Geopolitics and the geometry of global trade: 2026 update
Geopolitics and the geometry of global trade: 2026 update
https://www.mckinsey.com/mgi/our-research/geopolitics-and-the-geometry-of-global-trade-2026-update
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Tariff splashes, AI waves, and the ripples reshaping global trade.
Chapter 4.
The EU: Searching for growth amid a US–China squeeze
EU trade grew in 2025, and its trade surplus grew by $5 billion.41 Yet the headline figures masked a loss of competitiveness as the bloc was caught between rising imports from China and higher US tariffs that constrained key exports, particularly cars.
A closer look at the underlying trade flows reveals the double squeeze. The European Union’s trade deficit with China deepened as imports rose and exports fell. At the same time, the surplus with the United States narrowed over the course of the year, with most export gains stemming from temporary US frontloading of pharmaceuticals ahead of tariffs. Without this boost, the bloc’s total trade surplus would have shrunk by about $40 billion (Exhibit 17).
Exhibit 17
A multi-panel line chart tracks extra-EU imports and exports over time (2017–25) and monthly detail (2024–25), plus partner shares and summary growth rates. While 2024–25 annualized export growth appears strong (about 7.2 percent), excluding frontloading, it is closer to 4.7 percent, and the trade surplus change shifts from +3% to about −20% when frontloading is removed. Takeaway: Europe’s apparent 2025 strength with the US was partly temporary (frontloading-driven), while exposure to China remained a headwind.
Most industries face pressure, with autos at the epicenter
Rising competition from China weighed heavily on Europe’s manufacturing base. Imports from China increased by over $60 billion in 2025, reflecting stronger European demand for Chinese products across a wide range of industries. High-value manufactured products, including electronics such as batteries, EVs, and machinery, accounted for a substantial share of this increase, while imports also rose in textiles and contract manufacturing. In these sectors, where Chinese producers compete directly with European firms, imports grew faster than exports. Falling prices and increased low-cost e-commerce shipments added further pressure.
In principle, Europe could have offset these headwinds by supplying goods that the United States stopped importing from China. In practice, this did not occur. Once tariff-related frontloading is stripped out, the European Union captured less than 3 percent of the US demand previously met by China, largely in a narrow set of pharmaceutical products. In fact, outside of pharmaceuticals, EU exports to the United States dropped, with some sectors experiencing sharp declines, including a 7 percent drop in planes, trains, and automobiles.
Rising imports from China and limited gains in the US market collectively shrank the EU’s manufacturing trade surplus by $70 billion—when excluding frontloading—reflecting a deterioration in the trade balance across nearly every industry (Exhibit 18).
Exhibit 18
A stacked bar chart shows the change in the EU's trade balance (exports minus imports) by industry with China and the United States in 2024–25 (annualized dollars). Automotive shows the largest deterioration (about −$22B total, roughly −$13B with China and −$9B with the United States), and many other manufacturing sectors also weaken with both partners. Takeaway: Across sectors—especially autos—Europe faced intensifying competitive and tariff pressure from both the United States and China in 2025.
Autos, long central to Europe’s export strength and employment, were hit hardest, as the sector’s trade balance with the United States and China declined by $22 billion.
EU auto exports to both markets fell. Shipments to the United States declined by 17 percent, while exports to China, once viewed as a growth market, dropped by over 30 percent.
Import pressures compounded the strain, with EU purchases of lower-priced Chinese EVs surging to more than 800,000 units, about 50 percent higher than 2024 levels. Germany, the region’s largest carmaker for more than half a century, imported more cars from China than it exported there for the first time. By late 2025, EVs assembled in China accounted for about 15 percent of EV sales in the European Union.
Europe found partial offsets in auto exports elsewhere. Shipments to non-EU markets outside the United States and China grew by 5 percent, or about $10 billion. However, in those markets, China’s auto exports grew roughly twice as fast, limiting Europe’s gains. Intra-EU auto trade increased by 6 percent, rebounding from a contraction in 2024.
Against this backdrop, the European Union introduced several policy changes, including easing timelines for phasing out internal combustion vehicles—thereby allowing automakers to continue producing them for longer—and introducing incentives to increase domestic content in EV manufacturing. At the same time, firms attracted investment from Chinese EV and battery makers, which have announced about $10 billion of greenfield projects in Europe each year since 2022, more than in any other market. Projects include gigafactories in Hungary and Spain that could roughly double the European Union’s battery production capacity. Whether these developments materially strengthen the industry, and whether additional steps will follow, remain to be seen.
