Navigating Protectionism, Incentives & Pillar Two in 2026
TL/DR –
The world is currently described as a BANI (brittle, anxious, nonlinear, and incomprehensible) environment, with rapid policy shifts, uncertain trade relations, and investment decisions significantly influenced by sustainability, fiscal incentives, and industrial policy. Governments are utilizing grants, subsidies, and targeted credits to secure critical industries, promote decarbonization, and keep investment domestic. The IMF predicts a global growth of 3.1% for 2026, but warns that this resilience could be temporary due to high tariff rates and persistent inflationary pressures.
Executives Navigate BANI World Amid Swift Policy Shifts
Business executives today find themselves navigating a world branded as BANI: brittle, anxious, nonlinear, and incomprehensible. The landscape is riddled with rapid policy changes, unpredictable trade relations, and investment decisions increasingly influenced by the intersection of sustainability, fiscal incentives, and industrial policy.
Assistance is offered by governments in various forms such as grants, subsidies, and targeted credits to bolster critical industries, propel decarbonization, and preserve domestic investment.
According to the World Economic Outlook by the International Monetary Fund (IMF), the global growth is projected at 3.1% for 2026. This is a slight downgrade, despite the ongoing wave of US tariffs and geopolitical tensions.
The IMF warns of this resilience as possibly transient due to sustained high tariff rates and inflationary pressures. Nevertheless, the broader narrative remains optimistic: the global economy is adjusting, favoring more regional and strategically hedged networks.
Arising Fiscal and Trade Policies Influence Industrial Competitiveness
In view of major economies, fiscal and trade policies are progressively centered on industrial competitiveness. In the US, industrial and fiscal policy have found a common rhythm. The Inflation Reduction Act and the expansive 2025 tax-and-spending package provide production-linked credits, accelerated depreciation, and deductions for investments in sectors such as energy, semiconductors, and advanced manufacturing.
Such fiscal tools receive support from evolving import tariffs on commodities like steel, electric vehicles, and clean-tech components. This blend appeals to global capital but inserts an element of unpredictability.
Adjustments to tariff schedules and the 2025 tax-and-spending law provisions have complicated project timelines and modeling. Despite the uncertainties, the US remains a desirable destination for industrial investment but multinational corporations must consider policy revisions and quick implementation periods.
In the EU, competitiveness is challenged by high energy and labor costs, and a comprehensive regulatory framework. One strategy employed by the EU is to transform decarbonization into an economic advantage. The Clean Industrial Deal and competitiveness compass aim to steer funding towards green manufacturing, circular-economy projects, and digitalization.
The upcoming Clean Industrial State Aid Framework will extend member states’ capabilities to grant tax credits, accelerated depreciation, and direct funding for low-carbon initiatives. Complementary programs like the Innovation Fund, Important Projects of Common European Interest initiatives, and Horizon Europe amplify this approach.
Simultaneously, the Carbon Border Adjustment Mechanism and EU Emissions Trading System aim to balance carbon costs between EU producers and importers.
Adjusting to The BANI World
In the current volatile environment, longstanding geopolitical dynamics complicate long-term investment planning. Incentives that seem advantageous now could lose their value if their treatment changes, and tariff alterations can modify cost structures instantly. The IMF has observed that the private sector has responded dexterously by prioritizing imports, diversifying sourcing, and rerouting trade flows, but volatility is still a dominant characteristic.
To sail through these rough waters, companies must invest in data traceability and scenario modeling. Cataloging supply chains, origins, and combined nomenclature codes allows firms to quantify tariff exposure, carbon costs, and compliance necessities under EU regulations.
AI-powered analytics are being increasingly harnessed to model the collective impact of tariffs, incentives, and minimum tax rules, providing corporate boards with timely insight into regulatory and fiscal risk.
Effective governance is equally essential. Tax, trade and customs, treasury, sustainability, and government affairs teams should collaborate from the early stages of project planning to ensure investment structures are compliant and optimized. Delaying collaboration until projects are underway can lead to missed opportunities or increased exposure to policy changes.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.
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