The relationship between governments and markets has changed in a big way. It used to be that governments set the rules and businesses followed them. Now, things are more complicated. Governments are getting directly involved, choosing which industries to support, steering investments, and using trade policy as a tool. For businesses planning, it is crucial to understand this new reality.
From Laissez-Faire to strategic intervention
The United States has combined strong government action with dealmaking to create a new approach to industrial strategy. By 2026, this way of doing things will be spreading around the world. What began in America is now showing up in Europe, Asia, and other regions. The era of neutral, rules-based trade is being replaced by a more deal-focused approach.
The implications for businesses are substantial. When state actors are directly involved in favouring certain industries or penalising others, conventional competitive strategy becomes insufficient. Companies now need to factor in political relationships, regulatory alignment, and government priorities alongside the usual considerations of cost, quality, and market access.
Trade policy as a weapon
The average effective US tariff rate jumped from 2.4 per cent in late 2024 to about 22 per cent in early April 2025, its highest level in approximately a century, before a series of trade agreements reduced it to around 15 per cent by year-end. That kind of volatility does not just affect import costs. It disrupts investment planning, destabilises supply chains, and forces companies to maintain a level of strategic agility that was simply not required a decade ago.
Since 2020, around 18,000 trade measures have been introduced globally, with technical regulations and sanitary standards now affecting about two-thirds of world trade. For smaller exporters and businesses in lower-income economies, navigating this environment requires resources that many simply do not have.
The digital economy catches up
Industrial policy is not confined to manufacturing and commodities. The digital economy is increasingly subject to the same logic of strategic state intervention. The European Commission has re-emphasised technological sovereignty as an important principle in recent EU strategies, reflecting a view that digital infrastructure is as strategic as steel or semiconductors.
This plays out in real and practical ways for online businesses. Platforms operating across multiple jurisdictions now face overlapping national mandates, licensing requirements, and digital taxation frameworks. Those who adapt well tend to be the ones who treat compliance not as a burden but as a competitive differentiator. The broader online entertainment and digital services sector has been a particularly visible arena for this trend. Operators such as Betsson LT exemplify how digital businesses are recalibrating their structures to align with the increasingly assertive role of national and supranational regulators in shaping how digital commerce operates.
The risk for business leaders
For 2026, 64 per cent of INSEAD faculty identified geopolitical crises as the leading threat to business, while 24 per cent said geopolitical challenges also represented a top area for businesses to address directly. The gap between those two figures is telling. Most executives see the danger but feel limited in their ability to respond. That sense of constraint is itself a strategic problem.
The businesses best positioned for this environment are those that have moved beyond passive monitoring of policy shifts to active engagement with the regulatory and political landscape. Understanding which governments are likely to intervene, in which sectors, and with what tools is no longer the job of a government affairs team tucked away in a corner office. It has become a core leadership competency.