Europe makes some gains in other markets
Europe expanded many of its existing trade relationships beyond the United States and China. In several cases, this translated into export gains. Advanced machinery and industrial electronics drove the largest increases, with stronger shipments of semiconductor manufacturing equipment used in the AI supply chain to South Korea and Taiwan, as well as power generation equipment to rapidly electrifying markets in the Middle East and Africa. Medical and scientific equipment exports, including diagnostic equipment, prostheses, and pacemakers, expanded to fast-developing emerging markets in Latin America and the Asia-Pacific region. Meanwhile, demand strengthened in other non-EU European markets for pharmaceuticals and luxury foods and beverages—including cheese, cocoa, and wine (Exhibit 19).
Exhibit 19
A stacked bar chart breaks down changes in the EU trade balance by industry across China, the US, and the rest of the world in 2024–25 (annualized dollars), including a frontloading-related component. Several sectors improve their net balance with the rest of the world even as balances with China and the US are pressured; pharmaceuticals and chemicals show the largest overall improvement. Takeaway: Europe partly offsets United States/China headwinds in 2025 by strengthening its trade balance with other markets.
Overall, the European Union expanded external trade with a wide range of partners, driven primarily by exports to the Middle East and imports from Asia, notably textiles and electronics from ASEAN economies, as well as agricultural products, metals, and minerals from Africa and Latin America (Exhibit 20).
Exhibit 20
A bubble-and-lollipop chart plots the percent change in EU-27 goods trade with the top 30 partners from 2024 to annualized 2025, with circle size indicating 2024 trade value (scale shown at $250B). Many partners across regions show increases—including the US and several Asian and Middle Eastern economies—while trade with Russia declines. Takeaway: EU trade growth in 2025 was broad-based across regions, even as geopolitical constraints continued to reduce trade with Russia.
Trade expansion and EU competitiveness
Given pressure on its trade balance with external partners, one of the European Union’s stated priorities has been to increase the role of domestic demand.49 Intra-EU trade grew by around 6 percent in 2025, slightly faster than exports when frontloading is excluded, providing some additional demand for EU goods.
The European Union is also looking to further expand trade globally and is pursuing trade agreements with fast-growing markets. In January 2026, it signed agreements with India and the Latin American bloc Mercosur, the latter pending review by the European Court of Justice. Tariff reductions would be substantial in sectors where the European Union is a large exporter, particularly autos and pharmaceuticals.
Still, the current scale of trade puts these opportunities into perspective. Although the European Union is already the second-largest trading partner after China for both markets, the two together account for less than 8 percent of EU trade. By contrast, the United States and China together represent about one-third. These deals are therefore more likely to deepen long-term relationships than to materially shift the EU trade balance in the near term.
With competitiveness at the top of the EU agenda, new trade relationships may be crucial. But economic competitiveness does not necessarily go hand in hand with a larger trade surplus. Building a presence in the industries of the future often requires importing the technologies that underpin them. Expanding AI infrastructure would require greater imports from Asia, including advanced logic chips and other critical components. Imports of these AI-related goods to the European Union have so far trailed those to the United States and China, reflecting lower levels of data center investment.
Europe broadened its trade ties in 2025. While trade with new partners was not enough to offset pressure on domestic industry from rising Chinese imports and constrained access to the United States, the bloc continues to explore new options to engage broadly.
In the long run: What leaders can learn from an Olympic gold medalist
https://www.mckinsey.com/capabilities/tech-and-ai/our-insights/in-the-long-run-what-leaders-can-learn-from-an-olympic-gold-medalist?
Alistair Brownlee, a two-time Olympic gold medalist, shares his strategies for staying resilient amid pushback, removing barriers to creating habits, and leading with conviction.
Alistair Brownlee, two-time Olympic gold medalist, four-time triathlon world champion, three-time Ironman winner, and bestselling author, isn’t one to shy away from making a mantra his own: “If you want to achieve something no one has achieved before, you have to approach the challenge in a way no one has before.”
In a keynote fireside chat at the Unleashing Disruptive Growth event in Barcelona, Alistair sat down with McKinsey’s Philipp Hillenbrand to discuss invaluable lessons business leaders and entrepreneurs can learn from elite athletes.
Key insight #1: Determination drives long-term success and fuels persistence through pushback.
Philipp Hillenbrand: Alistair, you were studying medicine when you made the decision to become a professional athlete. You told me that people tried to discourage you by saying you would regret your decision. How do you deal with these voices?
