Regulations Have Become a Battlefield
TL;DR We’re moving into a world where regulations are no longer neutral administrative rules. They are the clearest public expression of state intent in a system where trust in the old arrangements, partners, and multilateral guardrails no longer holds.
A few days ago Martin Wolf wrote in the Financial Times (The fracturing of the world economy) that the US–China conflict is essentially a race to see who abandons their economic “follies” first. Michael Pettis (my goto economist on all things trade) countered that this isn’t about mistakes at all - it’s a clash between two incompatible models of global integration. One relies on persistent surpluses enforced through capital controls and industrial subsidies; the other demands re-industrialisation financed by large fiscal deficits. These models cannot coexist within the same global trade and financial architecture.
Pettis outlines four logical outcomes. Two of them - mutual accommodation, or the US once again absorbing global imbalances - are no longer credible. The remaining scenarios point either to (i) Europe and other deficit economies stepping into the adjustment role the US previously played, or (ii) a broad retreat into economic sovereignty with structurally lower trade and capital-flow integration. Europe is experimenting with (i) through NextGenEU and deficit-funded green spending, but its simultaneous move toward protective measures means the overall direction still leans toward (ii). Most analysts now assume some blend of fragmentation and partial European absorption as the base case.
What does this mean for regulatory and geopolitical risk teams?
It means that “regulations” - broadly defined - have shifted category. They’re not administrative artifacts anymore. They have become instruments of industrial strategy and national power. In many cases, they are the primary signals governments use to telegraph their strategic intent.
Tariffs, export controls, investment screening, subsidy regimes, carbon-border mechanisms, forced-labour rules, data-sovereignty restrictions, and supply-chain mandates are increasingly designed with geopolitical and economic-security objectives in mind. We saw the direction of travel in 2018–2020; since 2022 it has accelerated into a phase change.
The regulatory domains undergoing the most frequent and strategically significant shifts include:
- Tariffs and trade-remedy actions (EVs, batteries, semiconductors, steel, medical products)
- Export controls and technology-transfer restrictions (chips, AI, quantum, biotech)
- Inbound investment screening (CFIUS and global analogues)
- Outbound investment regimes (US EO 14105 and emerging EU/Japan versions)
- Industrial subsidies and local-content requirements (IRA, CHIPS Act, EU Green Deal Industrial Plan)
- Critical-minerals rules and forced-labour supply-chain due diligence
- Carbon border adjustment mechanisms (EU CBAM and others likely to follow)
- Data-flows, localization, and cyber-national-security rules
- Sanctions, de-risking measures, and financial-system controls
- Antitrust and merger-control regimes with national-security overlays
Across all ten, governments are acting with less trust, shorter timelines, wider enforcement discretion, and greater extraterritorial reach. This is no longer an occasional cycle; it is the continuous operating environment.
Organisations that still treat regulatory change as an episodic compliance exercise will spend the next few years reacting from behind. Those that treat regulatory shifts as continuous signals of intent - something to monitor, interpret, and model in real time - will be able to navigate rather than merely absorb the shocks.
At Carver, we think about risks emerging along multiple axes, and how best to navigate them. Would welcome perspectives from others tracking these shifts. Talk to us
#GeopoliticalRisk #RegulatoryRisk #TradePolicy #SupplyChainResilience #GlobalTrade