The world is in a “geopolitical recession.” Here’s what this means for businesses:

• Due to changes in global power relations, the world has entered a “geopolitical recession.”

• Experts said on a Goldman Sachs podcast that the U.S.-China rift is having a bigger impact on business than at any other time in history.

• “Every company in every region is caught in the crossfire of geopolitics. This is new.”

The geopolitical pot is boiling over with tensions between the US and China, war between Russia and Ukraine, and escalating conflict in the Middle East.

Experts said on a Goldman Sachs podcast that rising geopolitical turmoil is increasingly concerning for markets and the economy.

According to one political scientist, rising levels of conflict are pushing the world into a “geopolitical recession” as global leadership shifts and power relationships become distorted.

“I think this is a geopolitical recession,” Eurasia Group’s Ian Bremer said on Goldman Sachs’ “Exchange” podcast. “The institutions we have all over the world are [which are] It aims to create a level of governance that is no longer aligned with the underlying balance of power in the world. ”

Driving the geopolitical downturn is the rise of China and the powers of the Global South, while Japan and Europe are in decline. And as that political drama unfolds, there are ripples throughout the economy.

“Every company in every region finds itself caught in the crossfire of geopolitics. This is new,” Jared Cohen, president of global affairs at Goldman Sachs, said on the show. “Unless you’re in the energy sector or the technology sector, you’re largely unaffected by these geopolitical dynamics.”

Cohen explained that in the era of hyperglobalization that dominated the world economy, the “geopolitical center of gravity” was primarily in the Middle East. But after COVID-19, the center of tension shifted to the rift between Washington and Beijing.

The fact that the most predictable state actors have also gone “off script” has also added to global uncertainty, creating a lack of trust.

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“Whereas before we could expect the economic interests of the United States and China to drive geopolitical outcomes, that has now been reversed,” Cohen said. “The domestic circumstances of both countries are driving their geopolitical ambitions, which has an impact on their economic conditions in the medium to long term.”

This has injected new instability into geopolitics, hitting businesses more than any other country in history.

Geopolitical challenges continue to rattle markets, with the latest developments in the Middle East sending oil prices soaring on Friday, and Red Sea attacks risk reigniting global inflation due to soaring shipping costs.

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