Executive Summary
The World Economic Forum’s 2026 Global Cooperation Barometer reveals a deteriorating business environment in 2025, with 43% of executives reporting increased difficulty in operations. This analysis examines the underlying causes, future outlook, potential solutions, and specific implications for Singapore.
Case Study: The 2025 Global Business Disruption
Background Context
The 2025 business landscape was marked by unprecedented fragmentation in global cooperation. After decades of increasing economic integration, companies faced a reversal characterized by:
- Trade protectionism: US tariff announcements in April 2025 created immediate supply chain disruptions
- Talent mobility restrictions: Cross-border movement of skilled workers became more constrained
- Capital flow barriers: Investment restrictions increased between major economic blocs
- Security deterioration: 42% of executives reported declining peace and security cooperation
Key Findings from the Survey
Scope: 799 executives across 81 economies (McKinsey global survey panel)
Headline Results:
- 43% found business more difficult (vs. 7% easier)
- 38% cited growing barriers to trade, talent, and capital
- 42% saw security cooperation declining
- 29% reported tougher climate collaboration
Real-World Impact: The Tariff Turbulence
The US tariff announcements in April 2025 serve as a microcosm of the broader challenges. Companies experienced:
- Immediate disruption: Existing supply chains faced sudden cost increases
- Strategic uncertainty: Long-term investment decisions became harder to make
- Negotiation fatigue: Businesses had to navigate constantly changing tariff landscapes as deals were struck
- Competitive distortions: Companies in different jurisdictions faced varying cost structures
The Adaptation Story
Despite challenges, 60% of executives did not highlight trade as a primary problem, indicating successful adaptation strategies:
- Supply chain diversification: Companies reduced dependence on single markets
- Regional production hubs: Shift toward regional manufacturing to minimize tariff exposure
- Strategic partnerships: New alliances formed to navigate regulatory complexity
- Digital transformation: Technology enabled more flexible operations across borders
Outlook: What Lies Ahead
Short-Term Projections (2026-2027)
Continued Fragmentation The trend toward economic regionalization will likely persist. We can expect:
- Further bilateral trade negotiations replacing multilateral frameworks
- Increased “friend-shoring” as companies align supply chains with geopolitical allies
- More complex regulatory environments requiring specialized compliance teams
- Diverging technology standards between major economic blocs
Selective Cooperation Not all areas will see equal deterioration:
- Climate initiatives: Despite challenges (29% seeing tougher cooperation), renewable energy investment grew 10% in H1 2025, suggesting continued momentum in green transition
- Digital trade: Technology-enabled services may prove more resilient than goods trade
- Regional blocs: Cooperation within regions (EU, ASEAN, USMCA) may strengthen even as global cooperation weakens
Medium-Term Outlook (2028-2030)
Scenario A: Managed Fragmentation (60% probability)
- Stabilization of current trade barriers at negotiated levels
- Emergence of clear “spheres of influence” with predictable rules within each sphere
- Continued but slower growth in global trade volumes
- Innovation in services and digital economy compensates for goods trade friction
Scenario B: Escalating Tensions (25% probability)
- Further deterioration in trade relations and security cooperation
- Technology decoupling accelerates between major powers
- Companies face binary choices about market access
- Global growth significantly impacted, recession risks elevated
Scenario C: Cooperation Renaissance (15% probability)
- New crisis (climate, pandemic, economic) forces renewed cooperation
- Multilateral institutions reformed and strengthened
- Return to more open trade and capital flows
- Global growth accelerates
Critical Uncertainties
Several factors will determine which scenario unfolds:
- Geopolitical stability: Conflicts in various regions could escalate or de-escalate
- Economic performance: Recession could either force cooperation or deepen protectionism
- Technology breakthroughs: AI and clean energy advances may create new cooperation incentives
- Leadership changes: Elections in major economies could shift policy directions
Solutions: Navigating the New Normal
For Businesses: Strategic Adaptations
1. Supply Chain Resilience
Diversification Strategy
- Identify single points of failure in current supply chains
- Develop multi-source procurement for critical inputs
