Case Study: The Fracturing of Global Economic Consensus

Background

The 2026 World Economic Forum in Davos represents a critical inflection point for international cooperation. For over five decades, the WEF has served as a platform where business leaders, policymakers, and academics could forge consensus on global challenges. However, the 56th edition faces unprecedented questions about its relevance and effectiveness.

The piece describes a fundamental clash between Trump’s “America First” approach and the WEF’s traditional consensus-driven, rules-based international framework. Trump’s policies mentioned include trade tariffs, military intervention in Venezuela, threats regarding Greenland, and withdrawal from global cooperation on climate and health issues.

Concerns about relevance:

Some observers question whether the WEF remains relevant when major powers like the U.S. and China prioritize national interests over multilateral cooperation. Former Swiss ambassador Daniel Woker suggests the forum may become “an event from the past” if countries only look out for themselves.

Notable attendance shifts:

Interestingly, oil and gas executives from companies like ExxonMobil, Shell, and TotalEnergies are expected in force this year—a change from previous years when they largely avoided the forum due to its perceived anti-fossil fuel stance. This reflects Trump’s energy dominance agenda promoting drilling.

Leadership questions:

The article notes that 87-year-old founder Klaus Schwab stepped down as chair in April 2025 following an internal investigation, with BlackRock’s Larry Fink and Roche’s Andre Hoffmann now serving as interim co-chairs.

The WEF is framing the meeting as prioritizing dialogue amid uncertainty, though surveys show executives found business conditions harder in 2025.

The Trump Factor

President Trump’s expected appearance symbolizes the tension between nationalist policies and multilateral cooperation. His administration’s approach includes:

• Trade weaponization: Using tariffs as punitive measures, reaching levels not seen since the Great Depression
• Territorial ambitions: Threatening to take Greenland by force
• Military interventionism: Direct intervention in Venezuela
• Institutional challenges: Threatening Federal Reserve Chair Jerome Powell with criminal indictment, prompting central bankers globally to defend central bank independence
• Withdrawal from cooperation: Retreating from climate, health, and other global frameworks

Structural Challenges

Leadership Transition: Klaus Schwab’s departure after 87 years raises questions about institutional continuity. The appointment of Larry Fink (BlackRock CEO) and Andre Hoffmann (Roche vice-chair) as interim co-chairs signals a shift toward more corporate-aligned leadership.

Declining Multilateralism: With both the U.S. and China prioritizing national interests over rules-based cooperation, the forum’s foundational premise is being tested. As former Swiss ambassador Daniel Woker notes, in a system where everyone looks out only for themselves, the WEF has no reason to exist.

Industry Realignment: The significant presence of oil and gas executives this year—after years of sparse attendance—reflects how the forum is adapting to political realities rather than shaping them. This represents a reversal from the WEF’s previous climate-forward positioning.

Key Findings from WEF Survey

• Business conditions deteriorated in 2025
• Cooperation on peace and security showed marked decline
• Executives report increased difficulty navigating the global environment
• Trade tensions, while easing slightly in late 2025, remain elevated

Outlook: Three Scenarios for Global Economic Order

Scenario 1: Fragmented Multipolarity (Most Likely)

The global economy splits into competing spheres of influence:

Characteristics:

• U.S.-led Western bloc with conditional partnerships
• Chinese sphere of influence in Asia, Africa, and parts of Latin America
• European Union attempting independent strategic autonomy
• Middle powers (India, Brazil, Indonesia) navigating between blocs

Economic Implications:

• Duplicate supply chains and reduced efficiency
• Higher costs for businesses operating globally
• Technology decoupling accelerates (AI, semiconductors, quantum computing)
• Capital flows become more regionalized
• International institutions like WTO, IMF face diminished authority

Timeline: 2026-2030

Scenario 2: Transactional Bilateralism (Emerging Trend)

Rules-based multilateralism gives way to deal-by-deal negotiations:

Characteristics:

• Countries negotiate based on immediate interests rather than long-term frameworks
• Treaties and agreements become shorter-term and more conditional
• Economic relationships tied explicitly to security considerations
• Rise of “economic statecraft” using trade, investment, and technology as leverage

Economic Implications:

• Increased uncertainty for long-term business planning
• Advantage to large economies with negotiating leverage
• Smaller economies face pressure to choose sides
• Reduced investment in global public goods (climate, health, development)

Probability: 60-70% over next 3-5 years

Scenario 3: Renewed Cooperation (Low Probability)

A crisis or leadership change prompts return to multilateral frameworks:

Potential Triggers:

• Major global crisis (pandemic, climate disaster, financial collapse)
• Leadership changes in major economies
• Technology risks (AI safety) requiring coordination
• Shared economic pain from fragmentation

