Strategic Business Risk Assessment: Growing Authoritarianism and American Business

Executive Summary

We assess with high confidence that accelerating authoritarian dynamics in the United States are already generating direct and growing risks to American businesses, both abroad and at home. This risk environment is defined less by episodic shocks than by a structural shift away from rules-based governance toward personalized, discretionary power, in w

hich proximity to political authority increasingly shapes commercial outcomes. For many firms, the biggest immediate problem is not just volatility. It is the collapse of trust in the government. That trust was already weakening, but this administration’s disdain for the rule of law, rational and orderly regulation, and stable policy formation has already driven trust close to zero for firms that do not have easy access to power. And even for firms with access, that access is fragile, often bought through donations or business dealings with Trump allies and family members, and dependent on an increasingly erratic president.

From a board and investor perspective, the central concern is not only volatility but pressure on boards and executives to compromise long-term fiduciary obligations in favor of short-term political accommodation. Authoritarian systems reward loyalty, informal access, and responsiveness to discretionary demands; they penalize independence and long-run prudence. Firms that seek advantage by aligning closely with discretionary power may temporarily outperform but incur heightened legal, reputational, and regime-reversal risk.

Abroad, the erosion of a rules-based international economic order, the weakening or politicization of Foreign Corrupt Practices Act enforcement, and highly discretionary use of trade tools have already diminished a long-standing competitive advantage of American firms and pushed them into more politicized, adversarial markets. At home, militarized enforcement, weakened regulatory institutions, and arbitrary executive interventions are already distorting markets, damaging the labor force, and undermining predictable planning conditions. The practical effect is already visible in day-to-day business operations. In some places, firms are spending significant time simply recalculating costs every time tariff policy shifts, losing money on overtime and administrative churn before they even make a shipment decision.

The Steady State recently published an assessment of President Trump’s leadership style, that highlights the mercurial, personalistic, transactional, corrupt, and bullying environment that American businesses must navigate. While not based on a clinical examination, the Steady State assesses with low confidence that these negative leadership traits are more likely to worsen than moderate over the remainder of his term.

We judge that absent meaningful reversal, these dynamics will continue to introduce distortions into US and global markets, erode long-term competitiveness, and increase correlated political risks for investors. While a narrow subset of firms may benefit from proximity to power, sustained American economic strength depends on predictable rules, transparent enforcement, and performance-based competition.

Scope Note and Relationship to Prior Assessment

This assessment is a focused extension of Accelerating Authoritarian Dynamics: Assessment of Democratic Decline, published by The Steady State in October 2025. That earlier assessment applied US Intelligence Community analytic tradecraft to evaluate democratic backsliding and authoritarian consolidation in the United States, concluding with moderate to high confidence that the country was on a trajectory toward competitive authoritarianism.

The present document does not revisit that full institutional and constitutional analysis. Instead, it addresses a distinct analytic question: how the authoritarian dynamics identified in the October 2025 assessment, and in subsequent Democracy SITREP updates, translate into concrete risks for American businesses and the boards, executives, and investors responsible for governance, compliance, capital allocation, and long-term strategy.

As with the prior assessment, this document:

Draws solely on open-source information.
Offers analytic judgments rather than policy advocacy.
Is produced by former Intelligence Community and other national security professionals acting in a private capacity.

We apply similar standards of analytic rigor, confidence language, and structured judgment, tailored specifically to the operating, governance, and risk environment facing American firms.

Key Judgments

KJ 1. We assess with high confidence that the authoritarian dynamics identified in the October 2025 assessment are now producing direct and growing risks to American business competitiveness, both internationally and domestically. These risks affect market access, supply chains, capital costs, workforce stability, and long-term investment planning.

KJ 2. We assess with high confidence that the effective abandonment or politicization of US anti-corruption enforcement, particularly the Foreign Corrupt Practices Act, erodes a core competitive advantage of American firms rather than strengthening it. Over time, this increases the weight of political relationships and tolerance for corruption in determining outcomes.

KJ 3. We assess with high confidence that US businesses operating domestically face rising exposure to arbitrary executive intervention, including selective enforcement, market distortion, informal price and output pressures, and political influence on ownership and asset decisions.

KJ 4. We assess with high confidence that while a narrow subset of firms may temporarily benefit by adapting to a loyalty-based, access-driven system, most American firms are structurally ill-suited to succeed under such conditions, given existing governance structures, investor expectations, and operational models optimized for rules-based markets.

