Geoeconomics Takes Center Stage at Davos: five takeaways

The 2025 World Economic Forum in Davos highlighted how geoeconomics – the idea that countries can leverage economic power to influence international politics and advance their strategic interests – is a defining force shaping the global economy today. 

According to the latest McKinsey Global Survey on economic conditions, business leaders rank geopolitical tensions as the most significant risk to economic growth. This sentiment reflects a world where the fragmentation of trade between geopolitically aligned blocs is reshaping global markets. Trade between Western and Eastern-aligned economies has declined, while trade within aligned blocs has intensified, highlighting the growing divides in international commerce.

Source: McKinsey, 2025

Amid this fragmentation trend, some messages were sent by political and business leaders who attended the meeting in Davos, and five main points could be distilled:

1. There is need to promote a closer alignment between words and deeds, in order to avoid mixed signals and escalation of tensions. Global politics is built around perceptions and expectations. For this reason, using empty threats as negotiating tactics, or failing to ‘walk the talk’ while chastising others, jeopardises relations. The mismatch has not only diplomatic, but also practical economic consequences. The importance of ‘saying what you mean, and doing what you say’ was emphasised, with slightly different formulations, by the President of the European Commission, Ursula von der Leyen, by Deng Xiaoxian, Vice Premier of the State Council of the People’s Republic of China, and by German Chancellor, Olaf Scholz.  
2. A new overarching narrative has emerged in global politics, which signals a more pragmatic approach to economic diplomacy. Narratives function as sewing threads that connect and organise apparently disparate events, giving them meaning. The narrative that international relations should be conceived as a tug-of-war between democracies and autocracies at the world stage seems to be withering. It is being substituted by a new narrative based on a choice between an open and integrated economic order on the one hand, or a fractured and protectionist order, on the other hand. Political voices in Davos favoured the latter option. Chancellor Scholz emphasised that ‘isolation comes at the expense of prosperity’ and pledged to defend free trade. Von der Leyen recognised that the world entered a “new era of harsh geostrategic competition”, and underscored the vital importance of enhancing Europe’s competitiveness. In parallel, she sent a “message to the world”, affirming that “if there are mutual benefits in sight (…) Europe is open for business”. In practice, this means fostering cooperation not only with “long-time like-minded friends, but with any country we share interests with”, including by seeking to “deepen our relationship with China, and, where possible, even to expand our trade and investment ties”, said the President of the EU Commission. It will be interesting to see how this renewed desire for openness will be harmonised with the EU’s risk-based economic security strategy. 
3. The primacy of geopolitical concerns could mean lesser focus on global development, requiring strengthened articulation among developing countries. In the last decades, reports by several international organisations have shown that the gap between developed and developing countries is widening, particularly in the context of the digital economy. As noted by the WEF, “the world fragmented further in 2023, [and] developing economies saw a decline in their share of trade and capital flows”.  Development was given high priority in speeches by the President of South Africa, Cyril Ramaphosa – who underscored that the United Nations Sustainable Development Goal on reducing inequality is “as much an economic imperative as it is a social imperative” – and by China’s Deng Xiaoxian. In the case of the EU, references to reinforcing partnerships in Latin America, for example, were placed in the context of trade agreements, not development-related investment and aid. If developed countries give less priority to development – US president Trump suspended development cooperation disbursements shortly after taking office, for example – this could enhance the importance of bodies such as the BRICS New Development Bank. It would also show the need to strengthen economic diplomacy skills in developing countries, especially to fine-tune investment facilitation domestically, and boost investment promotion abroad.  
4. For businesses, these geopolitical shifts present both risks and opportunities. Although several sessions in Davos highlighted the growing economic costs generated by a divisive geopolitical landscape, the need for businesses to adopt a proactive (rather than reactive) stance was also an important message. Global value chains are becoming longer, and this may create opportunities for the inclusion of new players. The rush for critical minerals may empower certain developing countries that have abundant resources of these materials to upscale their position in value chains. Nearshoring could provide opportunities to countries located in the proximity of economic powerhouses. These are examples that highlight the need for risk-mitigation to be accompanied by opportunity-seeking strategies. 
5. The contours of geoeconomics in the 21st century are yet to be defined. Geoeconomics will be part of the everyday glossary of countries and businesses in the foreseeable future. The origins of the term are attached to a power-politics mindset, in which self-centered approaches and zero-sum relations are expected. Nevertheless, the contemporary practice of geoeconomics is not necessarily attached to these historical and analytical moorings. Is it possible to conceive geoeconomics as the pursuit of resilience, security and also of positive-sum outcomes, or ‘win-win relations’? Would it be responsible and socially acceptable to put geopolitical competition ahead of existential imperatives, such as fighting climate change, and promoting the necessary energy transition? The answer to these questions could shape a more positive, sustainable, and inclusive understanding of geoeconomics – one that mainstreams both economic security and development, and that makes sense to the global majority. 

In Davos 2025, political leaders called for an open approach that fosters partnerships across geographies and like-mindedness. The importance of free trade and investment for economic growth was underscored. There is also need for businesses to strengthen their capacity of geopolitical assessment in order to seize opportunities. Amid geopolitical tensions and uncertainty, a positive tone resounded in the Swiss Alps.