Alistair Brownlee: The truth is that deciding to become a professional athlete was a very difficult decision. Fortunately, I had a great support system of family and friends, but I also dealt with the negativity by having a strategy. I always remember that success happens over many years. It’s one of the greatest sporting clichés—but for good reason. Throughout my childhood and teenage years, I gradually got better at sport. I went from being the worst in my school to being the best in the city, and then I became World Junior Champion at 18, weeks before I started university at Cambridge for medicine. I decided to start studying despite my dream of becoming a professional athlete because winning the World Junior Championship proved to me that I could do both.
Philipp Hillenbrand: Can you tell us more about how you decided to become a triathlete?
In 2000, I saw triathlon debuting [at the Olympic Games] in Sydney and was immediately fascinated. It became “my sport.” The next morning, I was inspired to get up early and start training to become a triathlete.
Alistair Brownlee: Going to the Olympic Games was always something that had inspired me. I didn’t know if that was economically possible for me, but it was something I wanted to do. In 1996, when I was eight years old, I was already staying up very late to watch my first Olympic Games. Then, in 2000, I saw triathlon debuting in Sydney and was immediately fascinated. It became “my sport.” The next morning, I was inspired to get up early and start training to become a triathlete.
In 2007, I started university. My parents, teachers, and friends were always telling me what an amazing opportunity it was to be studying medicine. Switching careers to become a professional athlete was a crazy idea, especially when you have two parents who are doctors. Stepping away from a medical degree just to go run around in a Lycra swimsuit for a living seems ludicrous. I was hesitant and took some convincing. I remember having a meeting with my tutor at Cambridge and telling him I wanted to go away and become an athlete. He told me about someone who went away to be a professional tennis player, but it didn’t work out, so he came back to Cambridge a few years later to keep pursuing his degree. My tutor obviously shared the story to discourage me from leaving, but what I heard was, “You can always go away, do your sport, and do academics later.”
Another thing that convinced me was having a chat with my dad. It was on a winter’s day in Northern England, so it was dark and raining. I was outside riding my bike up a hill. My dad was worried, so he took the car out and followed me up the hill. There I am, riding with his headlights behind me; it was a Rocky-esque scenario. At the top of the hill, I said to him, “This is what I want to do.” I remember trying to make the point that hundreds of people can study medicine, but few can be the best in the world at their sport and fulfill their passion. Maybe it was the cycling in the rain and the dark, but somehow, I convinced him. He told me to always remember that I’ve been able to follow my dreams. Handling the voices that tell you that you can’t or shouldn’t pursue your passion is a combination of stubbornness and having support from the great people around you.
Key insight #2: Remove as many barriers as possible to build productive habits.
Philipp Hillenbrand: How did you train your personal mental resilience muscle? What keeps you going when you get up at 5:00 in the morning?
Alistair Brownlee: In its simplest form, all sport—especially endurance sport—is a dose-response relationship, meaning the more of it you do in small doses over a long period of time, the more your body responds by getting better, faster, stronger, and more consistent.
You have to find motivation and enjoyment in the process. I truly believe that you can’t motivate yourself to do hard things every day to achieve a goal that might happen in two, four, or eight years unless you celebrate small achievements along the way.
I had three strategies for achieving this. The first was making sure that what I was doing became a habit. Funnily enough, I never started anything at 5:00 a.m., which was an intentional part of building the habit, since starting that early is tough to maintain. Second, I was obsessive about removing the barriers to do what I needed to do. That would include things like getting up at 7:00 a.m. instead of 5:00 a.m. That was important because sleep is the second-most-important facet in training, after the training itself. I also made sure my equipment worked, my kit was dry, and my running and cycling shoes were warm and dry next to the door. I even bought my first house because it was close to the largest number of trails. I didn’t give myself a choice of whether I should train or not. It was like going to work. It was who I was. Establishing those habits and removing those barriers made me more resilient.
Third, as cliché as it sounds, you have to find motivation and enjoyment in the process. I truly believe that you can’t motivate yourself to do hard things every day to achieve a goal that might happen in two, four, or eight years unless you celebrate small achievements along the way. And you have to find what motivates you. For me, it was competing against my brother. He was always there to motivate me. When I spoke to 30 or so high performers from different sports for my book, I found that the people who perform well over decades are good at finding what motivates them.
Key insight #3: Increase the bar without breaking it.
Philipp Hillenbrand: You once told me that every race is a little bit tougher than the prior one. In such a competitive environment, how do you manage to outpace your contenders?
