For the foreseeable future, successful statecraft will depend on hedging.
Foreign Policy
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We are living in a new world of hedgers. The shocks of the last several years—COVID-19, Russia’s war in Ukraine, U.S. President Donald Trump’s tariffs, and the Iran conflict—have upended how nations approach international affairs. The smooth flows of a globalized and rules-based world have clotted into uncertainty, forcing states to find new pathways for trade, diplomacy, resource extraction, and defense cooperation. Countries no longer consider historical partnerships, values-driven alliances, and regional blocs to be sufficient to protect and advance national interests.
Hedging is the practice of avoiding exclusive dependence in a world of unreliable partners. It involves cultivating competing relationships across different domains so that no crisis or betrayal will leave a state out of options. In decades past, states tended to hedge their bets in specific circumstances. India, for example, emerged from colonization as a nonaligned nation but hedged amid China’s rapid growth to build ties with the United States—even as it maintained warm relations with Russia. Now, this is not just a tactic limited to emerging powers or a response to particular geopolitical shake-ups. Hedging has become central to international relations, shaping how powers great and small approach trade, technology, finance, energy, and security.
States are no longer hedging within a system that is episodically volatile but out of a recognition that there no longer is much of a system at all. The rise of what we might call “hedgemony” is both a response to the reshuffling of the global order and an accelerant of this transformation. Although these moves are being pursued by individual governments in search of stability and security, the net result may be a world that is less predictable and even more dangerous.
A photograph of Bill Clinton sitting at a desk outdoors, smiling and looking toward a group of people. In front of him is a blue sign with gold lettering that reads, "Permanent Normal Trade Relations With China." Several men and women in formal attire stand behind him, clapping.
U.S. President Bill Clinton is surrounded by Secretary of State Madeleine Albright, Treasury Secretary Lawrence Summers, Trade Representative Charlene Barshefsky, and members of Congress while signing a bill to establish permanent normal trade relations with China at the White House in Washington on Oct. 10, 2000.Mark Wilson/Newsmakers via Getty Images
Twenty-five years ago, globalization was embraced as almost a panacea. Deeper integration across borders was expected to make the world richer, more cohesive, and more humane. U.S. President Bill Clinton encapsulated the vision in his 2000 State of the Union address, when he argued that “open markets and rule-based trade are the best engines we know of for raising living standards, reducing global poverty and environmental destruction, and assuring the free flow of ideas.”
That conviction shaped an era of free trade agreements and global value chains: Companies shifted manufacturing to lower-cost jurisdictions and sourced inputs from wherever they came cheapest. Products designed in one country used components from others, were assembled elsewhere, and eventually funneled for shipping through centralized hubs to markets worldwide.
That model bore cheap goods and global economic growth, but it also scattered the seeds of future fragility. The 2008 financial crisis was an early warning that globalization carried the risk of cross-regional contagion. The bankruptcy of Lehman Brothers, headquartered in New York, set off a global chain reaction. It prompted a credit freeze that led to a banking collapse in Iceland, left the Russian stock market plunging, hit manufacturing across Asia, and sent commodity prices for minerals, metals, oil, and more plummeting.
In the ensuing years, governments began to experiment with using the machinery of a globalized economy as a tool of coercion, from the Belgium-based international banking network SWIFT’s move in 2012 to disconnect sanctioned Iranian financial institutions to Washington’s decision to tighten export controls in 2020 to block Chinese telecommunications company Huawei from obtaining many chips made with U.S. technology. These moves fit the model of what Henry Farrell and Abraham Newman have dubbed “weaponized interdependence”—the grip of powerful countries over central nodes of the global economic system.
The spread of COVID-19 laid bare still more dangers of dependence. Factory shutdowns, transport bottlenecks, shortages of semiconductors and medical supplies, and sudden border and export restrictions brought economic shocks alongside a public health crisis. The scramble for vaccines made plain that manufacturing countries would prioritize their own needs amid scarcity.
