In 2026, identifying geopolitical risk requires a shift from monitoring events to identifying signals that build up the pressure of geopolitical rifts between states and regional actors. This means, instead of analysing the implication of a conflict, experts now focus on identifying signs (or indicators) that could lead into a conflict. Learning from the recent US-Israel War on Iran which broke out on 28 February 2026, the war did not begin due to a single cause. Moreover, it did not break out in the span of one night, one week, or even one year. Similarly with other geopolitical rifts, there are many incidents that could lead to a greater conflict in the realm of international relations.
Geopolitical risk can be understood as “friction potentials resulting from political events, instability, or conflicts on financial markets, institutions and the global economy.” It comprises a variety of variables (be they local, regional or international) that will clash with business trajectory, and national or global instability. Social unrest, ethnic and religious clashes, stock crises, refugee and people displacement are some examples of the variables that disrupt a state’s efforts in maintaining stability and prosperity. In looking for a comprehensive understanding of the risk, the World Economic Forum’s Global Risk Report can be a valuable reference to identify imminent, moderate or low-scale risks that have been emerging in the international sphere.
The 21st edition of the report states that geoeconomic confrontation will be the top risk for 2026. The severity of the confrontation will depend on the developments arising from two occurrences namely, the 2026 tariff war and the US-China Summit.
2026 Tariff War
As mentioned, the report has listed that geoeconomic confrontation will be the number one concern for countries (p. 7). Geoeconomic confrontation can be understood as a state’s strategic use of economic instruments (such as trade restrictions, financial sanctions, and controls over technology and investments) to defend its national interest and geopolitical gain. Under the Trump 2.0 administration, massive new tariffs have been levied for US gain, aiming to reduce trade deficits, to encourage domestic manufacturing, and to provide leverage in international negotiations.
The recent US Supreme Court judgment in reversing sweeping tariffs towards Canada, China and Mexico, over illegal fentanyl trafficking from these countries (known as “fentanyl orders”) and for US trading countries (known as “the reciprocal order”) that introduced a 10% baseline global duty will be something to watch in the coming months. The Court has ruled that President Trump has exceeded his executive order by not going to the Congress for approval when introducing both tariffs. In the court’s opinion, Trump’s defence on using the International Emergency Economic Powers Act (IEEPA) is not applicable as the situation could not be deemed a national emergency. The IEEPA grants any US President to administer economic matters of the US only when “national emergency has been declared for purposes of IEEPA, and not for any other purpose.” The introduction of fentanyl orders and reciprocal orders in 2025 were done when the US is facing no national emergency, hence were declared unconstitutional.
Receiving this backlash, the administration pivots to alternative legal authorities to maintain Trump’s agenda. This includes Section 122 of the Trade Act 1974 which grants the President the authority to impose temporary, broad-based trade barriers during the balance of payment period (p. 14). Secondly, the administration has carried out Section 301 of the same Act – probes on 16 world economies, alleging that these countries had the ability to overproduce goods that could be detrimental to American industries.
At the moment, there is a ‘wait and see’ attitude among US trading partners, as they anticipate the next US moves in tariff implementation. The European Union, for instance, is currently analysing the implications while maintaining a close work relation with the administration. US’ largest trading partner, China, refutes Washington’s claim in saying the countries have the capability to over produce and that will distort the US market. In China’s response, overcapacity does not exist for the country.
The introduction of the fentanyl and reciprocal orders signals that US transactionalism will be the trend as far as the Trump administration is in power. True, such a legacy might persist with future administrations, but what is clear, is that the Trump administration will not set down its campaign and efforts in their aim to “Make America Great Again” in two aspects. First, implementing the tariff will make American products more competitive, encouraging worldwide consumption. Higher demand for American products will motivate further investments into the US. Second, implementing tariffs macroeconomically reduces the US trade deficit, will increase production of US based-products and consequently create more jobs.
Many countries have interpreted these developments as signals to adopt nationally oriented economic strategies and more inward-looking approaches to trade and industrial policy. For instance, China’s 2025 Five-Year Plan emphasises self-sufficiency and technological leadership across ten strategic high-technology sectors.
2026 US-China Summit
US-China strategic competition remains one of the critical clashes for 2026 and onwards. Analysts believe that US intrusion into Venezuela and alarming focus towards other countries in Latin America is a tactic to curb Beijing’s influence in the region. Argentina, under US pressure had to suspend China’s radio telescope project in the San Juan province. Under this pressure, it is said that the Milei administration would prefer collaboration alignment with the US over China, although the radio telescope project has been in the works since 2015.
As mentioned, following the US Supreme Court judgment, all eyes are on the Trump administration’s next move. Will the administration retaliate by introducing alternate tariffs on China or will the administration strike a different deal with Beijing? These points are important in illustrating the dynamics of both superpowers and how the dynamics will affect the businesses around the world.
In May 2026, the US-China Summit is slated to take place. It is anticipated that discussions between Donald Trump and Xi Jinping will evolve around the tariff, taking into account, the ruling of the US Supreme Court. Xi is said to be in an advantageous situation following the Supreme Court decision. Beijing will have the upper hand in negotiations regarding the tariff.
It is also anticipated that the discussion will also touch on the issue of Taiwan. For decades, Taiwan’s autonomy has been a strategic ambiguity for the US. The US aims to deter China’s invasion of the island, while at the same time acknowledging the One China Policy. Recent Taiwan’s closer relationship with the US, especially regarding Taiwan’s military and arms spending, received censure from China. Although the Taiwan issue is a political security issue by context, any irrational behaviour from US, China and Taiwan will raise confrontation between US and China. Confrontation between these two superpowers will create economic instability which could impact other parts of the world.
Strategically, the 2026 Summit will be utilised by China in reaffirming China’s disapproval and to remind all parties of the existence of One China Policy. In earlier communications with Trump, Xi has made it clear that Taiwan is the most important issue in US-China relations. The Summit according to China, will be a platform to lead the United States into acknowledging China’s control over Taiwan.
Interpreting Important Signals to stay Resilient
Geopolitical risk manifests across many dimensions. This commentary has focused primarily on the 2026 tariff war and spheres of engagement by the world’s superpowers, drawing on the Global Risk Report 2026 as its principal analytical reference. This focus does not imply that other signals are less significant, nor that geopolitical indicators can be neatly ranked in importance. Rather, it acknowledges that in the highly contested year of 2026, economic leverage and spheres of engagement have become the thrust for any cooperation or competition. It is important to note, both are not exclusive of other risks. The 2026 US-Israel War on Iran is also an alarming indicator i.e. should the war fail to de-escalate, a global and a greater catastrophe will occur. This includes an unprecedented global energy and economic shock when a spike of oil prices could lead the oil-important-dependent economies into recession.
Resilience in 2026 and beyond depends on the ability to interpret emerging signals early and to respond proactively. Understanding these signals enables governments and businesses to move beyond reactive crisis management and toward strategic risk anticipation. In an era where economic interdependence can increasingly be weaponised, recognising when cooperation turns into vulnerability will be essential for sustaining stability and long-term prosperity.
