The New Cost of Geopolitics
War, Sanctions, Tariffs and the Changing Economic Balance Between the United States and Europe
The global economy is entering a new phase.
For decades, finance, trade and investment were increasingly built around the assumption that economic integration would continue to deepen. Capital could move across borders, companies could build global supply chains, energy could be sourced internationally, and financial institutions could operate within an increasingly interconnected system.
That assumption is now being challenged.
War, sanctions, energy shocks, defence spending, tariffs, strategic competition and financial fragmentation are becoming structural economic variables.
The result is not simply slower growth.
It is a higher cost of uncertainty.
After more than four decades working across finance, corporate management, international banking and financial services, I believe that this is one of the most important changes facing financial professionals, investors and business leaders today.
The central question is no longer simply whether the United States or Europe will grow faster.
The more important question is:
Which economic system will prove more resilient in a world where geopolitics increasingly determines the cost and direction of capital?
The economics of war
Europe is experiencing perhaps the most profound change in its economic priorities in decades.
The war in Ukraine has transformed the European debate around defence, energy security, industrial capacity and strategic autonomy.
European Union defence expenditure reached approximately €418 billion in 2025 and is projected to rise to €454 billion in 2026, equivalent to around 2.4% of EU GDP. Defence investment is also increasing rapidly.
From a strategic perspective, this is understandable.
European countries need stronger defence capabilities.
But economics requires us to recognise the other side of the equation.