Kevin Phillips considers what could be the start of the biggest shift in the global balance of power in decades. In doing so, he falls victim to the same set of constantly changing circumstances businesses need to start getting comfortable with in today’s new world order.
Author’s note: As an illustration of my point, writing this article has felt like chasing a moving target. The facts have changed daily between brainstorming the content, doing additional research, and getting a first draft down. Undoubtedly, they will change again during the editing process and before this is published. Please forgive the factual inaccuracies in this. To get the article written, and to stay sane, I needed to choose a moment in time to write from (in this case, 3 February 2025 – pre-US business hours, and then updated on 11 February 2025, pre-US business hours). It’s not ideal, but it does illustrate the conundrum businesses face when they try to pin down a set of facts to use as a basis for forecasting and budgeting.
It’s not an exaggeration to suggest that the global political and economic landscape is undergoing its most significant transformation since the fall of the Berlin Wall. After decades of increasing interconnectedness, we're witnessing what appears to be a dramatic swing towards nationalism and economic isolationism. The implications for business planning and forecasting are profound, and companies need to start preparing now for multiple possible futures.
Signs of a shifting world order
The indicators of this shift are becoming impossible to ignore. What started with Brexit – the decision that saw the UK distance itself from its largest trading partner – has evolved into a broader pattern of economic nationalism. The latest and most significant development is the United States' announcement of new trade tariffs: 25% on goods from Mexico and Canada (almost immediately paused for 30 days), and 10% on Chinese imports, with potential expansion to the UK and EU.
The response has been swift, and predictable. Canada and Mexico threatened retaliatory tariffs, while China has announced "corresponding countermeasures" and plans to challenge the decision through the World Trade Organization. On 4 February, China imposed 15% tariffs on coal and liquefied natural gas exports to the US, and 10% tariffs on oil and agricultural machinery, as well as launching an antitrust investigation into Google. Markets in Asia and Europe have tumbled amid the uncertainty, with the Peterson Institute for International Economics projecting that these tariffs could reduce US GDP by $255 billion over the next four years – making this something of a pyrrhic victory for newly inaugurated President Trump.
One has to wonder how this supports his plan to make America great again.
And this is not an isolated strategy. In parallel the US has withdrawn from WHO, defunded USAID and other international development funds, withdrawn from the OECD’s minimum global tax deal, banned social media platform TikTok, and insisted on the renaming of the Gulf of Mexico (Google Maps, accessed in the US, displays it as the Gulf of America.)
A new world emerging
But nature dislikes a vacuum, and as traditional economic relationships and supply chains fracture and dissolve, new ones are likely to form. The BRICS nations appear increasingly ready and able to step into any gaps left by these global divorces. Beijing has already signalled its willingness to deepen economic ties with Canada as trade tensions escalate with the United States.
We’ve already seen what this shifting balance of power could look like. China's recent launch of DeepSeek – a lower-cost alternative to ChatGPT – caused more than $700 billion to be wiped from the value of US tech giants in a single day.
This raises an interesting question: if traditional trade relationships continue to deteriorate, how quickly will new ones form? And once new supply chains and markets are established, how likely are countries to revert to previous arrangements, even if conditions improve?
Planning in an uncertain world
For businesses and their accountants, this new reality demands a fundamental shift in planning approaches. Traditional budgeting processes often rely on historical data and relatively stable assumptions about market conditions. But how do you plan effectively when tariffs can change overnight, or when entire supply chains might need restructuring?
The key questions for businesses now include:
· Do we need to diversify our supply chains across multiple regions to reduce risk? What's the cost-benefit analysis of certainty versus efficiency?
· Should we prepare multiple budget scenarios based on different tariff outcomes? If so, what triggers should we establish for switching between scenarios?
· How do we balance the potential benefits of cheaper supplies or larger markets against the increasing compliance and political risks of international trade?
· What opportunities might emerge from this reshaping of global trade? Are there gaps we could fill or new markets we could enter?
A new approach to forecasting and budgeting
Perhaps the most crucial shift needed is in how we think about forecasting and budgeting. Rather than seeing this as an annual exercise in prediction, we need to view this as a dynamic tool for scenario planning. This means developing flexible frameworks that can adapt quickly to changing circumstances while maintaining enough structure to guide decision-making.
Last month, I wrote about the science and art of forecasting, arguing that the most valuable forecast isn't the one that proves the most accurate but the one that best helps us prepare for multiple possible futures. And that instead of predicting exactly what will happen, we need to build the capability to respond effectively to whatever does happen.
As accountants, our role must evolve from being guardians of historical accuracy to becoming strategic advisers who can help businesses navigate this uncertainty. This means developing new skills in scenario planning, risk assessment, and strategic analysis.
Wherever the pendulum swing lands, the end of globalisation as we know it isn’t just an abstract concept. Its impact will show up in every spreadsheet, forecast, and budget we work with. Today, as accountants, we need to do more than just track the numbers. We need to help our clients make sense of what's happening and adapt accordingly. The rulebook for international trade is being rewritten, and our job is to make sure businesses have the financial flexibility to handle whatever comes next.
As published AccountingWeb - February 2025
Commentaires