{
  "id": "S01",
  "slug": "geoeconomic-confrontation",
  "title": "Geoeconomic confrontation",
  "version": "0.2.0",
  "status": "active",
  "orientation": "downside",
  "family": "A",
  "short_title": "Geoeconomic confrontation",
  "thematics": [
    "economic-security-supply-chains",
    "information-integrity-social-cohesion"
  ],
  "likelihood_type": "systemic",
  "likelihood_note": null,
  "scores": {
    "likelihood_2y": {
      "band": 4,
      "rationale": "Escalation to Standard Severe (trade −20 per cent) within two years is plausible but not the base case after the 2025 truces."
    },
    "likelihood_10y": {
      "band": 5,
      "rationale": ""
    },
    "impact_systemic": {
      "level": 4,
      "rationale": "On the EBA and BoE calibrations."
    },
    "impact_national": {
      "level": 4,
      "rationale": "For trade-dependent middle powers."
    },
    "confidence": {
      "level": "high",
      "reason": "Well-documented instruments and precedents."
    },
    "priority": 16,
    "tier": "I",
    "source": "ginc-desk-v0.2"
  },
  "scorecard": {
    "onset": "rapid (weeks)",
    "duration": "3 years",
    "warning": "months",
    "scope": "global",
    "origin": "adversarial (great power)",
    "external_support": "partial",
    "policy_response": "current plans",
    "recovery_horizon": "years"
  },
  "summary": "Tariffs, export controls, investment screening and sanctions escalate between the two largest economies until the trading system splits into aligned blocs. Third countries are forced to choose suppliers, standards and payment rails. World trade volumes fall by a fifth and the price of neutrality rises every quarter. This is the WEF Global Risks Report 2026's top risk on every horizon to 2028.",
  "narrative": {
    "dateline": "October 2028",
    "text": "The third tariff round lands on a Tuesday and by Friday the shipping lines have repriced every contract into the Pacific. Export licences for lithography equipment, rare earth magnets, cloud compute and gene sequencers now need sign-off on both sides, and sign-off is political. Secondary sanctions reach banks in Jakarta, Lagos and São Paulo that cleared transactions for the wrong counterparties; two of them lose dollar correspondent accounts in a week. Treasury officials in middle powers run the same spreadsheet: which bloc buys more of what we sell, which one owns the standards our factories run on, and which one holds our reserves. Ministers announce 'balanced alignment' and are punished by both sides for it. Customs systems that were built for tariff codes now carry origin audits, end-user certificates and dual-use attestations; clearance times double. Inflation runs a point and a half above target in the aligned economies and three points above in the countries that import from both blocs. The IMF's October outlook cuts world trade growth for the third year running and uses the word 'fragmentation' 41 times."
  },
  "anchors": [
    {
      "shock_id": "us-liberation-day-tariff-package-2025",
      "date": "2 April 2025",
      "event": "US 'Liberation Day' tariff package",
      "what_happened": "Broad reciprocal tariffs; US effective tariff rate rose to its highest level since the 1930s; retaliation and partial truces followed",
      "calibrates": "onset, scope, policy volatility"
    },
    {
      "shock_id": "china-rare-earth-controls-2025",
      "date": "4 April and 9 October 2025",
      "event": "China rare earth export controls",
      "what_happened": "Licensing of heavy rare earths, then an extraterritorial regime; suspended for a year after the 30 October 2025 leaders' meeting",
      "calibrates": "export controls as escalation instrument"
    },
    {
      "shock_id": "us-china-tariffs-2018",
      "date": "2018–2019",
      "event": "US–China tariffs",
      "what_happened": "Tariffs on roughly US$360 billion of Chinese goods and retaliation; trade diversion to Vietnam and Mexico",
      "calibrates": "duration, diversion effects"
    },
    {
      "shock_id": "china-australia-trade-coercion-2020",
      "date": "2020–2021",
      "event": "China–Australia trade coercion",
      "what_happened": "Barriers on barley, wine, coal, lobster and timber",
      "calibrates": "coercion against a middle power"
    },
    {
      "shock_id": "eba-2025-adverse-scenario",
      "date": "January 2025",
      "event": "EBA 2025 adverse scenario",
      "what_happened": "'Worsening of geopolitical tensions' and protectionism: EU GDP −6.3 per cent cumulative over three years, unemployment +6.1 points",
      "calibrates": "Standard Severe macro path"
    },
    {
      "shock_id": "bank-of-england-stress-test-2025",
      "date": "March 2025",
      "event": "Bank of England 2025 stress scenario",
      "what_happened": "World trade volumes −20 per cent, world GDP −2 per cent",
      "calibrates": "trade volume shock"
    }
  ],
  "parameters": {
    "common": {
      "severity": {
        "major": "major",
        "severe": "severe",
        "extreme": "extreme"
      },
      "duration": {
        "major": null,
        "severe": "3 years",
        "extreme": null
      },
      "onset": {
        "major": null,
        "severe": "rapid (weeks)",
        "extreme": null
      },
      "warning": {
        "major": null,