Still, interdependence was not easily undone. By the eve of its 2022 invasion of Ukraine, Russia was supplying around 40 percent of the European Union’s pipeline gas imports. The full-scale war, which made dependence on Russian energy an immediate strategic liability, ended the dream of benevolent globalization in Europe, proving that economic interdependence was not a reliable shield against war. The fight over the Black Sea squeezed grain flows and food supplies worldwide. Disruptions in Eurasia were compounded in late 2023 by Houthi attacks in the Red Sea and a drought that slowed traffic through the Panama Canal.
A large blue and white tanker ship named "NEPTUNE" is being guided through calm, misty waters by two smaller tugboats. In the foreground, several people are seen from behind, watching the ship from a shoreline.
Members of the media watch as a Norwegian-flagged regasification ship for liquified natural gas is guided into Mukran Port in Germany on Nov. 23, 2022.Sean Gallup/Getty Images
Meanwhile, China still refines roughly 70 percent of the world’s supplies of 19 of the 20 most important strategic minerals—though the United States and other Western nations are fervently trying to change this amid intensifying U.S.-China competition and Beijing’s periodic throttling of critical mineral exports. Trump’s 2024 reelection as U.S. president, followed by his unilateral and mercurial tariff policy, betrayal of allies, and foreign-policy adventurism, dealt perhaps the final blow to an old system where trust was a primary underwriter of global interdependence.
Now that the spell of innocuous interdependence has been broken, nations are moving with grim resolve to foster diversified, even redundant, dependencies. Countries are increasingly hedging their bets with hegemons—namely, by seeking strong ties with both China and the United States—while also striving to lessen hegemonic dependency through greater self-sufficiency and diversified relationships. Even the superpowers are hedging: The Biden administration’s CHIPS and Science Act and Trump’s Pax Silica both sought to reduce reliance on China and, by association, Taiwan; Beijing’s push for technological indigenization, domestic food production, and the expansion of renminbi-based cross-border payments infrastructure is all part of an effort to shield itself from Washington.
Over the last year, the most urgent efforts to hedge have come from countries that could once count on larger powers. On trade, in response to Trump’s coercive tariffs, Brussels has inked new deals with Mexico and Mercosur, commenced negotiations for a free trade agreement with the United Arab Emirates, opened dialogue with the Trans-Pacific trade bloc, and secured a long-stalled free trade pact with Australia. Battered and betrayed by Trump, Canada has forged a new partnership and preliminary trade arrangement with China and established two multibillion-dollar funds for trade and transportation diversification. South Korea has widened its export horizons, and Japan has devoted greater commercial energies toward the global south.
The rise of industrial policy and autarky reflects another layer of hedging. Governments are more willing to invest in subsidies, domestic capacity building, and strategic stockpiling as well as accept the costs that come from reorganizing supply chains. The premise of industrial policy is that, to compete and withstand crises, nations cannot count only on either the market or even diversified interdependence and, in a pinch, must be able to rely on themselves.
Similar patterns are evident on defense. Trump’s disdain for NATO plunged Europe into near panic, prompting the continent to boost defense spending and foster its industrial base. The alliance’s 2025 annual report showed that its European members and Canada raised defense spending by an average of 20 percent in just one year. Europe is borrowing more, spending more, and procuring more from a widening array of suppliers.
In February, former Japanese National Security Advisor Masataka Okano wrote that “Japan and other countries [must] look beyond the United States to address shared concerns.” In recent months, Japan has deepened military cooperation with both the Philippines and Australia. New partnerships are also appearing in unexpected places: After being hammered by Iranian attacks, Gulf countries have turned to Ukraine for air defense and counter-drone capabilities, while Poland has looked to South Korea to replace Soviet-supplied systems. The logic is simple: A country cannot feel secure if its military capabilities depend on a power that it no longer trusts.
