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Preamble
This 3-part blog post is based on a Eurasia Group report titled ‘Top Risks for 2026’. Link at the end.
About Eurasia Group. [Quote]. Today’s geopolitical environment is increasingly complex, with risks coming at an accelerated pace as the world order undergoes significant change. It has never been more important for business decision-makers and investors to incorporate political risk into their strategies to spot the opportunities and manage the risks that politics creates—and to lead their organizations through turbulent times. Eurasia Group’s advisory and consulting business is built upon a research platform of leading political risk analysts and management consultants with deep country and sector expertise. [Unquote]
Part II: Economics, Trade and Technological Competition in the 2026 Risk Landscape
In a world increasingly defined by political volatility, economic policies and trade structures have become central battlegrounds for influence and power projection. Eurasia Group’s Top Risks 2026 underscores that economic strategy, from trade agreements to technology leadership, is not a backdrop to geopolitics but a driving force shaping the global order.
Risk #6: State Capitalism with American Characteristics
Traditionally, state capitalism is associated with countries like China. However, Eurasia Group’s forecast suggests that the United States is increasingly adopting interventionist, state-directed economic policies — a form of state capitalism with distinctly American traits.
Key Features
- Targeted government support for strategic industries
- Regulatory leverage used to benefit selected firms
- Trade and investment agreements tied to economic objectives
This approach resembles economic strategies more interventionist than typical U.S. laissez-faire models. This shift reflects a desire to shield domestic industries, maintain competitiveness, and balance against rising powers.
The Broader Implication
State capitalism in this sense:
- Redraws the boundary between public and private sectors.
- Changes how global economic competition is framed.
- Signals that purely free-market models are giving way to hybrid systems.
As companies and governments adjust, economic policy itself becomes a strategic tool of geopolitical influence.
Risk #7: China’s Deflation Trap and Industrial Influence
The global economy is sensitive to China’s trajectory. One risk posited by analysts is that Beijing could face persistent deflationary pressures, driving it to rely even more on export-led growth to bolster domestic indicators.
In practical terms, this could mean:
- A surge of low-cost manufactured goods flooding global markets
- Pressure on non-Chinese producers’ profit margins
- Long-term competitiveness advantages accruing to Chinese industries
This risk has significant implications for global supply chains, pricing power, and industrial policy, especially in regions where Chinese manufactured infrastructure is central to development planning.
Risk #8: Zombie USMCA – North American Trade in Limbo
Trade uncertainty is another destabilizing economic risk for 2026. Eurasia Group highlights what it calls the “Zombie USMCA” scenario, where the United States-Mexico-Canada Agreement continues in a state of uncertainty without meaningful extension or renegotiation.
Why This Matters:
- Firms struggle to make long-term investment decisions.
- Predictability in supply chain planning is compromised.
- Bilateral pressures could supplant regional trade logic.
Despite apparent continuity in trade terms, the lack of a durable, coherent agreement creates persistent uncertainty, punishing business planning and reducing economic confidence across North America.
Risk #9: AI Business Models and Societal Impact
Technological competition constitutes a unique economic and societal risk in its own right. Eurasia Group highlights the risk that AI companies may adopt extractive revenue models, prioritizing engagement and monetization over neutral public value.
Unlike the early days of the internet, where social media commoditized attention, AI systems powered by advertising or pay-to-influence strategies could:
- Shape public opinion with less transparency
- Amplify disinformation more efficiently
- Undermine shared notions of truth
This risk sits at the intersection of economic incentives and societal outcomes — reminding us that economic competition in technology isn’t only about innovation, but about governance models and ethical frameworks.
Risk #10: Water as a Strategic Economic Lever
One of the more unexpected but consequential risks identified for 2026 is the weaponization of water. Eurasia Group points to escalating competition over freshwater resources in Asia and Africa, compounded by weak international governance frameworks.
Economic Implications
Water scarcity affects:
- Agriculture productivity
- Industrial operations
- Population distribution
- Migration pressures
With nearly half the world under water stress and treaties like the Indus Waters Treaty increasingly strained, competition over this essential resource could escalate into broader regional tensions that have economic and security dimensions.
Conclusion: Economic Risks as Geopolitical Forces
Economic and trade trends in 2026 cannot be divorced from the broader geopolitical context. State capitalism, trade uncertainty, technological competition, and resource scarcity are not isolated economic phenomena; they are shaping the geopolitical terrain itself.
As governments and businesses operate in an environment where economic policy is a strategic weapon, understanding and adapting to these risks becomes essential to resilience.
Concluded.
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