Constant but simple innovation by iteration is an undervalued approach. . . . Maximizing the yield from everyday training by optimizing the routine impacts your body’s adaptation and compounds improvement; this is what leads to outliers in performance.
Alistair Brownlee: I believe a sporting career is an innovation that happens in many ways. I tried to be innovative first in my training. My body was changing, and the training that worked last year didn’t work the following year. Training is a process of consistent iteration. Each week was a chance to experiment. Could I do a few more minutes? Could I run a bit faster? I challenged myself to find different modalities of training that would give me a better result without risking injury. I think constant but simple innovation by iteration is an undervalued approach. We often think of innovation as something fancy and technical. In triathlon, for example, it might be buying the most expensive bike. But things like that bring only a tiny increase in value. Maximizing the yield from everyday training by optimizing the routine impacts your body’s adaptation and compounds improvement; this is what leads to outliers in performance, in my experience.
As a person new to the sport, the second way was figuring out how I could innovate differently from the competition in terms of the dynamics and tactics of the race. The third way was being analytical and scientific about my approach. I enjoyed reading about the latest scientific approaches to things like altitude training or certain nutritional supplements, just to stay on top of the game.
Philipp Hillenbrand: We could think of you as a one-man start-up. What do you think of the typical start-up mantra, “Go fast and then break things”? Does it apply to your approach to sport?
Alistair Brownlee: I think that’s a fantastic analogy. In lots of ways, being an athlete is like being a start-up. You’re doing a lot on your own and have to innovate. You’re only as good as your last race.
But the analogy stops when you say, “Go fast and break things.” Because if you go too fast, you just break yourself. I think one of the keys to sport is finding how to increase the bar as much as possible without increasing it too much. Because if you break something four weeks before the Olympic Games, you don’t have another chance. You have to find a balance.
Key insight #4: The bigger the rock, the bigger the gain.
Philipp Hillenbrand: Let’s stay with start-up clichés. Silicon Valley promotes getting 1 percent better every day, but you say to focus on a few areas that result in 70 to 90 percent progress leaps while still improving daily habits. How do you identify and prioritize these high-impact areas? How do you balance these transformative opportunities with small improvements?
Alistair Brownlee: I think it’s a question about where you focus your resources. Ten years ago, there was a popular sports mantra: “Leave no stone unturned.” While I thought that was fine, you can’t look under every tiny pebble and forget about the big rocks, because that’s ultimately where your biggest gains are.
Key insight #5: Effective leadership stems from conviction and assembling a supportive team.
Philipp Hillenbrand: Is there anything that business leaders, investors, and start-up founders can learn from you as a top athlete in terms of leadership?
Alistair Brownlee: You wouldn’t think there is much leadership in an endurance sport—you stand on the starting line by yourself, you race by yourself, you cross the finish line by yourself. In reality, you have a team of coaches, physiotherapists, doctors, masseurs, mechanics, and more. You have to take these people with you on what is ultimately a very selfish, self-indulgent goal of winning races. I was forced into a leadership position as a 21-year-old world champion, and my strategy was to find people who were just as committed as I was. But I realized that I was never going to find people like that. Like I said earlier, this has been a passion of mine since I was eight years old. Readjusting my expectations was important, as was finding people who were passionate, just at a different level than my own.
Because I was doing the training and racing, I made sure that I was making the final decisions. I could seek out the opinions of world experts for something specific, like an injury, but I was the one who closed the feedback loop when it was time to move on. Finding people who supported that approach and having my own convictions in making those types of decisions made me a more effective leader.
Why hotel teams don’t trust their leaders—and how to fix it
https://hotelsmag.com/news/why-hotel-teams-dont-trust-their-leaders-and-how-to-fix-it/?
Story contributed by Darryl Gibson, regional director of sales and marketing, LBA Hospitality.
Trust in hotels doesn’t disappear overnight. It erodes slowly, one broken promise, one inconsistency, one missing leader at a time. Teams don’t lose trust because of a single moment. They lose trust because the pillars that hold trust up begin to crack:
• Lack of transparency
• Broken promises
• Perceived unfairness
• Low competence
• Inconsistency
And the most damaging of all, the absence of empathy.
Empathy signals care. Empathy signals fairness. Empathy signals, “I see you.” But many leaders avoid empathy because they fear it makes them look weak. So instead of saying: “I’ve been where you are. I know what this feels like. I’m going to stand with you so you don’t have to go through this alone,” they distance themselves. They protect their image, their comfort, and their ego. And when “go-time” comes, when the team actually needs them, they’re nowhere to be found. Off the floor. Out the door. Fending for themselves. It’s the same energy as the manager who says, “My door is always open,” but is never actually in the office.