Governments are also diversifying their sources of energy. Europe has turned to new liquefied natural gas sources while phasing out Russian imports. (It has not yet mounted a comparable shift away from U.S. energy, though leaders are arguingthat this should come next.) The Baltic states have disconnected from Russia’s electricity grid and synchronized with the EU network. Japan has also said it is reducing dependence on Russian energy. In the renewable energy sector, countries are hedging against manufacturing concentration in China, with the EU boosting domestic battery and solar production. The ongoing standoff in the Strait of Hormuz and global energy convulsions seem likely to spur increased pipeline capacity in the Middle East, diversification of Asian supply chains, and acceleration of renewable energy adoption as insurance against further shocks.
A similar trend is evident in approaches to resource extraction and supply chains. The U.S.-led Minerals Security Partnership, launched in 2022, was designed to accelerate more diverse and sustainable critical minerals sourcing. This was followed by a 2023 U.S.-Japan critical minerals agreement to strengthen and diversify those supply chains. The EU has pursued parallel raw materials partnerships with countries including Kazakhstan and Namibia.
The impulse to hedge is reshaping diplomacy at large. Last May, Southeast Asian countries, the Gulf states, and China held their first trilateral summit. That same month, Britain and the EU restored a formal security and defense partnership after years of Brexit-strained ties, and Brazil signed 20 new agreements with China. Meanwhile, Europe and India have committed to strengthening their strategic partnership, while Australia has continued the slow stabilization of relations with China. None of these moves amounts to full-fledged realignment, but they signify that states are widening their diplomatic options so that their foreign policy does not have to run through Washington, Beijing, or Moscow alone.
A wide shot showing workers on a scaffolding structure, attaching large white corrugated panels to a tall, silver metal frame of a building under construction. The background features a bright blue sky with wispy white clouds and a glimpse of a city skyline in the distance.
Workers install equipment at a high-tech industrial park in in Yongzhou, China, on Nov. 20, 2025. Jiang Keqing/VCG via Getty Images
Taken together, these moves mark a profound global shift. Globalization once promised a sheltering umbrella of prosperity; now, it seems to leave countries dangerously exposed to the elements.
While many of these trends predate Trump’s second administration, his policies have rapidly accelerated this transformation. While the United States’ strong economy, consumer base, and defense capabilities will continue to encourage engagement, Washington is no longer the dependable rock of a coherent international order. No future U.S. administration, no matter how agreeable, can make foreign capitals forget that there lurks within their onetime benefactor streaks of recklessness, vindictiveness, and a willingness to betray allies.
China inspires a different unease. Although Beijing likes to play responsible stakeholder as a foil to Trump’s mercuriality, its opaque authoritarianism, readiness to punishperceivedslights, and extractive infrastructure practices make close dependence feel risky.
Russia enters this era with a diminishing but still consequential network of ties, many inherited from the Cold War. Long-term structural weaknesses—above all, a constricted economy and deepening estrangement from the West—narrowed Moscow’s reach even before 2022. Then, the war in Ukraine, ensuing sanctions, blows to Russia’s military prestige, and failure to preserve Syria’s Assad regime hastened the shift, as countries including Armenia and India sought to reduce reliance on Russian protection, transit, energy, and weapons. Today, Moscow remains a power others must reckon with but is rarely a partner of choice in a world of furious hedging.
The systems seem no more reliable than the superpowers. The rules-based global trade order is crumbling beneath the pressure of Chinese subsidies, Trump’s tariffs, and the growing use of economic leverage for political ends. The norm against unauthorized unilateral force, never sacrosanct, is now brazenly flouted. The United Nations secretary-general and Security Council can’t or won’t step in to reassert the rules. More entrepreneurial mediation efforts, such as those undertaken by Qatar in Gaza and Pakistan in Iran, bring initiative without serious leverage.