KJ 5. We assess with moderate confidence but high potential consequence that continued authoritarian consolidation could produce a systemic sorting of American businesses in which political alignment, rather than market performance, increasingly shapes survival and growth. This would fragment competition, increase correlated political risks across sectors, and undermine portfolio resilience.

KJ 6. We assess with moderate confidence that boards and executives who compromise fiduciary obligations in pursuit of short-term political advantage increase long-term shareholder risk, including legal exposure, valuation instability, and vulnerability to abrupt adverse government actions under current or future leadership.

Introduction: Business Risk in an Authoritarian Context

The threat to American firms arises from a cluster of authoritarian behaviors that reinforce one another: concentration of executive power, politicization of law enforcement and regulation, erosion of independent courts, suppression of media and civil society, and increasingly aggressive and unilateral foreign and economic policy.

Corruption is a critical component of authoritarian governance, but the more material business risk comes from the erosion of predictable rules, expansion of discretionary enforcement, and politicization of regulatory and legal processes. In this environment, compliance programs, contracts, and prior regulatory understandings no longer reliably safeguard operations and investments.

Trade and financial instruments such as tariffs, sanctions, export controls, capital access restrictions, and regulatory discretion have always carried political dimensions. What has changed is their scale, speed, personalization, and normalization as tools of leverage. In an interconnected global system, these instruments transmit effects rapidly through financial institutions, supply chains, insurers, and logistics providers, embedding exposure deep in the architecture of global commerce. The result is not only market disruption, but growing mistrust of the US government itself, which then spills over into mistrust of US business abroad.

Historically, American businesses operated within domestic and international systems that, while imperfect, offered reasonably predictable rules within which business competence determined outcomes: product quality, operational efficiency, innovation, and access to capital. Commercial success depended primarily on performance within a stable legal and regulatory framework, not on proximity to political power.

The October 2025 Steady State assessment concluded that this broader environment is being restructured around personal loyalty and discretionary power rather than predictable application of law. This business-focused extension examines how that political transformation translates into concrete commercial risks, particularly in settings where compliance, contractual protections, and regulatory consistency can no longer be assumed to function as safeguards. The purpose of this paper is not merely descriptive. It is to wake up firms that are still asleep, and to push firms that think they can simply stay quiet and wait this out. That posture will not be enough.

American and other Western firms have long experience operating in ill-governed, corrupt, and authoritarian states. Some projects can be lucrative in the short term. Over the medium to long term, however, there is a consistent pattern of diminishing profitability and rising risk as businesses encounter escalating demands for corruption, weaker local partners, increasingly arbitrary courts, and growing threats of partial or full nationalization and threats to employee safety. Current US policies are already replicating aspects of those environments abroad and introducing comparable unpredictability at home.

Two Overlapping Business Environments

This assessment focuses on two overlapping categories of American firms:

US businesses operating abroad, including those with overseas assets, supply chains, customers, joint ventures, intellectual property exposure, or reliance on international capital markets.
US businesses operating primarily at home, whose revenues, assets, labor forces, and regulatory exposure are largely domestic.

These categories are not mutually exclusive. Many firms operate in both environments. Several dynamics described below, such as selective enforcement, politicized regulation, arbitrary decision-making, manifest in similar ways at home and abroad. Distinguishing these environments clarifies how authoritarian governance mechanisms converge to undermine market-based competition.

Corruption is best understood not solely as bribery or illicit payments, but as the abuse of entrusted power for private gain. In the United States context, it manifests in three forms that matter directly to markets:

Transactional corruption: bribes, kickbacks, and explicit quid pro quos.
Structural corruption: rules rewritten to advantage insiders and favored firms.
Institutional corruption: weakening or capture of enforcement bodies and oversight mechanisms.

We assess that the most consequential risks to American firms arise less from isolated acts of transactional corruption and more from structural and institutional corruption, which can deeply distort markets while maintaining formal legal compliance.

Corruption, Destabilization, and Militarization

Authoritarian shifts affect business risk through three overlapping channels relevant to both domestic and international operations:

Aggressive foreign policy: use of coercive diplomacy, threats of force, unilateral military action, or selective application of international law. These policies destabilize trade relationships, increase sanctions exposure, disrupt supply chains, and heighten political risk for US firms operating abroad.
Domestic and external destabilization: deliberate creation or exploitation of social, political, or economic instability at home or abroad to consolidate power. Decoupling foreign policy from ordinary domestic constraints increases the volatility and unpredictability of resulting actions. For businesses, destabilization manifests as regulatory unpredictability, labor disruption, capital flight, infrastructure vulnerability, and heightened security costs. Increasingly erratic presidential behavior amplifies this volatility.
Militarization of governance: growing reliance on security forces, intelligence services, or paramilitary-style units to manage political dissent and enforce policy, instead of civilian institutions and courts. This erodes investor confidence and introduces non-market coercion into business operations, increasing the risk of sudden business interruptions and compelled compliance.