Probability: 20-30% by 2030

Singapore Impact Assessment

Vulnerabilities

Singapore faces acute challenges given its economic model:

Trade Dependency: As one of the world’s most trade-dependent economies (trade-to-GDP ratio exceeding 300%), Singapore is highly exposed to:

• U.S. tariff policies affecting Asian supply chains
• Potential trade wars between major economies
• Disruption to free trade agreements and WTO framework
• Reduced efficiency in global logistics and shipping

Financial Hub Status: Singapore’s position as a financial center depends on:

• Open capital flows between East and West
• Neutral ground for international business
• Stable rules-based international order
• Both scenarios of fragmentation and transactional bilateralism threaten this positioning

Technology Sector: Singapore’s tech ambitions face headwinds from:

• U.S.-China tech decoupling
• Export controls on advanced semiconductors and AI technology
• Pressure to choose sides in technology standards
• Reduced cross-border data flows

Energy Transition: Trump’s fossil fuel agenda complicates Singapore’s green transition plans:

• Potentially cheaper oil and gas in near term
• Reduced international momentum on climate cooperation
• Uncertainty around carbon pricing and green finance
• Regional partners may slow decarbonization

Strategic Responses

Singapore is likely to pursue several adaptive strategies:

Enhanced Economic Diplomacy

• Deeper engagement with multiple economic blocs simultaneously
• Strengthening ASEAN as a middle-power coalition
• Bilateral agreements to supplement multilateral frameworks
• Positioning as neutral convening ground

Diversification Initiatives

• Accelerating supply chain diversification beyond China
• Attracting manufacturing in strategic sectors (semiconductors, pharmaceuticals)
• Developing new trade corridors (India, Middle East, Africa)
• Reducing dependency on any single market

Technology Sovereignty

• Building domestic AI and cybersecurity capabilities
• Strategic investments in critical technologies
• Developing neutral technology standards where possible
• Balancing relationships with U.S. and Chinese tech ecosystems

Financial Sector Adaptation

• Positioning as bridge between Eastern and Western capital
• Developing yuan internationalization capabilities
• Expanding wealth management for Asian capital
• Building digital currency and fintech infrastructure

Green Economy Hedging

• Continuing green finance development despite U.S. policy shifts
• Regional clean energy partnerships (solar, hydrogen)
• Carbon services for Asian transition
• Preparing for eventual policy reversals

Opportunities

Despite challenges, disruption creates openings:

Safe Haven Status: Political and economic turbulence elsewhere could strengthen Singapore’s appeal as a stable, predictable jurisdiction for:

• Corporate headquarters for Asian operations
• Wealth preservation
• Dispute resolution and legal services
• Regional coordination centers

Middle Power Leadership: With traditional powers focused inward, Singapore can:

• Lead ASEAN consensus-building
• Champion pragmatic multilateralism
• Develop alternative cooperation frameworks
• Convene dialogue between competing blocs

Sector-Specific Growth:

• Increased demand for logistics optimization in fragmented supply chains
• Growth in trade finance and insurance for higher-risk environment
• Expansion of legal and consulting services for regulatory complexity
• Technology localization services

Policy Priorities

To navigate this environment, Singapore should consider:

1. Maintain Strategic Ambiguity: Avoid premature alignment with any bloc
2. Invest in Resilience: Build redundancy in critical supply chains (food, energy, water)
3. Strengthen Regional Ties: ASEAN unity becomes more valuable
4. Accelerate Innovation: Double down on competitive advantages (AI, biotech, finance)
5. Enhance Social Cohesion: Prepare citizens for economic volatility

Risk Assessment

High Risk (70%+ probability):

• Significant trade disruption in 2026-2027
• Reduced economic growth (from 3-4% to 2-3% range)
• Increased business uncertainty affecting investment

Medium Risk (40-60% probability):

• Financial sector consolidation as some players retreat
• Brain drain if other hubs become more attractive
• Regional tensions spilling into economic sphere

Low Risk but High Impact (10-20% probability):

• Major power conflict disrupting sea lanes
• Complete collapse of WTO and international trade rules
• Currency instability from fragmented financial systems

Conclusion

The 2026 Davos meeting symbolizes a global economic order in transition. For Singapore, the shift from rules-based multilateralism to a more fragmented, transactional system poses existential questions about its economic model. Success will require nimble diplomacy, economic diversification, and strategic investments in resilience and innovation.

The next 3-5 years will be critical. Singapore must leverage its strengths—governance quality, strategic location, neutral positioning—while adapting to a world where power, not principles, increasingly shapes economic relationships. The small city-state has navigated challenging transitions before, but this may be its most complex test yet.