamics have prompted increased US investment in the defense industrial base, with an increase from an average of $84 million per year from 2013 to 2019 to $774.5 million from 2020 to 2023. This includes an additional $74.6 billion in investments through combined supplemental and base defense appropriations for fiscal year 2024. These developments present opportunities for defense contractors and dual-use products, as well as IT, infrastructure, and construction. The purpose of the investments is to both secure US defense manufacturing supply chains and inject fiscal stimulus into the overall American economy.
Defense spending also poses a growth opportunity for unconventional defense companies, particularly in the tech industry. To ramp up AI-enabled systems, the US Department of Defense awarded companies such as Microsoft, Amazon, and Alphabet $28 billion in contracts between 2018 and 2022. Investors are paying attention. From 2021 to 2023, venture capital firms invested nearly $100 billion into defense tech start-ups, a 40 percent increase from the past seven years combined.
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.
Operating footprint. Manufacturing, storage, and customer engagement locations are critical cost categories, and physical commitments provide both geopolitical opportunity and exposure. Several companies have recently shifted their footprint in response to geopolitical shifts:
- Samsung SDI and Chrysler parent Stellantis are in line to receive a US Department of Energy loan of up to $7.54 billion to help build two electric-vehicle lithium-ion battery plants in Indiana. This move would allow Samsung additional access to the US market while enabling US domestic priorities, such as creating about 2,800 jobs and strengthening domestic battery supply chains.
- Apple, which recently announced its plan to invest $500 billion to build new AI servers in Houston in partnership with Taiwanese company Foxconn, is creating 20,000 jobs over the next four years. In this highly uncertain environment, it’s unclear how this will pan out. But in some scenarios, the move could help Apple avoid tariff risk, while reshoring its operations to avoid geopolitical entanglements.
- Semiconductor companies such as Micron Technology and Taiwan Semiconductor Manufacturing Company (TSMC) are expanding their US footprint by setting up fabs in Idaho, New York, and Arizona, with support from the CHIPS Act, as semiconductor manufacturing has emerged as a strategic national priority. Here too, the outcome is uncertain, but that’s true of most strategic bets.
Supply chain. Recent notable supply chain disruptions have led to facility closures, prompting many supply chain leaders to source from multiple vendors, move away from just-in-time ordering and delivery, and even stockpile critical inputs. Some are taking advantage of industrial policies offering incentives for localization of production or supply base (for example, Tesla leveraging the tax credits presented by the US Inflation Reduction Act of 2022 to strengthen its supply chain by sourcing materials domestically and shifting its manufacturing capabilities from Germany to the United States). Others are using advanced technologies (for instance, risk maps and digital twins) to anticipate and prepare for future geopolitical disruption and other challenges. Cisco has started to develop risk maps to anticipate geopolitically driven supply chain issues and requires its suppliers to fill in a business continuity planning (BCP) assessment questionnaire, particularly in more volatility-prone emerging-market countries.
Talent footprint. Companies can review talent concentration patterns, rebalance workforce allocations, and localize teams to mitigate geopolitical impact on their people. In the wake of Russia’s invasion, IBM provided relocation and financial assistance to employees in Ukraine, ensuring both employee safety and talent retention in the face of on-the-ground geopolitical volatility.
This is especially noticeable in digital roles; given the short supply, companies can use expatriate workers (though this may expose companies to changes in immigration policy) and create delivery centers in digital hubs (for example, India, Mexico, Poland, et cetera). Another idea comes from Micron, which established the Northeast University Semiconductor Network, in partnership with leading US universities, to strengthen the pipeline of workers to the semiconductor industry.
Technology infrastructure. Historically, multinational organizations built technology functions where talent, infrastructure, and data footprints extended across borders. That’s changing now, as companies seek to deflect geopolitical threats such as cyberattacks, intellectual property theft, data localization requirements, and more. As of 2023, Microsoft geographically houses all EU customer data within EU data centers to comply with the EU Data Boundary requirements. Companies can select which threats are most critical to their businesses and implement tailored mitigation strategies. Chevron and GE Vernova teamed up to build natural-gas-based power plants located next to US data centers. Some companies are splitting their IT infrastructure and operations across international borders to comply with different regulatory regimes.
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.
Broadening the view of corporate strategy. When global trends are uncertain, leaders can fold geopolitical considerations into their regular strategy, business-planning exercises, and board discussions. The underlying question for corporations is whether a policy change can influence their strategic decisions, which is underpinned by the risk appetite of the organization.
Future-proofing multinational organizations. The rise in international conflict increases the likelihood that an organization may need to swiftly exit a market, such as Russia in 2020. Business leaders can preemptively evaluate their legal structure to facilitate regional or sector-wide pivots, or even preemptively shift their organization structure (governance, legal, capital, and people) to separate operations across geopolitically aligned theaters in case they need to suddenly sever regional ties.
Building a dedicated functional group. Companies that quickly adapt to geopolitical disruptions often have dedicated teams focused on monitoring global changes, forecasting, and scenario planning. These teams, led by a geopolitics officer, keep senior leaders and the board informed for swift responses. They ensure the company stays ahead of changes and seizes opportunities. At the October 2024 conference of the Institute of International Finance, JPMorgan Chase CEO Jamie Dimon noted that his team runs scenarios and would characterize the current geopolitical risks as “treacherous.” Regular discussions on geopolitical risks and opportunities help in quick decision-making, fostering a culture of resilience and positioning the organization to thrive amid global uncertainties.
Establishing a crisis response playbook. Another trait of a successful organization is codifying the scenario-planning exercises into a playbook, which provides a starting point for assessing the impact of conflicts, tariffs, or other shifts. Such a playbook can equip leadership teams with the critical tools for the first 24, 48, and 72 hours following a core operational disruption.
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 time of publishing, countries worldwide are actively revising tariff and trade policies. Final outcomes and implications for government, business, and individuals are highly uncertain.
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