In Today’s Multipolar World, what are the Geopolitical and Economic Implications of a US Transactional Foreign Policy?

In the wake of the 2024 US presidential election, Donald Trump was elected President of the United States with a clear mandate. As the champion of an “America first” strategy and a transactional approach to US foreign policy, his election raises a significant risk of exacerbating geopolitical tensions and rivalries, impacting economic stability, security and the world order. 

In today's multipolar world, characterized by a shift in the world order since 1945 from a US-dominated unipolar system to a multipolar configuration of power across multiple influential regions, America's national interests have undoubtedly become more complex and interdependent. 

This means that, by adopting a transactional approach to foreign policy, the US risks overlooking insidious complexities and thus making decisions contrary to its long-term interests, notably in terms of its security, economy and key role on the international stage, with far-reaching consequences for the rest of the world.

What happens when the US decides that transactional foreign policy trumps alliances?

A transactional approach to U.S. foreign policy refers to a strategy that prioritizes short-term gains, agreements, and pragmatic considerations over long-term relationships, values, and multilateral cooperation. 

So, what happens when the US, a key global economic player, elects to prioritize transactional relationships over alliances? And when that reset comes at a time when wars are raging in Africa, Israel, Gaza and Ukraine, and when menacing adversaries are regrouping their forces.

The implications are multiple and far-reaching:

Heightened geopolitical tensions and rivalries: As the unipolar dominance of the U.S. wanes and the power dynamics become more multipolar, rising powers like China are challenging the existing world order. This leads to intensified strategic competition over spheres of influence, access to resources, and ideological differences. For example, China's booming clean-tech sector, driven by an aggressive development strategy and a strong focus on exports to offset the country's weak economy [China's ailing economy], is likely to exacerbate trade tensions with the United States.

Erosion of multilateral cooperation: The US has historically played a leading role in creating and sustaining multilateral institutions that rely on cooperation and shared commitment for collective actions. A transactional foreign policy may undermine these institutions (UN, WTO, NATO), as countries perceive the US as prioritizing its own interests over multilateralism. This can lead to a decline in global governance, making it harder to address cross-border pressing issues like climate change, pandemics, mutual defense… trade disputes.

The emergence of new alliances: A more transactional approach may weaken or shift traditional alliances. A new balance of power could lead to the emergence of new alliances that seek to establish new partnerships based on shared interests rather than historic ties that will reconfigure global power dynamics and military alliances. Co-operative blocs, such as that formed by China, Russia, Iran and North Korea (the “chaos quartet”), ready to wreak havoc, could thus emerge.

Increased risk of regional conflicts and proxy wars: If the US shifts its focus, this disengagement from critical regions could prompt regional powers to fill the void. They will then try to assert themselves by gaining influence, which could lead to conflict. This type of environment is conducive to conflict escalation whenever major powers get involved, either directly or through a proxy conflict.

Economic disintegration and protectionism: transactional foreign policy often involves negotiating tactics that can lead to restrictive economic policies (tariffs, sanctions, trade disputes) and market fragmentation along geopolitical fault lines. Intensified conflict can disrupt global supply chains, trade agreements and partnerships (countries feel compelled to prioritize their own transactional priorities over global integration) as well as disrupt investments, resulting in international market instability. As protectionism intensifies, Chinese companies are looking to expand abroad, both to circumvent trade barriers and to conquer new markets in the global South.

The result is multipolar disorder, making the global operating environment more volatile, more complex and harder for companies to navigate. It underscores the need for robust scenario planning, diversified supply chains and adaptable strategies to manage political risks across different regions.

Humanitarian Crises: As conflicts intensify, humanitarian crises may arise, displacing populations and straining resources. This can lead to increased migration and refugee flows, placing additional burdens on neighboring countries.

Potential Isolationism: If the US continues to prioritize transactional relationships, it may lose its moral authority and soft power, which are often derived from its commitment to alliances and shared values. It may inadvertently shift toward a more isolationist stance, reducing its global engagement and influence, which could have far-reaching implications for global stability.

Final Thoughts

To sum up, a transactional approach to US foreign policy in a multipolar world can lead to weakened alliances, increased global rivalry, undermined multilateral institutions and regional instability. 

It is essential that policymakers recognize the shifting dynamics of international relations and adopt a more strategic and cooperative approach that considers the complexities of today's global landscape.