The world of tomorrow

“All under heaven is in chaos, and the situation is excellent.” Markets are unlikely to share Chairman Mao’s sentiment in response to the current U.S. administration’s flurry of announcements.

What once served as a rallying cry for revolution now reflects a broader systemic shift: the end of post–Cold War globalization and the beginning of a new era defined by geopolitical fragmentation and competition over critical resources and industrial supply chains.
 

From globalization to geopolitical fragmentation

For the past three decades, the global order appeared to follow an irreversible path. Economic interdependence was seen as a safeguard against conflict among major powers, and globalization was promoted as a driver of development and convergence across different economic and social systems. Thomas Friedman’s “Flat World” envisioned a future of increasing alignment in economic dynamics, propelled by technology, free trade, and expanding multilateral governance to address challenges like climate change. It was the high point of Adam Smith’s legacy —laissez-faire economics and the theory of national specialization in full bloom.

Instead, current dynamics point to escalating tensions between the United States and China. At the trade level, the economic winds have shifted—from the breeze of free trade to the gale of mercantilism.

This is not an unfamiliar world —it resembles the one we knew in the 1960s and 1970s. It reflects a cyclical pattern in international relations.

For 30 years, globalization was a positive-sum game. It was so successful it seemed beyond criticism: cheap Chinese goods —enabled by abundant labor, favorable tax regimes, economies of scale, and the world’s cheapest coal energy— helped drive inflation down (to the point where pushing prices above 2 percent became difficult) and opened up expanding markets.

At the same time, globalization offered environmental benefits to wealthier countries, which outsourced high-impact industrial processes. It was, in short, an ideal arrangement for the West, which assumed its technological edge would remain unchallenged.

Today, that paradigm is beginning to fracture, and the belief in mutual benefit for all players has weakened. In a way, globalization has entered its adolescence: the son —China— challenging the father —the West— asserting its independence in thought and action.

The result is a shift from a unipolar Western-led world, as described in Ian Morris’s “Why the West Rules —for Now”, to a more contested system in which major powers promote diverging industrial, trade, and political models, each courting less-aligned countries.

The old assumption of the West’s enduring supremacy no longer holds. Technological capabilities are spreading more broadly. And not surprisingly, since 2012, the Thucydides trap has regained relevance in describing the risks of conflict between hegemon and emerging power.

Industrial policy as a new security policy

Despite the proclamations and provocations of the current U.S. administration, the shift underway appears more than tactical. It signals the emergence of a new order —one that marks the return of national-scale industrial policy for the first time since the fall of the Berlin Wall. It also reflects a renewed focus on “Main Street” —the world of independent small businesses— as a counterpoint to both Wall Street finance and China’s rapid technological ascent, sometimes dubbed the “Great Wall Street.”

Markets, with their faith in the efficient allocation of capital, tend to downplay the risks of dependency. But today, the world is no longer flat —everything is viewed through the lens of national security.

The United States and China are now competing not just for market access, but for the pillars of value creation: energy and industry, resources and strategic supply chains —from semiconductors to rare earths— and assured access to critical technologies, especially in aerospace and defense.

Alongside the renewed focus on industrial and energy cycles, a trend toward selective exclusion is gaining strength. Tariffs, financial restrictions, and the sidelining of firms from “non-aligned” countries in major projects are becoming tools to reshape supply chains, dependencies, and trade flows.

Industrial policy is once again security policy. Control over resources is becoming an extension of national sovereignty. In this new “cold war,” global supply chains are being redrawn according to criteria that go beyond economics. Access to key production inputs can no longer be assumed—it is now shaped by security concerns and alignment within geopolitical blocs.

Energy and transition in the new era of competition

Setting aside other variables, the more fragmented and volatile world now taking shape will have significant implications for the energy sector —shaping how resources are preserved, how value chains for new projects evolve, and how opportunities for international arbitrage unfold.

From an energy standpoint, a new push to secure upstream assets is likely, especially in underexplored regions or areas with untapped potential. This pressure will only grow as production from major U.S. onshore basins begins to decline —a shift many expect within the next few years. Players that had stepped back from international exploration are now likely to return to regions they once left behind. South America, Africa, and parts of Asia offer promising prospects for new resource development.

At the same time, restrictions on financial participation by companies from “non-aligned” countries in strategic projects are likely to increase, aimed at curbing rival powers’ access to key resource basins. This renewed scramble for resources will inevitably reshape relationships with major producers in the Middle East, where both the U.S. and China will work to secure exclusive —or at least preferential— alliances.

In a more fragmented global landscape, opportunities for arbitrage and trading are likely to grow. U.S. energy —particularly LNG, with exports reaching about 11.6 Bcf/d in 2024— may become inaccessible to the Chinese market, reshaping global flows and forging new routes and alliances. In a more extreme scenario, industrial components —such as technologies and equipment— could also face mutual restrictions, with direct consequences for project development costs.

Finally, with regard to the energy transition, two parallel trends are emerging. On one hand, there is momentum behind accelerating the development of renewable energy and advanced nuclear technologies to reduce import dependence and enhance national energy resilience. On the other, growing distrust of global supply chains —especially those dominated by less trusted actors— risks slowing project implementation and driving up the costs of transition-related technologies.

The energy transition now seems increasingly shaped by the logic of security

Competition is overtaking cooperation, leading to a transition that is uneven, slow, and fragmented. The vision of a global economic model, coordinated international action, and sustained Western leadership appears to be unraveling.

For the industrial and energy sectors, the implications are significant. Technological asymmetries and arbitrage are emerging as defining features of this new landscape. After decades of downward cost pressure, a new inflationary factor is entering supply chains: the price of security and geopolitical rivalry.

The world is no longer flat. This is a new era—marked by Colbert-style interventionism, mutual distrust, the pursuit of national advantage, and growing disorder. Chaos under heaven, once again.