By FERNANDO NOGUEIRA DA COSTA*
The geoeconomics of globalization, with its complex interdependence and sensitivity to crises and conflicts, effectively creates barriers to the geopolitical expansion of major economic powers.
The geoeconomics of globalization, in fact, limits the geopolitical expansion of major economic powers, mainly by affecting the performance and valuation of shares of transnational companies and, consequently, their capitalization power. The economic interdependence created by globalization places companies and, by extension, national economies, in a vulnerable position to market fluctuations, geopolitical tensions and global economic instability.
This directly affects the capital needed to finance new investments and promote sustained growth. In the current case of the rise of the nativist and populist far-right to the US government, it is interesting to analyze the contrast between market forces, in this case represented by stock prices. big tech transnational corporations on a relevant stock exchange.
Donald Trump's campaign promise to greatly raise tariffs on Chinese imports, and the rise in inflation in the US, projected by economists, are problems in the global expansion of big tech. Six of the “magnificent seven” – Alphabet (Google’s parent company) with a market value of US$2,2 trillion, Amazon (US$2,2 trillion), Apple (US$3,4 trillion), Meta (US$1,4 trillion), Microsoft (US$3,1 trillion), Nvidia (US$3,6 trillion) and Tesla (US$926 billion) – invested in donations to Democrat Kamala Harris, except for Tesla, owned by billionaire Elon Musk, Donald Trump’s biggest supporter, including the use and abuse of its X.
In January 2021, after the invasion of the US Congress, Donald Trump was banned from the social networks Facebook and Instagram, controlled by Meta. For this reason, this social network was called the “enemy of the people” at the beginning of Donald Trump's campaign. He was also banned from the old Twitter, but later became X under the management of Elon Musk in support of the far right. He defends his interest in having a regulatory relaxation on anti-competitive issues, privacy and content monitoring.
As big tech expect the repeal of a decree regulating Artificial Intelligence in the US, signed by Joe Biden, in November 2023. Another practical measure by Donald Trump should occur in the command of regulatory agencies, stricter with big tech in the Joe Biden administration, accusing them of monopolies in e-commerce, cell phones, internet searches, etc. in antitrust and privacy lawsuits.
The relationship with billionaire investors from Silicon Valley also favors the scenario of relaxing antitrust laws. The elected billionaire knows the venture capital segment and criticizes the tougher regulatory stance for reducing the movements of acquisitions of startups by big tech.
A weakening of national laws and regulatory bodies in the US would lead to decisions around big tech, including antitrust and privacy lawsuits, to the American states. The regulatory vacuum would be occupied by the federative units and would create “regulatory havens” occupied by technology companies.
The state of Virginia, for example, has already offered tax breaks for the expansion of data centers, the foundations for the advancement of artificial intelligence. Another is Arizona, where semiconductor giants such as the American Intel, the South Korean Samsung and the Taiwanese TSMC have received billions of dollars in incentives from the Joe Biden administration to set up semiconductor factories, reducing their dependence on components from China.
Donald Trump should not change the injection of resources into the local semiconductor industry, but should redirect it to North American companies such as Intel.
However, it is necessary to analyze some of the main factors in this confrontation between the ultranationalist geopolitical ambitions of the new US government and the globalist geoeconomic reaction of transnational corporations. Some of them have market values only below the four largest GDPs: USA (US$ 27,361 trillion), China (US$ 17,795 trillion), Germany (US$ 4,456 trillion), Japan (US$ 4,213 trillion). The sum of the market values of the shares of the “magnificent seven” is US$ 16,8 trillion, a value almost equivalent to China’s annual GDP!
Economic globalization, with its complex supply chain networks and market interdependencies, means that the shares of transnational corporations are highly sensitive to regional, political and economic crises. Trade tensions, sanctions and geopolitical restrictions between major powers (such as the US and China) often result in falling share prices for these companies.
This devaluation reduces the market value of companies with international operations. By reducing their capitalization power, it affects their ability to make new investments in innovation and infrastructure for growth.
Geopolitical uncertainties such as sanctions, trade wars, nationalizations and abrupt changes in economic policies create an unfavorable environment for long-term investments. Investor confidence is essential for stock appreciation and stable capital flows.
When investors perceive heightened geopolitical risks, they tend to sell shares of companies exposed to these risks. This capital flight limits financing opportunities for the most affected companies.
Transnational corporations depend on a stable global economic cycle and sustained growth to maximize their profits and expand their operations. However, the globalized geoeconomy imposes a complex dependence on international macroeconomic conditions with cycles of uncertainty and fragility. In times of global crisis, such as the 2008 GCF or the 2020 pandemic crisis, there was a strong impact on the shares of transnational corporations, directly reflecting on their long-term investment capacity and affecting their operations at a global level.
Global geoeconomics, by establishing a network of international financial and investment flows, generates economic interdependence between countries. It creates a scenario in which major economic powers, such as the United States, China and the European Union, need to balance their global economic interests with their geopolitical ambitions.
Expansion or protection measures, such as the imposition of sanctions or tariffs, weaken the assets of domestic companies in global markets. If they reduce the market value of these companies, they become a barrier to financing expansion policies or geopolitical influence in the long term.
Globalization puts pressure on companies to seek profitability and maximize shareholder value in the short term. This approach conflicts with long-term investment strategies and sustainable development.
Many transnational corporations, especially those operating in capital-, energy- and manufacturing-intensive sectors, face the challenge of balancing profitability with the need to adapt to new environmental and social regulatory requirements. This pressure, imposed by the need to respond to global markets, is detracting from their support for geopolitical policies.
The expansion of new economic actors and the resurgence of regional self-sufficiency strategies (such as the “Made in China 2025” or the industrial policy of the European Union) create a fragmentation of economic globalization. This process imposes new barriers for transnational companies that need to face different regional regulations and protection policies. Fragmentation also reinforces geopolitical rivalry and thus creates uncertainty for investment and for the valuation of transnational assets.
The geoeconomics of globalization, with its complex interdependence and sensitivity to crises and conflicts, effectively creates barriers to the geopolitical expansion of major economic powers. Transnational corporations, when influenced by geopolitical fluctuations and global tensions, face difficulties in maintaining the value of their shares and, consequently, their ability to finance new investments.
To overcome these limitations, it is necessary to reassess long-term investment strategies in light of economic protection policies. Is it possible to sustain geopolitical expansion without compromising the financial resilience of transnational corporations?
Furthermore, initiatives to strengthen local financial markets and develop greater economic self-sufficiency are strategies capable of mitigating some of these impacts. They may exacerbate the fragmentation of globalization and intensify geopolitical rivalries.
We will see whether transnational corporations will in fact act as a counterweight to the structural power of imperialist geopolitics. Will they also seek to influence the definition of global norms to favor openness and reduce protectionism?
*Fernando Nogueira da Costa He is a full professor at the Institute of Economics at Unicamp. Author, among other books, of Brazil of banks (EDUSP). [https://amzn.to/4dvKtBb]
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