Abroad: Loss of Rules-Based Advantage

The Trump Administration’s punitive and highly discretionary trade policies are already creating a new international order in which authoritarian adversaries and opportunistic partners can more easily justify retaliatory actions against US businesses. One element of the post–World War II rules-based order was tacit mutual deterrence: states refrained from exploiting rules in narrow self-interest because violations could be reciprocated and would damage the system that benefited all.

By departing from these norms and deploying tariffs in ways that are inconsistent with established trade practices, the Administration has already created an arbitrary, unpredictable operating environment for US firms. Tariffs have been applied and threatened to press personal grievances and non-trade disputes, including:

A 100 percent tariff on Canada if it pursued a trade agreement with China.
Raised tariff rates on Switzerland based on personal displeasure with the tone of its former president.
Threatened tariffs against multiple European states for opposing US designs on Greenland, later withdrawn under allied pressure.
A 50 percent tariff on Brazil over its treatment of a favored foreign leader.

Canada is the clearest example of how this is already pushing allies and businesses away from the United States. The issue is not only buying Saab instead of F35 aircraft. It is the broader distancing from the US economy that Mark Carney is pursuing across the board. This is exactly the kind of example that should be used to show readers that this is not hypothetical or reversible by default. Once allies start reordering procurement, supply chains, and investment behavior, those decisions are not easily turned around.

Uncertainty over tariffs and bilateral ties has harmed small businesses, with the US Chamber of Commerce documenting difficulties in estimating costs, sourcing inputs, and pricing products. In at least some cases, firms are losing money simply because each policy shift forces another round of calculations and overtime work to reprice, reorder, and re-plan. A recent example from North Carolina shows a business spending substantial time recalculating costs every time tariff policy changes, losing money on overtime pay just to keep up with the chaos. Some firms have begun to shift operations out of the United States due to rising costs and uncertainty.

Examples include:

Manufacturers relocating production to Mexico or other jurisdictions to avoid tariff exposure and secure supply chains.
US producers such as Alcoa are constrained in shipping inputs from Canada, forcing downstream manufacturers to purchase aluminum at higher domestic prices.
American soybean exporters losing access to Chinese markets and facing unsold inventory when China turned to Brazil during tariff disputes.

Foreign financial institutions have signaled concern and in some cases begun to limit holdings of US debt. If this trend accelerates, it could impair the government’s ability to finance operations at low cost, leading to job losses, potential recession, and reduced global credibility.

The erosion of a rules-based international order increases the likelihood of armed conflict, coercive economic action, sudden market closures, and alliance realignments that push partners closer to strategic competitors such as China. The Administration’s efforts to divide the world into spheres of influence, and its preferences for transactional arrangements with Russia and China, have already spurred allies, including Canada, the United Kingdom, partners in Southeast Asia, and multiple European states, to deepen trade and in some cases security ties with China. This is also where the damage to the US dollar matters. If trust in the US government erodes, trust in the dollar as the reserve currency can erode too, along with its role in oil trade and other critical markets.

Divergent US interests have also strained the postwar Five Eyes intelligence alliance, with some partners reportedly withholding sensitive intelligence or contemplating alternative arrangements that sideline the United States. NATO allies have felt compelled to send troops to Greenland to deter threatened US annexation, an unprecedented step that undermines alliance cohesion and signals deep mistrust.

These global dynamics and the erosion of long-standing norms increase the risk of extortion, expropriation, sanctions whiplash, supply chain severance, and sudden loss of market access for American firms. Heightened uncertainty and a more precarious threat environment introduce correlated global shocks that cannot be fully mitigated through diversification. Foreign buyers may also begin looking elsewhere for goods and long-term partnerships if they believe the United States is moving toward an unreliable, tariff-heavy, America First approach that makes future sourcing risky.

Authoritarian Governance Undermines US Firms Overseas

The Trump Administration’s suspension and weakening of enforcement of the Foreign Corrupt Practices Act has damaged a long-standing competitive protection for US businesses: the ability to refuse corrupt demands abroad under a clear legal mandate. In February 2025, President Trump suspended FCPA enforcement for 180 days, publicly criticizing the law for making it “very very hard” to make deals. Subsequent guidance suggested a more permissive posture going forward, while investigative resources were reportedly shifted away from white-collar and public corruption cases.

