A PESTLE Analysis of Rising Uncertainty in a Post-Trust World

By Paul Barnett, Founder, Enlightened Enterprise Academy

In the first episode of the Financial Times' six-part series The Economics Show, Martin Wolf and Nobel Prize-winning economist Paul Krugman offer an unsettling diagnosis: the United States, the postwar world's architect of multilateralism and economic stability. has become a source of global disruption. Once trusted to uphold the rule of law, economic order, and liberal democratic values, the U.S. is now a volatile force that seems increasingly indifferent to its foundational commitments.

“The United States,” Krugman warns, “is now the odd man out: completely unreliable.”

This shift marks more than a crisis of governance; it reflects a collapse of institutional trust with wide-reaching implications.

To assess the full spectrum of potential risk implications based on the commentary by Wolf and Krugman, I thought it would be useful to apply the PESTLE framework - Political, Economic, Social, Technological, Legal, and Environmental. And to also look at those risks from short, medium, and long-term horizons.

Political: From Rule of Law to Rule by Fiat

The U.S. was once the beacon of constitutional democracy. Today, its political system is veering dangerously toward “arbitrary despotism,” as Wolf puts it. In recent years, key agreements, ranging from NAFTA to the Paris Climate Accord, have been torn up unilaterally. The pattern of executive overreach, weaponisation of national emergencies, and disregard for legislative norms resembles the politics of strongman regimes.

“We’re basically undoing the Glorious Revolution of 1688,” Krugman notes. “We’re back to arbitrary rule by a single individual.”

Implications to be considered:

Short-term: Foreign governments are rethinking their strategic partnerships. Sudden policy shifts have undermined U.S. credibility within NATO and G7. Diplomats can no longer reliably interpret U.S. intentions from one month to the next.

Medium-term: Allies increasingly hedge their bets. France, Germany, and Japan are quietly reinforcing strategic autonomy while strengthening bilateral ties with more predictable partners like Canada, India, and the EU bloc.

Long-term: The U.S. may lose its de facto role as global coordinator. The geopolitical vacuum could be filled by a fragmented multipolar world in which China, the EU, and regional powers shape norms, but without a singular hegemon to enforce consistency. This increases the risk of regional conflicts and the erosion of multilateral governance.

Economic: Uncertainty as Economic Policy

The postwar economic order was based on mutual trust, legal commitments, and rational policy. This framework was shattered by America’s sudden imposition of steel and aluminium tariffs under a national security clause, widely seen as an abuse of trade law. Krugman describes this moment as transformative: “Trade agreements are now suggestions, not obligations.”

The notion that tariffs could be arbitrarily raised week-to-week evokes comparisons to the infamous Smoot-Hawley Tariff Act of the 1930s. Yet even that was predictable. Today’s policy environment is unmoored from both theory and precedent, they noted.

Short-term: Volatile markets, frozen investments, and capital flight. Businesses cannot plan when tariff structures are unpredictable. Corporate supply chains are disrupted, while smaller firms face rising input costs with no warning.

Medium-term: U.S. capital markets remain robust for now, but global investors increasingly diversify into jurisdictions with stronger institutional checks. Europe’s appeal grows for firms seeking rule-based governance. Developing countries lose out as trade fragmentation worsens and FDI becomes more risk-averse.

Long-term: America’s role as issuer of the world’s “safe asset,” U.S. Treasury bonds, is under threat. Should political actors flirt too closely with debt default or currency debasement, a worldwide liquidity crisis could ensue. Lacking a viable alternative, global finance may splinter into spheres of influence, making international cooperation far harder.