Goldman's Jared Cohen and George Lee on the Unprecedented Shocks in Geopolitics
Feb 27, 2025
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Jared Cohen, President of Global Affairs at Goldman Sachs, and George Lee, Co-head of the Goldman Sachs Global Institute, dive into today's turbulent geopolitical climate. They discuss the surprising implications of J.D. Vance's Munich speech on transatlantic relations and the unexpected toughness of U.S. tariffs. The duo also examines the rise of Gulf powers in AI, the significance of subsea cables, and the emerging position of geopolitical swing states like Japan and India, offering valuable insights for investors navigating these complexities.
The current geopolitical landscape is witnessing a pivotal shift as Gulf countries emerge as influential players in technology and defense.
Europe's internal fragmentation is hindering its ability to implement cohesive economic and defense strategies, jeopardizing its global relevance.
The security of subsea cables, critical for global data traffic, is increasingly becoming a geopolitical concern amidst rising tensions.
Deep dives
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Geopolitical Changes and AI Competitiveness
Recent geopolitical dynamics have led countries to position AI technology as essential for national security and economic growth. This shift has prompted leaders worldwide to publicly address the significance of AI, likening it to a matter of national destiny. European nations, despite their historical intellectual capital, are facing challenges in competing with the capital-rich Gulf countries and technology-focused United States. The implications of AI development will not only impact economics but also the very nature of international power dynamics moving forward.
The Rise of Gulf States in Geopolitics
Gulf countries have transformed from being seen mainly for their energy resources to becoming influential players in global geopolitics. New leadership has brought ambitions to diversify economies and elevate their roles on the world stage, particularly in areas like technology and defense. Their sovereign wealth funds have enabled them to take advantage of geopolitical shifts, positioning themselves as integral players in the AI conversation. The increasing importance of these nations reflects a larger trend where capital, rather than traditional geopolitical structures, determines influence.
EU's Struggles with Internal Cohesion
Europe faces significant internal challenges, particularly regarding cohesive economic and defense strategies. The lack of decisive action among member states is often attributed to fragmented political landscapes and coalition governments, which complicates the ability to implement necessary structural reforms. European leaders acknowledge the urgency of aligning defense spending and regulatory frameworks but struggle with execution amidst competing national interests. This fragmentation is contributing to a perception of Europe losing its geopolitical relevance, as decisions are often bogged down by the complexities of consensus-building.
The Importance of Subsea Cables in Global Trade
Subsea cables play a critical role in global trade and digital communication, facilitating approximately 95% of international data traffic. However, increasing geopolitical tensions have raised concerns about their security and maintenance, as incidents of cable disruptions have highlighted vulnerabilities in the network. The dominance of Western companies in the subsea cable market has prompted responses from nations like China, seeking to secure a foothold through both investment and technical capabilities. With the growing recognition of their geopolitical significance, the stability and security of these cables are now seen as essential for maintaining global economic interactions.
The first month of the Trump administration has been noisy and novel by basically any measure. But perhaps the biggest shockwaves have been in the realm of geopolitics. Europeans were caught off guard by a recent speech given by Vice President JD Vance in Munich, calling into doubt the future of the Trans-Atlantic partnership. Meanwhile, when it comes to tariffs, the Trump administration has actually been tougher on Mexico and Canada than it has been on China. Then add into all of this the anxiety over AI domination, as a result of the hype around DeepSeek. So how should we understand these novel risks? And how should investors incorporate them into their thinking? On this episode we speak with Jared Cohen and George Lee, the co-heads of the Goldman Sachs Global Institute. They discuss the future of Europe, what they're expecting from the Trump administration, the rise of the Gulf powers, AI, undersea cables, and the opportunities in identifying what they call "geopolitical swing states" like Japan and India.