In hospitality, “I’ve got your back” is said far more often than it’s lived. And teams feel that gap every single day.
The Truth We Don’t Want to Admit
This isn’t a new problem, and it’s not all leaders. But it’s enough leaders, for long enough, that it has become a systemic issue in our industry.
And I’ll be honest: I’m not writing this from a pedestal. I’ve fallen into these patterns myself. Every leader has. The point isn’t perfection: it’s acknowledgment.
Because if we can’t admit this is happening, if we can’t confront it head-on, if we can’t own the truth of our own behavior… Then we are doomed to repeat it.
We owe the next generation of hoteliers something better than that, a version of leadership that is more self-aware, more present and more human than the one many of us inherited.
But far too often, we’re consumed with getting ahead, planning the next phase, chasing the next title, proving we can “be all we can be.” And in the process, we ignore the essence of our industry: the people.
We say hello in passing. We have polite conversations as we walk through the hotel. But most of us walk into a property with an agenda, a checklist that has nothing to do with uncovering uncomfortable truths about how we can make this industry better.
We’re not listening to what’s broken. We’re not asking what people need. We’re not slowing down long enough to see what’s right in front of us.
And that’s how trust erodes, not in dramatic moments, but in the quiet ones.
Rebuilding Trust, One Conversation at a Time
Trust in practice looks exactly like it sounds: you practice what you preach. You become someone your team can rely on, not because you’re perfect, but because you’re consistent.
It means showing up when you say you will. It means doing what you said you were going to do. It means believing in your people. And here’s the part leaders forget: you won’t always come through on every promise. But trust isn’t built on perfection; it’s built on effort.
Trust is built in the small, human moments, not the grand gestures. I’m not talking about gifts or bonuses. I’m talking about genuine interaction: swapping stories, asking real questions, noticing when something feels off.
We’re not dealing with automation or machinery. We’re dealing with the human element, the most valuable part of the hotel. And if we want our employees to trust us, we have to show our humanity first.
The Leadership Shift Hospitality Needs Now
Hospitality doesn’t need more policies or leadership slogans. It needs a shift, a shift back to people. The next generation of hoteliers isn’t asking for perfection. They’re asking for leaders who are present, honest, consistent, empathetic, and human.
Because hotels don’t run on systems, hotels run on people. And people run on trust. If we want to rebuild this industry, we have to rebuild trust first, one leader, one team, one hotel at a time.
Marriott just opened its 10,000th hotel here
https://hotelsmag.com/news/marriott-just-opened-its-10000th-hotel-here/?
Marriott International has opened its 10,000th hotel, the JW Marriott Ranthambore Resort & Spa in India, as the company approaches its 100th anniversary.
The resort is situated near Ranthambore National Park and offers 127 accommodations, including private villas, guestrooms, and suites. The opening was marked with associates and company leaders, including David Marriott, Chairman of the Board, and Rajeev Menon, President, Asia Pacific excluding China, along with resort owner Nilesh Gadhiya and the Gadhiya family.
“Marriott was founded 99 years ago as a nine-seat root beer stand and as of today, has grown into a global portfolio of 10,000 properties spanning 146 countries and territories. I’m immensely proud of this tremendous milestone, made possible by our global teams and the owners who continue to place their trust in Marriott brands,” said Marriott International President and CEO Anthony Capuano. “Marking this accomplishment with a property carrying the JW Marriott brand is especially meaningful given its naming after our co-founder, J. Willard Marriott. He and Alice S. Marriott built an incredible legacy of opportunity, service, and innovation that we’re privileged to carry forward.”
Deluxe king garden view bedroom of JW Marriott Ranthambore Resort & Spa.
The JW Marriott brand now comprises more than 130 properties globally. Marriott’s luxury portfolio spans seven brands representing nearly 700 properties across 74 countries and territories.
Recent openings across the portfolio include the St. Regis Budapest, marking the brand’s debut in Hungary within the historic Klotild Palace; the Westin Playa Vallarta, Westin’s first all-inclusive property in Mexico; Artik Suzhou, Apartments by Marriott Bonvoy, marking the brand’s debut in Greater China; and StudioRes by Marriott Greensboro Airport in North Carolina, developed using modular construction and opened in May.
Marriott International operates properties across 146 countries and territories.
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