Transportation Executives Must Now Consider Geopolitics in Their Planning Efforts

 For many years, Transportation executives have had to consider a range of variables in crafting their supply chain strategies. These variables have included the economy, carrier capacity, customer demand, interest rates, inflation, climate change, technology, energy costs, Ecommerce strategy, and availability of raw materials.

While geopolitical issues such as trade policies with NAFTA countries, the European Union and China have been having impacts on supply chains in the United States and Canada for the past several decades, transportation executives have been able to largely focus on domestic matters.

This has changed dramatically over the past year. A number of geopolitical forces are shaping strategies in board rooms throughout North America and internationally. They include:

1. The War in Ukraine

The war in Ukraine is now well into its second year. It has had significant impacts well beyond Russia and Ukraine. Ukraine is an important food supplier, particularly to African nations. Should the west, particularly the United States, not continue to support Ukraine financially and militarily at the required levels, this could result in not just the takeover of Ukraine by Russia, but the expansion of Russia’s incursions into other European nations.

2. The War in the Middle East

The incursion by Hamas into Israel took place on October 7 of this year and it has already had major effects throughout much of the world. Much of the Middle East is impacted by this war. The evolution of the war may undo some of Abraham Accords and delay the advancement of an Israeli/Saudi agreement. The war is, of course, having major impacts on Israel and Gaza. The Israeli economy is being impacted by having 8% of its citizens serving in the military. Gaza is being devastated by the daily bombing that has been taking place.

3. The rise of Anti-Semitism, Anti-Zionism and Anti-Palestinian Forces

The war in the Middle East has also triggered a rise in hate crimes and hate speech in many parts of the world. This is being manifested in assaults on people, schools, businesses, and other institutions.

4. China’s Political and Economic Agenda

President Xi, now China’s leader for life, has been flexing his political muscle and has been aligning himself and his country with Russia (and Iran). His country’s policies have made it increasingly difficult for foreign countries to conduct their commercial operations in China. President Xi is also positioning his country towards a takeover of Taiwan. While these forces are taking place, the Chinese economy is faltering. The world is watching to see if last week’s meeting between President Xi, President Biden and other world leaders will produce any softening in China’s international relations and business climate.

5. Health Issues

The arrival of Covid-19 had a major impact on the world’s economies and citizens, and on freight transportation over the past few years. This fall we are facing a combination of Covid, the Flu and RSV, a nasty respiratory illness that is most impactful on children and seniors. Only 15% of Americans have received a booster shot for Covid. It remains to be seen how these viruses will play out on North American citizens over the coming years.

6. Elections

There are 40 national elections scheduled for this year. These elections represent approximately 41% of the world’s population and 42% of the world's gross domestic product. One of the most important elections next year is in the United States where two unpopular candidates, Joe Biden and Donald Trump, will likely face off in a repeat of their contest three years ago. Trump is threatening to reach an agreement with Russia on the Ukraine situation and undo some of the democratic processes in place in America. There are also consequential elections in countries such as India, that many countries covet as a trading partner due to its large population.

As an example of the forces of disruption, Geert Wilders’ far-right, anti-Islam Party for Freedom (PVV) is on course to be the largest party in the Dutch parliament, with 37 seats in a major electoral upset whose reverberations will be felt around Europe. There will likely be other surprises and upsets as the year unfolds.

The Fallout from these Powerful Forces

Jennifer Welch, chief geo-economics analyst with Bloomberg Economics says the world faces perhaps its most tumultuous year in a generation from a geopolitical standpoint. In addition to these strains, governments and companies are engaged in a global competition to lock down supplies of raw materials needed to transition to cleaner energy and protect local industries.

Transportation executives must now evaluate these forces in their supply chain planning. What would a Trump election mean to American shippers? What impact would this have on the future of American policy on China, Taiwan, Russia, NATO, Ukraine, Immigration, and a host of other issues? How will company policies on the Israel-Hamas conflict impact on their business and customer-facing strategies? How will the geopolitical forces now shaping the world impact on each company’s products, markets, sourcing, pricing, speed to market and market communication strategies?

President Joe Biden has warned that the world is “facing an inflection point in history”. Some leaders are using terminology like the threat of World War III in describing the dangers that lie ahead. Smart companies need to consider these issues, in addition to all the standard supply chain issues, to steer their companies through what could be a very challenging year.

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