What’s keeping BlackRock awake?

When the world’s biggest investment fund speaks, you gotta listen. Or not. You do you. But when that fund weighs in on its biggest geopolitical risks? Yes, we tend to listen. 

So when the $12.5 trillion BlackRock dropped its latest Geopolitical Risk Report, we dusted off our most cat-shaped sticky notes, pinkest highlighters, and a mechanical pencil that’s so pretentious we got a job offer from Apple.

Here are the report’s five key quotes:  

1. 🇺🇸 “Uncertainty and volatility have become fixtures of the geopolitical landscape, with rapidly evolving US policy as an animating force” 

Sometimes in government, things are highly classified not because of what’s being said, but who’s saying it. And that kinda applies here: it’s not news that Trump 2.0 is upending many of our world’s assumptions. That was his platform! No more business as usual, folks.

But what is interesting is who’s saying it: Wall Street royalty, aka BlackRock.

The so what here is interesting, too: after three quarters of a century playing a stabilising role for the very post-WWII system it ushered in, it’s jarring for many capitals to see DC now playing a de-stabilising role, whether across trade, tech rules, or beyond.

And of course, the president’s supporters would see this destabilisation as the exact medicine the US (and the broader world) needs, particularly when it comes to ties with…

2. 🇨🇳 “Military tensions may be poised to escalate, especially in the event of an accident or miscalculation” 

While many folks focus on the economic fallout of the (ahem) conscious uncoupling between Beijing and DC, the BlackRock analysts warn that the probability of US-China tensions escalating over Taiwan or the South China Sea is “high”.

And they go on to underline the significance of China’s recent deployment of two aircraft carriers (the Liaoning and the Shandong) beyond what national security types call the first island chain (aka Japan, Taiwan, the Philippines, Malaysia, and Indonesia): it “demonstrates China’s posture to deny U.S. access to the region in the event of a conflict”.

But it’s not just the Liaonings and the Shandongs turning heads anymore. It’s also…

3. 🤖 “We think AI and its associated hardware, data and tech clusters will increasingly be treated as national security assets” 

We’ve already seen that play out, whether it was the Biden administration’s chip diffusion rules (who gets how many types of what chips), or DC’s evolving export controls.

We say ‘evolving’ because, as we explored on Wednesday, Trump 2.0 just reversed course on banning certain Nvidia chip sales to China, instead embracing the idea that the world needs more US tech — not less — for the US to stay ahead.

You can see that same evolving philosophy in the president’s first trip abroad this year, with big tech export deals across the Gulf in a seeming reversal of Biden’s diffusion rules.

But as we grapple with the national security implications of AI (the Pentagon just signed $200M in AI deals), it’ll naturally become a target for adversaries, too. As if capitals didn’t have enough to worry about, like… 

4. 📉 “Export-dependent economies will face the greatest pressure, we think, with currency realignment likely serving as the primary adjustment mechanism”

Why export-dependent economies? It’s partly because one of their biggest customers (China) is buying less, but also because capitals everywhere are rushing to protect their own industries by slapping tariffs on stuff from abroad.

So why might everyone’s currencies absorb much of the shock? The other options are:

• Try to find other buyers, but it’s hard to casually replace a ‘China’ or a ‘USA’, especially when everyone else is trying to do the same thing, or you could…

• Stimulate more demand at home, but few capitals want much more debt.

Of course, currency depreciation comes with its own costs: anyone buying energy from abroad, for example, will see those bills go right up. So central banks will move to defend their currencies, but then cue the accusations of currency manipulation.

And speaking of accusations…

5. 🇰🇵 “North Korea is emboldened by its stronger relationships with Russia and China as well as its own military advances” 

Somehow, given everything else going on, Kim Jong Un quietly slips down many risk lists these days. Bro is unbothered. Moisturized. Happy. In his lane. Focused. Flourishing.

But he’s not sneaking past the bespectacled analysts at BlackRock, who think his recent string of diplomatic and military advances will further insulate him from any pressure.