The Impact of Geopolitical Tensions on Global Supply Chains and Inflation Dynamics

Abstract

Geopolitical tensions are increasingly shaping the stability of global supply chains and the dynamics of inflation. Traditional analyses often examine these domains separately, overlooking their recursive interconnections. This study develops a Geopolitics–Supply Chain–Inflation (GSI) framework to explain how shocks originate, propagate, and persist through feedback loops. The paper draws on thematic literature and three case studies: the Russia–Ukraine war, the U.S.–China trade war, and the COVID-19 pandemic. It demonstrates that geopolitical disruptions—whether driven by military conflict, protectionist policies, or systemic health crises—share common economic effects. These disruptions weaken supply chains and contribute to both cost-push and demand-pull inflation. The findings reveal that policy responses designed to stabilize economies, such as subsidies, monetary tightening, and reshoring, often create new vulnerabilities that feed back into the system and generate further instability. This recursive dynamic challenges conventional linear models of geopolitical risk and inflation by demonstrating how policy interventions can amplify, rather than resolve, systemic fragilities. The GSI framework therefore advances the understanding of inflation as an evolving outcome of recurring geopolitical and structural interactions, providing a conceptual tool for navigating an era in which shocks are systemic, spillover effects are global, and instability is self-reinforcing.