        "severe": "months",
        "extreme": null
      },
      "scope": {
        "major": null,
        "severe": "global",
        "extreme": null
      },
      "origin": {
        "major": null,
        "severe": "adversarial (great power)",
        "extreme": null
      },
      "external_support": {
        "major": null,
        "severe": "partial",
        "extreme": null
      },
      "concurrency": {
        "major": null,
        "severe": "standalone",
        "extreme": null
      },
      "policy_response": {
        "major": null,
        "severe": "current plans",
        "extreme": null
      },
      "recovery_horizon": {
        "major": null,
        "severe": "years",
        "extreme": null
      }
    },
    "specific": [
      {
        "name": "Share of bilateral trade under tariffs or controls",
        "default": "60 per cent",
        "range": "20–100",
        "unit": "per cent",
        "note": null
      },
      {
        "name": "Number of aligned blocs",
        "default": "2",
        "range": "2–3",
        "unit": null,
        "note": null
      },
      {
        "name": "Services and finance included",
        "default": "no",
        "range": null,
        "unit": null,
        "note": "yes at Extreme"
      },
      {
        "name": "Secondary sanctions on third countries",
        "default": "partial",
        "range": "none–full",
        "unit": null,
        "note": null
      },
      {
        "name": "Standards and payment-rail bifurcation",
        "default": "partial",
        "range": null,
        "unit": null,
        "note": null
      }
    ]
  },
  "transmission": [
    "Tariffs and controls raise input costs and cut export volumes.",
    "Third-country firms lose access to one bloc's components or markets.",
    "Secondary sanctions disrupt correspondent banking and payments.",
    "Investment screening blocks capital flows and acquisitions.",
    "Standards diverge, raising compliance cost and stranding equipment.",
    "Diplomatic alignment is priced into trade and finance terms."
  ],
  "loading": [
    {
      "dimension": "Hard",
      "domain": "critical-technology",
      "load": "High",
      "channel": "loss of access to controlled inputs and tools"
    },
    {
      "dimension": "Hard",
      "domain": "defence-security",
      "load": "Medium",
      "channel": "defence supply chains re-routed; alliance friction"
    },
    {
      "dimension": "Hard",
      "domain": "strategic-infrastructure",
      "load": "Medium",
      "channel": "ports and customs capacity; standards divergence"
    },
    {
      "dimension": "Soft",
      "domain": "government-effectiveness",
      "load": "High",
      "channel": "trade negotiation, customs, sanctions compliance, industrial policy"
    },
    {
      "dimension": "Soft",
      "domain": "influence-cohesion",
      "load": "High",
      "channel": "alignment pressure; diplomatic bandwidth"
    },
    {
      "dimension": "Soft",
      "domain": "human-capital",
      "load": "Low",
      "channel": "talent mobility restrictions"
    },
    {
      "dimension": "Economic",
      "domain": "industry-trade-supply",
      "load": "High",
      "channel": "volumes, diversion, re-shoring cost"
    },
    {
      "dimension": "Economic",
      "domain": "macro-financial",
      "load": "High",
      "channel": "inflation, reserves composition, payments access"
    },
    {
      "dimension": "Economic",
      "domain": "energy-resources",
      "load": "Medium",
      "channel": "commodity price volatility and export bans"
    }
  ],
  "stakeholders": {
    "government": {
      "exposure": "Trade dependence and alignment",
      "actions": [
        "Map bloc exposure by product and payment rail",
        "Pre-negotiate exemptions",
        "Build customs capacity"
      ],
      "watch": [
        "Effective tariff rate",
        "Licence denial rates"
      ],
      "relevance": 4
    },
    "technology": {
      "exposure": "Controlled inputs and foreign standards",
      "actions": [
        "Dual-qualify suppliers",
        "Segment product lines by bloc"
      ],
      "watch": [
        "Entity-list additions",
        "End-user rules"
      ],
      "relevance": 4
    },
    "investors": {
      "exposure": "Earnings of trade-dependent sectors and sovereign spreads of non-aligned states",
      "actions": [
        "Stress portfolios on a 20 per cent trade-volume fall"
      ],
      "watch": [
        "Tariff announcements",
        "FX of middle powers"
      ],
      "relevance": 5
    },
    "public": {
      "exposure": "Prices and jobs in export sectors",
      "actions": [
        "Household budget resilience"
      ],
      "watch": [
        "Food and fuel prices"
      ],
      "relevance": 3
    }
  },
  "regions": [
    {
      "region": "north-america",
      "exposure": "Medium",
      "rationale": "Initiator and target; diversified"
    },
    {
      "region": "europe",
      "exposure": "High",
      "rationale": "Export-dependent, caught between blocs"
    },
    {
      "region": "china",
      "exposure": "High",
      "rationale": "Initiator and target; export engine"
    },
    {
      "region": "indo-pacific",
      "exposure": "High",
      "rationale": "Supply-chain hub for both blocs"
