Government
Relevance 4/5- 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
Likelihood, two years4Likelyto end-2028
Likelihood, ten years5Highly likelyto end-2036
Systemic impact4Severeglobal
National impact4Severetypical highly exposed nation
OnsetRapid (weeks)
Duration (acute phase)3 years
Warning timeMonths
ScopeGlobal
Recovery horizonYears
Capability loadHard 1/3Soft 2/3Economic 2/3domains loaded High
ConcurrencyStandalonetriggers 4 · triggered by 2
Confidence · movementhighnew
Rated at Standard Severe. Likelihood type: systemic. Source of scores: ginc-desk-v0.2.
03Narrative
Dateline: October 2028
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.
The dateline is illustrative, not a forecast. The narrative is hypothetical; the historical anchors below are real events.
04Summary
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.
05Historical anchors
| Event | Date | What happened | Calibrates |
|---|---|---|---|
| US 'Liberation Day' tariff package | 2 April 2025 | Broad reciprocal tariffs; US effective tariff rate rose to its highest level since the 1930s; retaliation and partial truces followed | onset, scope, policy volatility |
| China rare earth export controls | 4 April and 9 October 2025 | Licensing of heavy rare earths, then an extraterritorial regime; suspended for a year after the 30 October 2025 leaders' meeting | export controls as escalation instrument |
| US–China tariffs | 2018–2019 | Tariffs on roughly US$360 billion of Chinese goods and retaliation; trade diversion to Vietnam and Mexico | duration, diversion effects |
| China–Australia trade coercion | 2020–2021 | Barriers on barley, wine, coal, lobster and timber | coercion against a middle power |
| EBA 2025 adverse scenario | January 2025 | 'Worsening of geopolitical tensions' and protectionism: EU GDP −6.3 per cent cumulative over three years, unemployment +6.1 points | Standard Severe macro path |
| Bank of England 2025 stress scenario | March 2025 | World trade volumes −20 per cent, world GDP −2 per cent | trade volume shock |
06Parameters
Shown at their preset values. Parameters are not adjustable in this release and nothing on this page is computed from them. Custom settings run (Phase B) but are labelled 'non-standard run' and excluded from comparisons.
Common sliders at Standard Severe · read-only
1. Severity
majorsevere (Standard Severe)extreme
2. Duration (acute phase)
30 days90 days1 year3 years (Standard Severe)5 years
3. Onset
suddenrapid (weeks) (Standard Severe)gradual (years)
4. Warning time
nonedaysmonths (Standard Severe)
5. Scope
nationalregionalglobal (Standard Severe)
6. Origin
naturalaccidentaladversarial (great power / neighbour / non-state) (Standard Severe)
Standard Severe: adversarial (great power)
7. External support
fullpartial (Standard Severe)none
8. Concurrency
standalone (Standard Severe)plus one named scenarioplus two
9. Policy response assumed
none (pure exposure)current plans executed (Standard Severe)best practice
Standard Severe: current plans
10. Recovery horizon
monthsyears (Standard Severe)structural
Scenario-specific parameters · read-only
| Parameter | Default | Range or options | Note |
|---|---|---|---|
| Share of bilateral trade under tariffs or controls | 60 per cent | 20–100 | — |
| Number of aligned blocs | 2 | 2–3 | — |
| Services and finance included | no | — | Yes at Extreme |
| Secondary sanctions on third countries | partial | none–full | — |
| Standards and payment-rail bifurcation | partial | — | — |
07Transmission channels
- 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.
