The Diplomat author Mercy Kuo regularly engages subject-matter experts, policy practitioners, and strategic thinkers across the globe for their diverse insights into U.S.-Asia policy. This conversation with Rodney Faraon – partner and chief creative officer at Crumpton Global LLC, a corporate advisory firm in metro Washington, D.C. – is the 452nd installment in “The Trans-Pacific View Insight Series.”
Navigating Business Risks Amid U.S. Foreign Policy Shifts
Companies thriving in today’s geopolitical climate are those that go beyond merely consuming news—they are actively preparing for disruptions. Geopolitical risk has become a core business consideration, with sanctions, trade wars, and regulatory shifts rapidly altering industry landscapes. Organizations that fail to anticipate these changes risk losing their competitive edge.
Leading firms are investing in internal intelligence operations to track policy changes, assess risk exposure, and proactively adapt to market fluctuations. Swift policy shifts, such as tariffs, security crackdowns, or export bans, can fundamentally reshape market dynamics. While agility is crucial, foresight offers an even greater advantage.
Companies with substantial exposure to China have diversified into markets like Vietnam, Mexico, and India, leveraging emerging incentives and infrastructure investments. Meanwhile, regulatory policies are being increasingly wielded as economic tools, favoring businesses that can adapt preemptively to these changes. In this climate, the most successful companies are not merely reacting to policy changes—they are shaping their strategies around them.
USMCA and Tariffs: The Impact on North American Trade and China
Tariffs have transformed global trade into an unpredictable landscape, requiring businesses to continuously reassess costs, alliances, and supply chains. The U.S.-Mexico-Canada Agreement (USMCA) was originally designed to provide stability, but new U.S. tariffs on Canada and Mexico are undermining its intended purpose. Rather than fostering a cohesive trade framework, North America is now operating under a shifting patchwork of rules, forcing companies to rethink their long-term strategies.
Tariffs on China have redirected supply chains toward Mexico, but new tariffs on Mexico introduce fresh uncertainties. A key question remains: if Chinese manufacturers relocate to Mexico, will the U.S. recognize them as local enterprises under USMCA, or will they still face regulatory scrutiny akin to mainland Chinese firms? The answer will determine whether Mexico remains a viable nearshoring destination or becomes another regulatory hurdle.
Security concerns further complicate economic uncertainty. The U.S. designation of narcotrafficking cartels as terrorist organizations introduces new legal and compliance risks for cross-border operations. If companies unknowingly interact with cartel-affiliated entities, they may face severe legal consequences, creating a chilling effect on investment and trade.
At this stage, USMCA is increasingly seen as a fragile framework, overshadowed by political and economic friction. Companies must navigate an evolving landscape that combines supply chain management with trade policy uncertainties and national security imperatives.
Global Supply Chain Risks in an Era of Transactional Trade
The “just-in-time” supply chain model has given way to a “just-in-case” approach, emphasizing resilience over efficiency. Companies that once relied on streamlined, single-source suppliers are now diversifying their operations, but this shift introduces challenges such as fragmentation, price volatility, and increased regulatory scrutiny.
U.S. trade policy has shifted from a stable economic framework to a dynamic bargaining tool. Tariffs, export controls, and industrial policies are increasingly being used for short-term geopolitical leverage, turning trade into a contested space. Supply chains for critical resources—including semiconductors, rare earth minerals, and advanced technologies—are now wielded as instruments of power.
The greatest uncertainty remains the White House itself. A company aligned with U.S. interests today may find itself targeted tomorrow due to shifting political priorities. The Trump administration’s transactional decision-making approach has often resulted in unpredictable policy shifts, compelling businesses to remain flexible and forward-thinking. In a landscape where trade agreements and regulatory environments can change overnight, companies must prioritize adaptability alongside efficiency and scale.
China-U.S. Decoupling and the Shifting Offshoring/Nearshoring Landscape
Decoupling between China and the U.S. is not a formalized strategy but a reactive process driven by political pressures and ad hoc policy measures. Export controls, investment restrictions, and reshoring incentives are accelerating efforts on both sides to reduce economic interdependence. While companies are not fully withdrawing from China, many are diversifying operations by expanding into Vietnam, India, and Mexico while maintaining a presence in the Chinese market.
China, meanwhile, is doubling down on domestic innovation, particularly in semiconductors and AI, while U.S. technology firms face increasing restrictions on exports and investments. Washington is tightening scrutiny over U.S. capital flows into China, with new measures targeting private equity, venture capital, and even publicly traded securities. Pension funds and university endowments are now under regulatory examination, raising stakes for financial institutions that previously considered themselves beyond government oversight.
If these restrictions continue, U.S. capital will face mounting pressure to divest from China, reshaping global financial markets. Investors are already reassessing their exposure, and private equity firms anticipate a more cautious fundraising environment. At the same time, the administration has directed the Committee on Foreign Investment in the United States (CFIUS) to increase oversight on inbound investments, signaling a broader effort to restrict Chinese access to critical U.S. industries, including biotechnology and raw materials.
For businesses, the key takeaway is clear: decoupling is no longer solely about supply chains—it now extends to capital, investment, and financial entanglements. Companies that recognize this shift and adapt accordingly will be best positioned to navigate the evolving geopolitical landscape.
Managing Geopolitical Risk in the Asia-Pacific Region
In a rapidly evolving geopolitical environment, waiting for clarity is a losing strategy. The past decade has demonstrated that global markets can be reshaped overnight by executive orders, trade restrictions, or shifting alliances. Companies that hesitated in the face of uncertainty found themselves reacting rather than leading.
The Asia-Pacific region exemplifies this dynamic. While U.S. trade policy remains fluid, regional agreements such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are redefining economic engagement. These trade frameworks are shaping market access, supply chains, and regulatory environments, presenting both risks and opportunities. Companies that align with these structures rather than awaiting a definitive U.S. strategy will be best positioned for success.
Beyond trade, geopolitical risk increasingly intersects with consumer sentiment and regulatory enforcement. A single misstep in corporate messaging or supply chain decisions can trigger severe reputational and legal repercussions in key Asian markets. U.S. companies must recognize that market dynamics are being shaped by regional actors as much as by Washington.
The firms that will thrive in this environment are those that remain agile, monitor policy shifts closely, and develop proactive strategies independent of U.S. trade leadership. The Asia-Pacific region’s economic trajectory is being charted with or without direct U.S. involvement, and businesses that recognize and adapt to this reality will not only survive but secure a lasting competitive advantage.
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