Material insecurity further clouds the picture. Recent disruptions have revealed how quickly access to energy, food, medicine, and industrial inputs can be constricted. The artificial intelligence race has added fresh pressure, driving demand for electricity, semiconductors, rare earths, batteries, and the supply chains that deliver them. Already, the rapid development of frontier AI technologies is giving rise to new chokepoints, as illustrated by emerging geopolitical tensions over access to Anthropic’s powerful Mythos model. Yet another wild card is geopolitical. No one knows whether a future world order will be dominated by the United States, China, an uneasy combination of the two, or another configuration entirely; states want to position themselves to deal with any outcome.
In such a wobbly world, hedging is prudent. For the foreseeable future, responsible statecraft depends on it.
A group of four men stand together in a wood-paneled room. In the center, two men are shaking hands, while the men on either side hold large, formal leather-bound folders. The flags of India and the United Kingdom are visible in the background.
British Prime Minister Keir Starmer and Indian Prime Minister Narendra Modi shake hands after the signing of a free trade agreement between the two countries in Aylesbury, England, on July 24, 2025. Kin Cheung/ WPA/Getty Images)
Hedging reflects the world as it is, but it will also reshape it. For one, it will produce a less efficient and more nation state-directed global economy. Transaction costs for government and business will rise in a world that is more compartmentalized. The International Monetary Fund has already found that geoeconomic fragmentation leads to output losses as countries reorganize production and commerce around security concerns. Successful hedging strategies will likely mean lower highs and higher lows: lesser windfalls but a better ability to withstand shocks.
Hedging will also weaken the universal aspirations of the liberal order and make geopolitics more transactional. Considerations of democracy, rights, and shared political values will quietly recede as criteria for partnerships. Nations will deal more readily with dissimilar regimes, be more willing to overlook internal repression, and treat ideological kinship as a secondary concern.
This does not mean sidelining values entirely. Trump has already pushed several allies more tightly into one another’s arms. The EU has shown heightened solidarity under duress, and the United Kingdom is rushing to reconcile with its former bloc. In areas that are sensitive or existential—territorial security, intelligence sharing, sanctions coordination, and defense industrial planning—trust cannot be written out of the equation, and common values will still matter but as just one variable among many.
Hedging will also have serious security consequences. With states less able rely on one another, it’s likely that armament stockpiles will become larger, nonproliferation regimes will be tested, signals will be harder to read, and skirmishes below the threshold of war will intensify. Expect more testing of boundaries—including by Russia in Europe, by China in the Taiwan Strait, and by both powers when it comes to thwarting the United States through cyber and financial brinkmanship. And stable deterrence will be largely a thing of the past. Deterrence depends on clarity and credibility; hedged relationships do not generate the same fear of decisive retaliation.
More broadly, a hedged world will be one in which perspectives on the outside world are refracted, even more than they are today, through national considerations: how to avoid being trapped, screwed, or cut off. The rewiring of international circuitry to ward off shocks and disruptions will privilege the states that can assemble nimble teams of forecasters and negotiators capable of making course corrections and seizing opportunities in real time. For instance, Ukraine, which has shown remarkable ingenuity in its fight against Russia, is already providing a paradigm for adaptability in defense and for diversifying its sources of technology and weapons.
Yet many countries will be increasingly vulnerable in this system, and even relative winners will struggle at times to navigate changing geopolitical landscapes. All countries may find that they have fewer resources to devote to long-term objectives, such as curbing climate change or managing AI risks, amid the scramble to keep vital inputs flowing.
In theory, countries could do well to heed Canadian Prime Minister Mark Carney’s words at the World Economic Forum in January, when he called for middle powers to band together. After all, middle and smaller powers with limited leverage to coerce others or flex their might may have the most to gain from a more ordered geopolitics. If they summon the will, they might be able to join forces to reinvigorate or invent anew global institutions, forming pacts and institutions that offer a semblance of rules, norms, and predictability. While the Trump administration tends to resist initiatives not of its own making, it will not hold power in Washington forever. Future U.S. administrations may well seek to become part of what others build—and under that new and more predictable paradigm, hedging may even become less necessary in the long run.
