Virginie Maisonneuve sees what she calls ‘Digital Darwinism’ as the driving force behind a global realignment, where technology, tariffs, and geopolitics are reshaping markets at an unprecedented pace.
Speaking to Investment Officer as global financial markets digested news of Trump’s trade tariffs, the global CIO equity at Allianz Global Investors explains how these forces are redesigning supply chains, influencing inflation trends, and redefining investment strategies in a world where adaptability is key.
IO: Are we now entering a new phase of de-globalisation, where companies permanently rethink supply chains, or can firms adapt without major disruption?
VM: “I would not call this a phase of de-globalisation but a phase of global realignment. Technology and geopolitics are at the heart of this along with the redesign of the new world order. This is linked to both the ability to ‘on shore’ given the relative cost of various components including labor into the manufacturing of specific products, and the ability to use a higher level of technology and automation than in the past.”
“We have called this ‘Digital Darwinism’ or the intensification of competitive forces via the technology divide. With technology and especially artificial intelligence technology advancement, on-shoring trends and a global acute competitive landscape, the global supply chain is being reshaped around tariffs and trust lines. Firms who can anticipate disruptive forces and adopt technology faster and better than others will do well while others may not survive. This is the case across all sectors.”
IO: Given that tariffs increase costs for businesses and consumers, how might this shape inflation trends over the next few years?
VM: “Tariffs will act as a ‘one off’ cost and push inflation as such. Mitigating factors include how companies decide to ‘pass on’ tariff increases to customers. This will be influenced by demand elasticity for the specific products, companies’ margins and their ability to absorb some of the increased costs as well as pricing power. Currencies will also play an important role in mitigating the impact of tariffs.”
“The inflationary effect of tariffs will also depend on whether we have a ‘cascade’ effect across jurisdictions.”
“Finally, over the medium to long term it is important to consider the rate of productivity increase that technology and AI can support and its impact on growth and inflation. Technology tends to be deflationary. With the accelerating use of technology and Artificial intelligence we expect productivity growth to be supported going forward, mitigating some of the inflationary pressure induced by tariffs. Or other factors such as demographic challenges.”
IO: Are we looking at a sustained shift towards domestic-focused equities, infrastructure plays, or industrial policy-driven sectors? Which sectors could face structural headwinds?
VM: “We find attractive companies in many sectors including infrastructure and industrial policy driven sectors. The current tariffs-induced volatility needs to settle down to understand specifically company by company how profit margins and revenues will be impacted. Companies with manufacturing bases in the US will, everything being equal, gain some competitive advantage. As a result of tariffs we might in fact see a wave of foreign direct investment globally to compensate for cost increases where it makes sense.”
IO: “If trade tensions escalate, should investors start factoring in higher risk premiums for certain geographies?”
VM: “The tariffs-induced disruption means that portfolios need to be well anchored across sectors and geographies to outperform in 2025. Volatility, because of the new, less predictable, regime in the US should be anchored via careful portfolio construction.
For example, with quantitative well diversified volatility-absorbing strategies as an anchor, then including higher conviction across styles and themes as needed. Geopolitical volatility will remain a constant but with rates declining in parts of the world and some equity markets selling at attractive valuation or growth to valuation profile, we believe investors should remain risk-on, albeit with careful portfolio construction as mentioned above.”
IO: Given that tariffs are politically driven and could change with elections, how should investors build resilient portfolios that can weather policy reversals?
VM: “It is important to think about the various sources of resilience in portfolios. This is not only looking at it from a geographic or a sector perspective but also in terms of innovation, thematic resonance and overall competitive advantage. Interestingly as the DeepSeek example shows, tariffs and off limits can sometimes create even more resolve from the parties that are targeted and bring more productivity or innovation, stemming new waves of innovation. As investors it will be important to run scenario analysis to stress test portfolios.”