    },
    {
      "region": "south-asia",
      "exposure": "Medium",
      "rationale": "Beneficiary of diversion, exposed to controls"
    },
    {
      "region": "gulf-middle-east",
      "exposure": "Medium",
      "rationale": "Energy demand and alignment pressure"
    },
    {
      "region": "africa",
      "exposure": "Medium",
      "rationale": "Commodity prices, aid and finance alignment"
    },
    {
      "region": "latin-america",
      "exposure": "Medium",
      "rationale": "Commodities; USMCA uncertainty"
    },
    {
      "region": "russia-eurasia",
      "exposure": "Medium",
      "rationale": "Already partly decoupled"
    }
  ],
  "indicators": [
    {
      "name": "Trade-weighted effective tariff rates",
      "source": "WTO, Yale Budget Lab",
      "threshold": null,
      "cadence": null
    },
    {
      "name": "Export-control notices and entity-list additions",
      "source": "BIS, MOFCOM",
      "threshold": null,
      "cadence": null
    },
    {
      "name": "Global Supply Chain Pressure Index",
      "source": "New York Fed",
      "threshold": null,
      "cadence": null
    },
    {
      "name": "Share of world trade between rival blocs",
      "source": "IMF fragmentation indicators",
      "threshold": null,
      "cadence": null
    },
    {
      "name": "Correspondent banking relationship counts",
      "source": "BIS",
      "threshold": null,
      "cadence": null
    },
    {
      "name": "WTO disputes filed",
      "source": null,
      "threshold": null,
      "cadence": null
    },
    {
      "name": "Investment screening rejections",
      "source": null,
      "threshold": null,
      "cadence": null
    }
  ],
  "compounds": {
    "triggers": [
      {
        "id": "S02",
        "note": null
      },
      {
        "id": "S05",
        "note": null
      },
      {
        "id": "S09",
        "note": null
      },
      {
        "id": "S13",
        "note": "market-concentration variant"
      }
    ],
    "triggered_by": [
      {
        "id": "S07",
        "note": "populist turn"
      },
      {
        "id": "S06",
        "note": null
      }
    ],
    "amplified_by": [],
    "triggered_by_other": [],
    "amplifying_trends": [
      "supply-chain concentration",
      "industrial policy competition",
      "polarisation"
    ]
  },
  "open_questions": [
    "Whether services and finance belong in Standard Severe or only Extreme.",
    "How to score nations that benefit from diversion.",
    "Whether 'alignment pressure' is a capability load or a trend."
  ],
  "commentary": null,
  "overview": {
    "source": "ginc-desk-v0.2",
    "lenses": {
      "political": "Middle powers are pressed to **choose a bloc**. Ministers who announce 'balanced alignment' are punished by both sides.",
      "economic": "World trade volumes fall by **a fifth**. Inflation runs above target and secondary sanctions cut banks off from dollar correspondent accounts.",
      "social": "Prices rise and **export-sector jobs** go. Households in countries that import from both blocs carry the highest inflation.",
      "technological": "Export licences for lithography, rare earth magnets, cloud compute and gene sequencers become political. **Standards diverge** and equipment is stranded.",
      "legal": "Customs systems built for tariff codes now carry **origin audits**, end-user certificates and dual-use attestations. Clearance times double.",
      "environmental": "Commodity prices swing and **export bans** spread to energy and resource inputs."
    },
    "regions": {
      "north-america": "Initiator and target at once. A **diversified economy** absorbs the tariffs, but input costs rise and retaliation lands on exporters.",
      "europe": "Export-dependent and **caught between blocs**: firms lose components from one side and markets on the other.",
      "china": "Initiator and target. The **export engine** is hit by tariffs and controls, and answers with licensing of its own.",
      "indo-pacific": "The **supply-chain hub** for both blocs. Factories segment product lines and requalify suppliers bloc by bloc.",
      "south-asia": "Gains from **trade diversion**, while exposed to controls on the inputs its new factories need.",
      "gulf-middle-east": "Energy demand softens and **alignment pressure** rises on suppliers, standards and payment rails.",
      "africa": "Commodity prices swing. Aid and finance come with **alignment conditions** and banks risk their correspondent accounts.",
      "latin-america": "Commodity exporters sell to both blocs under **USMCA uncertainty**. Banks that clear for the wrong counterparty are sanctioned.",
      "russia-eurasia": "Already **partly decoupled**; the wider split adds less new exposure here than elsewhere."
    }
  },
  "history": [
    {
      "edition": 2027,
      "rank": 5,
      "L2y": 4,
      "L10y": 5,
      "impact_systemic": 4,
      "impact_national": 4,
      "confidence": "high"
    }
  ],
  "changelog": [
    {
      "version": "0.2.0",
      "date": "2026-10-02",
      "change": "Entered the Library at v0.2 with GINC desk scores."
    }
  ],
  "citation": "GINC (2027). Scenario S01 Geoeconomic confrontation, Scenario Library v0.2. scenarios.ginc.org/library/geoeconomic-confrontation"
}