Simultaneously, President Trump has personally benefited from pay-to-play schemes, including high-value gifts and investments from foreign governments and entities seeking favorable treatment. Qatar provided a luxury aircraft, major media and entertainment firms reportedly entered into large “settlements” that directed funds to his presidential library, and an investment vehicle tied to the United Arab Emirates invested heavily in a Trump family cryptocurrency business.

Highly visible conflicts of interest at the top of the political system alter expectations for US firms operating abroad. They can:

Increase pressure on US companies to compete in environments where political relationships and payments carry more weight.
Reduce the perceived costs of offering inducements to politically connected actors.
Undermine the standing of compliance-focused firms that refuse such practices.

At the same time, the Administration’s withdrawal from or paralysis of international organizations and dispute mechanisms, including an executive order to withdraw from dozens of treaties and blocks on appointments to the World Trade Organization’s Appellate Body, accelerates the transformation of overseas markets into more politicized, less predictable environments. US firms are increasingly viewed through a political lens rather than as neutral commercial actors, heightening political risk and complicating long-term planning. This is also where the evisceration of US science matters, because weakening academia and cutting-edge firms like Moderna erodes one of the country’s core economic and strategic advantages.

At Home: Arbitrary Power, Workforce Damage, and Market Distortion

Domestically, authoritarian dynamics are reshaping the operating environment through militarized enforcement, workforce disruption, and institutional degradation. National Guard deployments in cities, coupled with aggressive Immigration and Customs Enforcement and Border Patrol operations that employ tactical gear, helicopters, flashbangs, pepper spray, and tear gas, have:

Disrupted logistics and supply chains.
Restricted employee movement and access to workplaces.
Damaged physical assets and raised insurance and security costs.

Enforcement actions fall disproportionately on non-white and immigrant communities, contributing to absenteeism, labor force withdrawal, and workforce instability. Data already show:

A 3.1 percent workforce decline in California between May and June 2025, including a 7.2 percent drop in noncitizens showing up for work.
A net loss of 155,000 workers from California’s labor force over four months, reversing prior growth.
Estimates that without undocumented workers, California’s agricultural sector could contract by 14 percent and construction by 16 percent.
Significant revenue losses in affected regions, such as an estimated 59 million dollars in Orange County, California, and tens of millions in lost wages and small-business revenue in Minnesota.

Heavy enforcement has also depressed local economic activity. In Washington, DC, deployments of National Guard and ICE units in 2025 coincided with an 81 percent decline in foot traffic to local retailers as residents avoided downtown areas.

These measures intersect with broader labor shortages. Research indicates that there are millions of unfilled positions in critical sectors such as agriculture, construction, hospitality, healthcare, and manufacturing. Removing immigrants from the workforce exacerbates these gaps, raises costs, and constrains growth.

Education impacts are likely to compound the problem. School systems in Minnesota, North Carolina, California, and Illinois have shifted to remote learning or seen significant declines in attendance due to fear of enforcement, adding to pandemic-era learning losses. Over time, reduced educational attainment and disrupted schooling will erode the talent pipeline and diminish US competitiveness.

Once security forces and paramilitary-style units are routinely used to manage domestic political conflict, commercial activity becomes subject to curfews, access restrictions, and informal directives. Businesses facing these conditions for prolonged periods are likely to consider relocating, reducing employment and tax revenue in affected areas. If operating access depends on political permission rather than transparent rules, the business environment becomes significantly less stable.

Domestic Markets: Weakening Institutions and Regulatory Arbitrage

Domestic markets are particularly sensitive to the weakening of independent institutions, politicization of enforcement, and concentration of executive authority. As consistent rule enforcement declines, business costs rise and planning becomes more uncertain. Firms may confront sudden decisions imposed from above that affect pricing, operations, or competitive dynamics.

The degradation of regulatory and oversight institutions, including reduced inspection and enforcement capacity at agencies such as the Environmental Protection Agency, Food and Drug Administration, and consumer protection bodies, increases the risk that weakened oversight or heavy reliance on voluntary compliance will allow cost pressures to outpace enforcement. This raises the likelihood of:

Inconsistent standards and product quality concerns.
Greater reputational and liability exposure.
Erosion of confidence in American goods and services.

At the same time, the Administration has used regulatory and licensing powers to seek concessions from domestic firms, including reported pressure on media companies, technology platforms, and firms in strategically important sectors. Requests for equity stakes or other benefits in exchange for favorable policy treatment exemplify a shift from neutral regulation toward explicit patronage.