08Capability loading
High: capability band shifts expected under current plans. Medium: band shifts under 'none' policy response only. Low: strain without band shift. Loads are judgement-based until the Atlas connects. Domains link to the Atlas.
| Domain | Load | Channel |
|---|---|---|
| Hard | ||
| Critical technology | High | loss of access to controlled inputs and tools |
| Defence and security | Medium | defence supply chains re-routed; alliance friction |
| Strategic infrastructure | Medium | ports and customs capacity; standards divergence |
| Soft | ||
| Government effectiveness | High | trade negotiation, customs, sanctions compliance, industrial policy |
| Influence and cohesion | High | alignment pressure; diplomatic bandwidth |
| Human capital | Low | talent mobility restrictions |
| Economic | ||
| Industry, trade and supply | High | volumes, diversion, re-shoring cost |
| Macro-financial | High | inflation, reserves composition, payments access |
| Energy and resources | Medium | commodity price volatility and export bans |
09Stakeholders
Technology
Relevance 4/5- Exposure
- Controlled inputs and foreign standards
- Actions
- Dual-qualify suppliers
- Segment product lines by bloc
- Watch
- Entity-list additions
- End-user rules
Investors
Relevance 5/5- 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
Public
Relevance 3/5- Exposure
- Prices and jobs in export sectors
- Actions
- Household budget resilience
- Watch
- Food and fuel prices
10Regional exposure
| Region | Exposure | Rationale |
|---|---|---|
| North America | Medium | Initiator and target; diversified |
| Europe | High | Export-dependent, caught between blocs |
| China | High | Initiator and target; export engine |
| Indo-Pacific | High | Supply-chain hub for both blocs |
| South Asia | Medium | Beneficiary of diversion, exposed to controls |
| Gulf and Middle East | Medium | Energy demand and alignment pressure |
| Africa | Medium | Commodity prices, aid and finance alignment |
| Latin America and Caribbean | Medium | Commodities; USMCA uncertainty |
| Russia and Eurasia | Medium | Already partly decoupled |
11Early-warning indicators
| Indicator | Source | Threshold |
|---|---|---|
| Trade-weighted effective tariff rates | WTO, Yale Budget Lab | — |
| Export-control notices and entity-list additions | BIS, MOFCOM | — |
| Global Supply Chain Pressure Index | New York Fed | — |
| Share of world trade between rival blocs | IMF fragmentation indicators | — |
| Correspondent banking relationship counts | BIS | — |
| WTO disputes filed | — | — |
| Investment screening rejections | — | — |
12Compounds
- Triggers
- Triggered by
- Amplifying trends
- supply-chain concentrationindustrial policy competitionpolarisation
- Key trends
- Great-power competitionCriticalSupply-chain concentrationCriticalExport controls & economic statecraftCriticalEconomic security policyCriticalDeglobalisationCriticalFriend-shoring & regional trade blocsCriticalUS policy volatilityCriticalIndustrial policy competitionCriticalTariff escalationCriticalRare earth processing concentrationCriticalShifting economic powerVery highTaiwan Strait tensionVery highRise of middle powersVery highAdvanced semiconductorsVery highWeakening multilateral institutionsVery highTechnical standards competitionVery highPolarisation & populismVery highAI chips & accelerator supplyVery highLithography & chip-tool chokepointsVery highDollar dependence & payment-rail fragmentationVery highReshoring & localised manufacturingVery highCritical minerals supplyVery highManufacturing overcapacityVery high
From the GINC 250: trends rated Very high or Critical for this scenario. All S01 trend scores.
13Rating rationale
| Rating | Band or level | Why |
|---|---|---|
| Likelihood, two years | 4Likely | Escalation to Standard Severe (trade −20 per cent) within two years is plausible but not the base case after the 2025 truces. |
| Likelihood, ten years | 5Highly likely | — |
| Systemic impact | 4Severe | On the EBA and BoE calibrations. |
| National impact | 4Severe | For trade-dependent middle powers. |
| Confidence | high | Well-documented instruments and precedents. |
Source of scores: ginc-desk-v0.2. Confidence refers to the rating, not the scenario. Calibration sources are listed with the anchors above and on the methodology page.
14Open questions
Contested assumptions for the panel to resolve.
- 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.
15Commentary
No signed commentary in this build.
16Version and citation
- Version
0.2.0· active- Change log
- Full change log
0.2.0· 2 October 2026 · Entered the Library at v0.2 with GINC desk scores.
Cite as
GINC (2027). Scenario S01 Geoeconomic confrontation, Scenario Library v0.2. scenarios.ginc.org/library/geoeconomic-confrontationContent and data are published under CC BY 4.0.