- Build inventory buffers for high-risk components
- Map entire supply chain to understand hidden dependencies
Regionalization Approach
- Establish production capacity in multiple regions
- Create “China+1” or “US+1” manufacturing footsteps
- Design products for modular regional assembly
- Invest in logistics networks that serve regional markets
2. Talent Management Innovation
Global Talent Access
- Develop robust remote work capabilities for international teams
- Create regional talent hubs in multiple jurisdictions
- Invest in training and upskilling local workforce
- Use technology to enable collaboration across borders
Retention and Development
- Offer compelling reasons for talent to stay despite mobility restrictions
- Build internal academies to develop specialized skills
- Create clear career progression paths across regional operations
- Implement competitive compensation adjusted for local markets
3. Financial Flexibility
Capital Structure Optimization
- Maintain access to capital in multiple markets
- Use local currency financing where possible to hedge exposure
- Build strong relationships with regional financial institutions
- Keep credit facilities available for unexpected disruptions
Investment Strategy
- Take staged approach to major investments with flexibility to adjust
- Build in optionality for market access scenarios
- Consider joint ventures to share risk in uncertain markets
- Prioritize investments that serve multiple markets
4. Regulatory Navigation
Compliance Excellence
- Invest in trade compliance systems and expertise
- Monitor regulatory changes across all operating jurisdictions
- Build relationships with government affairs professionals
- Participate in industry associations to influence policy
Scenario Planning
- Develop contingency plans for various policy scenarios
- Model financial impact of different tariff/regulatory outcomes
- Identify trigger points that would require strategic pivots
- Conduct regular stress tests of business model resilience
For Policymakers: Systemic Solutions
1. Strengthen Regional Cooperation
While global cooperation faces challenges, regional frameworks can provide stability:
- Deepen existing trade agreements with comprehensive provisions
- Create common standards within regions to reduce compliance costs
- Establish dispute resolution mechanisms that work efficiently
- Coordinate on talent mobility within regional blocs
2. Invest in Economic Resilience
Governments should help their economies adapt:
- Fund infrastructure that enables flexible supply chains
- Support workforce retraining for evolving job requirements
- Provide transition assistance for industries affected by trade shifts
- Maintain fiscal capacity to respond to economic shocks
3. Maintain Selective Global Cooperation
Even in fragmented world, some issues require global solutions:
- Climate change mitigation and adaptation
- Pandemic preparedness and response
- Technology standards for safety and interoperability
- Financial stability and crisis prevention
4. Create Predictability
Businesses need stable policy environments:
- Grandfather existing investments with clear transition periods
- Announce policy changes well in advance
- Provide clear criteria for regulatory decisions
- Establish consistent enforcement of rules
For International Institutions
Reform and Relevance
The WEF findings suggest multilateral institutions need updating:
- Modernize governance to reflect current economic realities
- Focus on areas where cooperation delivers clear mutual benefits
- Create flexible coalitions for specific issues rather than universal frameworks
- Improve dispute resolution mechanisms for faster, fairer outcomes
Singapore Impact: Navigating as a Global Hub
Vulnerabilities
Singapore faces specific challenges given its unique position:
Trade Dependence
- Non-oil domestic exports constitute significant portion of GDP
- Highly integrated into global supply chains as a manufacturing and logistics hub
- Vulnerability to tariff disputes between major trading partners
- Risk of being caught in crossfire of trade tensions
Talent Flows
- Dependent on foreign talent for many sectors (finance, tech, professional services)
- Restrictions on cross-border movement could impact competitive advantage
- May face pressure to reduce foreign workforce as global sentiment shifts
Capital Hub Status
- Position as financial center depends on free capital flows
- Could be affected by capital controls or sanctions regimes
- Competition from other regional financial centers may intensify
Survey Evidence According to a related survey mentioned in the article, nearly half of Singapore firms indicated they would pass on tariff costs, suggesting limited ability to absorb trade friction impacts.