Adaptation and Failure: Who Can “Surf the Wave”

Firms with long-established compliance cultures and investor accountability may struggle in an environment where outcomes depend on partisan actors exercising discretionary authority rather than on transparent rules. Governance structures must now grapple with conditions in which expectations and directives shift rapidly and unpredictably.

Companies in sectors where the state asserts a direct national security interest are likely to face the earliest and most intense pressure. Over time, these pressures can spread to additional industries. Some firms will not experience immediate adverse effects and may even benefit in the short term if they align publicly with prevailing political leadership or accommodate informal demands.

However, political alignment is inherently unstable. Changes in leadership priorities, coalition dynamics, or public sentiment can quickly alter a firm’s position. Firms perceived as regime aligned may also face reputational consequences, including consumer boycotts and investor concern. Recent examples include:

Boycotts of major retailers over perceived capitulation on diversity, equity, and inclusion policies.
“Resist and unsubscribe” campaigns targeting large technology and media firms judged to be enabling harsh immigration policies.
Subscriber losses and cost-cutting at major media outlets after decisions seen as politically driven.

Boards must navigate the tension between mitigating political risk and upholding fiduciary duties. Efforts to surf the wave of authoritarian dynamics can appear rational in the short term but create significant legal, reputational, and valuation risks when political winds change or enforcement resurges.

The Capo Advantage in Authoritarian Systems

In established democratic market systems, the attributes that confer prestige and effectiveness on American business leaders are closely aligned with the rule of law and institutional predictability. These include advanced formal education, domain-specific expertise, proficiency in complex finance, and the capacity to manage compliance within stable and transparent regulatory regimes. Such competencies are rewarded because they enable efficient allocation of capital, lawful risk-taking, and scalable enterprise growth within a framework where legal constraints are both knowable and consistently enforced. Under these conditions, competitive advantage is derived from innovation, operational excellence, and the disciplined navigation of rules that are broadly applicable and relatively durable over time.

In autocratic systems, however, the value of these competencies is materially degraded. Where legal and regulatory frameworks are applied selectively, altered unpredictably, or subordinated to political imperatives, success depends less on compliance and more on the ability to circumvent or manipulate those systems. Advantage accrues to actors capable of cultivating patronage relationships, facilitating opaque or illicit financial flows, and operating effectively in environments where coercion and informal enforcement mechanisms displace formal legal processes. In such contexts, the operative skill set more closely resembles that associated with organized patronage networks than with traditional corporate leadership. Put differently, in an autocracy, the traits associated with a mafia capo are often more functional than those of a captain of industry—and firms led by the latter, relying on lawful compliance and transparent operations, face structural disadvantages in competing on those terms.

Toward a Patronage-Based Political Economy

We judge that continued consolidation of executive authority could contribute to restructuring the US business environment in ways that mirror patronage-based systems elsewhere. In such systems, loyalty to leadership and political alignment weigh more heavily than performance in shaping outcomes. Over time, firms are sorted into three broad categories:

Favored entities that align with prevailing leadership and receive advantageous treatment, including access to contracts, credit, and regulatory forbearance.
Neutral or unaligned firms that experience uneven enforcement, unpredictability, and heightened vulnerability to arbitrary decisions.
Disfavored firms that encounter targeted regulatory pressure, exclusion from opportunities, or punitive actions.

This sorting distorts competition by steering opportunities and investment toward politically connected firms rather than those with stronger performance. For institutional investors, it introduces correlated political risk across sectors and complicates diversification strategies.

Outlook and Implications for American Business Leaders

This assessment does not imply a failure of American business leadership. Instead, it underscores a growing gap between the conditions under which US firms historically succeeded and the conditions already emerging under more personalized and discretionary governance. American executives are trained to compete on performance, innovation, and operational excellence within a reasonably predictable framework of rules. Systems that prioritize political loyalty and access fundamentally alter those dynamics.

Consistent with the October 2025 assessment, we judge that absent reversal, these dynamics are likely to introduce increasing distortions into US markets and place sustained pressure on long-term global competitiveness. While a small number of firms may benefit temporarily from proximity to power, the broader health of the American economy depends on predictable rules, transparent enforcement, and performance-based competition.

For American firms and investors, the implications include elevated political risk, weaker contract and property protections, increased exposure to selective enforcement, and greater vulnerability to geopolitical and domestic instability driven by unilateral and coercive policy actions. When rules are no longer predictable and enforcement becomes discretionary, performance alone is no longer enough. The core strategic challenge for boards and executives is to act now, resist, and speak up before the market and political environment hardens further around them.