Global economic collapse without war: how Trump’s statements cost the world $5 trillion (continued)

IA “FACT” already wrote, as geopolitical tensions over wars, trade conflicts, and rising defense spending have turned into a systemic threat to global financial stability. According to the IMF, such conflicts “eat up” up to 1% of market capitalization every month, and for developing countries, the losses are even greater. The biggest blow was caused by Russian aggression in Ukraine. At the same time, economic sanctions, customs wars between the US and China, tensions in the Middle East and around Taiwan cause stock market panics, oil spikes and inflationary shocks.

Investors are switching to a survival strategy: reducing risky assets, building portfolios based on credit derivatives and refocusing on stable regions. The world economy is fragmenting — globalization is giving way friendshoring’y: production is transferred to political allies. The dollar is losing dominance, and the new economic order threatens to shrink world GDP. Meanwhile, the Ukrainian banking system is showing resilience, but is preparing for even tougher tests.

Sovereign risks: defaults, currency crises and impact on budgets

Geopolitical conflicts — from Ukraine to the Middle East and Africa — are not just disturbing the international order, but also entrenched in the global financial architecture. Investors are increasingly wary of risk assessment, and access to credit now costs more. According to KPMG, the price of risk is rising, and therefore the cost of borrowing for countries with weak economies is skyrocketing.

Cartography of future defaults causes anxiety S&P points to a number of countries teetering on the brink of financial collapse: Argentina, Lebanon, Sri Lanka, Zambia, Pakistan, Ethiopia, Ukraine. This sounds like a warning: defaults this year may not be the exception, but the trend. And it’s not just about debts: access to capital is narrowing, and pressure on budgets is growing.

The problem becomes systemic. When more than 20% of budget revenues is spent on debt service, as it happens in some countries, the states do not have room for development. Social programs, infrastructure, education, medicine take a back seat. Survival trumps development.

Ukraine is at the epicenter of this storm. The war drains the budget. Forecast for the current year from the Ukrainian Future Institute sounds as an alarm signal: even with grant support in the amount of 22 billion dollars, the budget deficit may reach 8.5% of GDP. This is an indicator of the depth of the crisis in which the state is plunging, forced to balance every month between the urgent needs of the army and the need to pay off debts.

The world faces a choice: either take systemic measures to strengthen financial stability, or prepare for a new wave of sovereign crises. After all, in conditions where risks are growing, mistakes become too expensive.

Geopolitical risk premium and cost of capital

World business has abandoned the illusion of cheap money and predictability. Now capital lives in a state of constant combat anxiety. Formulas of economic efficiency have lost their force. The main criterion for investing today is the geography of risk. The market no longer dictates the cost of capital, it is now shaped by the front. The conditions of the game are determined not by the growth of profit, but by proximity to the affected area.

In response, multinational corporations change their logic: cut production, rearrange routes, evacuate capacity and abandon long-term plans. China, which was called the Factory of the World just yesterday, is losing this status today – not because of value, but because of vulnerability. Global players — Apple, Dell, HP, Sony — are moving their facilities to India, Vietnam, Mexico. Not because it’s cheaper there, but because they don’t shoot there.

This is not a short-term reaction, but a strategic transition. Created era of friendshoring — production only in allied countries. This is not a fashion, but a new doctrine. Companies are not just changing logistics — they are building a new industrial architecture. Foxconn invests in Vietnam and Thailand, Tesla is building factories in Mexico and India. Amazon, Nestlé, BASF, Siemens create internal analytical headquarters where geopolitical assessment becomes more important than financial. This is no longer consulting, but operational planning taking into account military intelligence: modeling the blocking of sea routes, analysis of satellite data, calculation of local conflict scenarios.

But the most important thing is that the value of money has changed. The world has lost the illusion of a single price for capital. The investor is not interested in the brand or presentations. He is interested in a guarantee that a war will not start next door tomorrow. Every additional kilometer to the risk point is worth it.

In countries with an average level of threat to the rate on equity capital grew up by 70-150 basis points. In developing markets – up to 300. This means: yesterday, business attracted investments at 8%, today at 11%. Not because the business is worse, but because the coordinates have changed. In the new financial register, the price of money depends on whether rockets can be transferred here.

The consequences are not theoretical. The German giant RWE failed in April 2025 get expected funding. Markets refused due to the geopolitical background: Ukraine, Iran, Taiwan, new US tariffs against China. Reputation is not enough – today only the risk map is important.

Barclays admits: corporate financing in Great Britain rose by 35 points. The reasons are not in the country’s economy, but in global anxiety. The global financial sector works as an early warning system: it sees not the numbers, but the direction of potential shocks. And it changes the cost of capital before the politicians have time to make a statement.

The most vulnerable sectors, sensitive to logistics, energy, IT. According to the data SSRN, companies in these industries are forced to pay for loans anymore not because they have become less efficient, but because they have found themselves in the zone of external risk. Banks don’t look at financial statements — they assess a map of geopolitical instability. In this mode, the economy turns into a front. The shock wave affects the balance sheets, the investor is not buying a share of the business, but insurance against war.

And that is why the slogans about cheap loans and massive investments are either out of ignorance or intentionally misleading. The world no longer promises stability—it demands a price for it. Business has become a subject of global security. And in 2025, they are not worried about profits, but about whether it will be possible to hold on in the new world, where risk decides everything.

Long-term implications for global growth

The world is no longer one. What was called globalization yesterday is today turning into a network of separate camps, trade alliances and currency zones. The new order does not ask, “Are you efficient?” Instead, he asks: “Are you yours?”

The IMF is sounding the alarm: if the fragmentation of the economy becomes systemic, losses in world GDP may occur to reach up to 7%. This isn’t just a correction, it’s a deep, long-term decline, comparable to the 2008 financial crisis or the shock of COVID-19. Factories migrate, investments are frozen, logistics are complicated. All this is the price of losing trust in the system, in allies, in predictability.

Some countries reacted instantly and won: Vietnam, Mexico, Poland, Indonesia, Morocco. They did not wait for the old chains to collapse, but became part of the new ones.

Vietnam attracted $36 billion in foreign investment last year alone — the most in ASEAN. Mexico has become the main beneficiary of the relocation of production from China to North America (this is the so-called nearshoring). Poland is a key center of the “new Europe” in defense and IT.

Neutrality is a luxury the world no longer allows. The countries left between the blocs face a sharp decline in investment, problems with trade and degradation of the technological base.

IMF research visualizes: states with unstable political regimes, low integration into global chains and the absence of a clear economic strategy suffer the most.

…Ukraine has a choice. To be a “connector country” like Vietnam or Poland, or to become a geo-economic gray belt through which everything passes, but nothing remains. Infrastructure, tax policy, court reforms, business security – now these are not just demands of the West. This is armor in the new economic confrontation.

Tetyana Viktorova