Opportunities
Singapore’s challenges also present strategic opportunities:
Safe Haven Status
- Political stability and rule of law become more valuable in uncertain times
- Could attract businesses seeking neutral, reliable jurisdiction
- Opportunity to position as “Switzerland of Asia”
Regional Integration
- ASEAN centrality provides platform for regional cooperation
- Can strengthen position as gateway to Southeast Asian markets
- Opportunity to deepen ASEAN economic integration
Innovation Hub
- Continued investment in R&D can create high-value industries less vulnerable to trade friction
- Green economy transition creates opportunities in renewable energy, sustainable finance
- Digital economy less constrained by physical trade barriers
Strategic Responses for Singapore
1. Economic Diversification
Sector Development
- Accelerate growth in services that are less trade-vulnerable (professional services, education, healthcare)
- Build capabilities in emerging areas (AI, biotechnology, clean energy)
- Strengthen domestic-oriented sectors to balance external exposure
- Develop unique specializations that create switching costs for partners
Market Diversification
- Reduce concentration risk by expanding trade with diverse partners
- Strengthen ties with emerging markets in Southeast Asia, India, Middle East
- Pursue trade agreements with multiple blocs to maintain optionality
- Build resilience by ensuring no single market is critical
2. Talent Strategy Evolution
Sustainable Talent Model
- Invest heavily in local workforce development and upskilling
- Create pathways for mid-career switching to growth sectors
- Maintain selective openness for genuinely scarce skills
- Position as destination for top global talent despite overall restrictions
Regional Talent Network
- Facilitate easier movement within ASEAN for Singapore companies
- Create talent exchange programs with regional partners
- Build educational partnerships to develop regional talent pipeline
- Establish Singapore as training hub for regional workforce
3. Value Proposition Enhancement
Connectivity Infrastructure
- Continue investing in physical infrastructure (ports, airports, logistics)
- Build digital infrastructure for seamless regional connectivity
- Maintain position as regional headquarters location
- Enhance quality of life factors that attract businesses and talent
Regulatory Excellence
- Maintain reputation for efficiency, transparency, and rule of law
- Offer clear, stable regulatory environment amid global uncertainty
- Provide responsive business support and facilitation
- Balance regulation with business-friendly approach
4. Strategic Partnerships
Bilateral Relationships
- Deepen ties with major economies through comprehensive partnerships
- Negotiate carve-outs or exceptions in trade restrictions where possible
- Provide unique value propositions to key partners
- Maintain careful balance in geopolitically sensitive relationships
Multilateral Engagement
- Continue leadership in ASEAN economic integration
- Support reform of multilateral institutions
- Create issue-specific coalitions (climate, digital trade, supply chain resilience)
- Position as bridge-builder and honest broker
5. Climate Leadership
With renewable energy investment growing despite challenges, Singapore can:
- Accelerate green economy transition as economic opportunity
- Position as regional hub for sustainable finance
- Invest in clean energy R&D and deployment
- Lead regional climate cooperation initiatives
Implementation Priorities
Immediate Actions (2026)
- Conduct comprehensive vulnerability assessment across sectors
- Establish crisis response mechanisms for trade disruptions
- Launch accelerated workforce development programs
- Strengthen relationships with key trading partners
Medium-Term Initiatives (2027-2028)
- Implement economic diversification roadmap
- Build out innovation infrastructure in priority sectors
- Deepen ASEAN integration through practical cooperation
- Position Singapore as global-regional connector
Long-Term Vision (2029-2030)
- Achieve more balanced, resilient economic structure
- Establish leadership in emerging high-value sectors
- Build reputation as indispensable partner to multiple blocs
- Create model for small state success in fragmented world
Conclusion
The WEF survey findings confirm that 2025 marked a significant inflection point in the global business environment. The era of seamless globalization has given way to a more complex, fragmented landscape characterized by trade barriers, talent restrictions, and geopolitical tensions.
However, the fact that 60% of executives found ways to navigate these challenges demonstrates that adaptation is possible. Success in this new environment requires:
- Strategic agility: Ability to adjust quickly to changing circumstances
- Diversification: Reducing dependence on any single market, supplier, or model
- Investment in resilience: Building buffers and redundancies that allow weathering shocks
- Selective cooperation: Finding partners and forums where mutual benefit drives collaboration
For Singapore, the challenges are significant but not insurmountable. The nation’s traditional strengths—strategic location, efficient governance, openness to trade and talent—face headwinds, but they remain valuable. By evolving its economic model, investing in new capabilities, and maintaining its position as a trusted, neutral hub, Singapore can continue to thrive even as the global environment becomes more challenging.
The outlook is neither uniformly pessimistic nor optimistic. Rather, it suggests a world where success comes from navigating complexity, managing uncertainty, and building resilience. Those businesses and nations that adapt most effectively to this new reality will be best positioned to prosper in the years ahead.