While the world fixates on tariffs, sanctions, and military posturing, a quieter shift is reshaping international influence. At the World Economic Forum in Davos last month, Brand Finance launched its 2026 Global Soft Power Index and the results tell a story that runs counter to almost everything dominating headlines.
The headline number: The United States experienced the steepest decline in soft power among all 193 nations surveyed, yet still holds the top spot. China climbed to second, now less than 1.5 points behind. Japan leapfrogged the UK into third place. Western Europe is hemorrhaging credibility. And nations like Switzerland, South Korea, and the UAE are demonstrating that strategic investment in attraction and persuasion can deliver economic resilience that hard power simply cannot.
We sat down with David Haigh, Chairman and CEO of Brand Finance, to unpack what these shifts mean for nations navigating an era where military might and economic coercion are becoming more expensive, and less effective, than many governments realize.
The Economic Case for Soft Power
The summit’s theme framed soft power as essential for “economic resilience.” It’s an ambitious claim, that intangible assets like reputation, cultural appeal, and diplomatic influence can actually buffer economies during crises. But is there evidence for this?
According to Haigh, absolutely. “Soft power acts as an economic shock absorber during periods of geopolitical disruption,” he explains. The 2026 index shows that nations with stronger soft power maintain investment flows, trade relationships, and talent attraction even when hard power conflicts erupt around them.
“By reinforcing perceptions of stability, effective governance, and openness, soft power supports continued flows of investment, trade, and talent, thereby underpinning economic resilience,” Haigh notes. “Reliance on hard power alone is both costly and economically destabilizing.”
This isn’t abstract theory. Look at the numbers. China deliberately invested in soft power and climbed to second globally for Business & Trade, ranking first worldwide for ease of doing business and future growth potential. More tellingly, it jumped five places to third globally for perceptions of a strong and stable economy, the single most influential driver of soft power among the 35 nation attributes measured.
Meanwhile, Switzerland—bucking Western Europe’s decline—ranks first globally for economic stability perceptions and either first or second across all five “Recommendation” dimensions: investment, trade, talent, education, and tourism. Strong soft power translates directly into tangible economic flows.
The Hard Power Paradox
In an era defined by sanctions, trade wars, and military posturing, what’s soft power’s most effective role? Haigh’s answer cuts against conventional wisdom about needing to “get tough” in international relations.
“The index shows that unilateral hard power actions tend to erode reputation and trust, weakening long-term influence and economic attractiveness,” he says, pointing to the U.S. decline as evidence. “The US saw considerable decline in perceptions due to ‘America First’ policies, sharp drops in friendliness, generosity, ease of doing business, climate action support, political stability, human rights, and ethical standards.”
The index demonstrates that soft power is most effective when it complements hard power within what researchers call a “smart power” framework. Japan and the UAE exemplify this balance—maintaining economic robustness and diplomatic influence while fostering trust and engagement. This approach preserves investment, trade, and talent flows even amid global instability.
“While hard power may deliver short-term leverage, soft power reduces the cost of influence, sustains preference, and underpins economic resilience over time,” Haigh argues.
This matters because hard power is becoming prohibitively expensive. Sanctions create blowback. Tariffs damage domestic industries. Military interventions drain treasuries. Meanwhile, nations investing in attraction see returns compound over decades.
Europe’s Credibility Crisis
For the European Union that’s facing simultaneous geopolitical conflict and economic vulnerability, what should be the soft power investment priority?
Haigh doesn’t mince words: “Restoring credibility in economic governance and collective delivery.”
The data is brutal. Western European nations experienced disproportionate soft power erosion, driven by declining perceptions of political leadership and economic vibrancy. Governments are increasingly seen as failing to deliver on promises of good governance and lasting prosperity. The UK fell to its lowest-ever position at fourth. Germany and France saw weakening perceptions of economic strength and innovation.
“Perceptions of the bloc as a whole are also in recession, with much negative sentiment focused on EU institutions,” Haigh notes.
The path forward requires the EU to first restore trust among Europeans by delivering with impact and communicating with confidence. External soft power projection means little if domestic populations have lost faith in the institutions claiming to represent them.
Corporate Brands as Geopolitical Assets
An underappreciated aspect of national soft power: corporate brands. How can a nation’s branded exports function as both soft power and economic resilience assets during disruptions?
“Corporate brands and branded exports are among the most important carriers of soft power during periods of global disruption,” Haigh emphasizes. “Strong perceptions of a nation’s products and brands reinforce familiarity and economic credibility, sustaining preference even when geopolitical conditions deteriorate.”
The U.S. provides a telling example. Despite reputational declines across governance and values, it ranks second globally for “products and brands the world loves”—helping sustain influence even as other metrics crater. American cultural exports and corporate brands continue driving familiarity and preference independent of government policy.
China has strengthened its position similarly, climbing to fourth globally thanks to rising recognition of brands like Huawei and TikTok, plus increased visibility in electric vehicles and cultural phenomena like Labubu. “These examples demonstrate how private sector strength can help anchor national influence and trade attractiveness, even amid global volatility,” Haigh notes.
This has strategic implications: nations can build soft power through enabling, not just regulating their corporate champions. Brand success abroad translates directly into national influence.
South Korea’s Playbook: Culture as Defense
When hard power crises erupt, how can nations protect or enhance reputation? South Korea offers a case study in strategic cultural investment.
The government committed serious resources: KOCCA’s annual budget exceeds $400 million, complemented by a 2023 support package of $620 million for content, tourism, and language education, plus a 2024 K-Content Fund of $420 million.
The results are measurable. South Korea ranks seventh globally for arts and entertainment and seventh for influential media. More importantly, these cultural assets have helped counterbalance declines in governance perceptions linked to the recent constitutional crisis while contributing to gains in overall familiarity and influence.
“Cultural salience has become a defensive asset,” Haigh explains, “enabling nations to maintain visibility and affinity even when reputational indicators experience temporary decline.”
This isn’t about K-pop being catchy. It’s about strategic investment creating buffers against political volatility. When governance stumbles, cultural strength can keep doors open.
Where to Invest Scarce Resources
If a government has limited resources and they all do, where should soft power investment go?
Haigh’s answer is data-driven: “Brand Finance’s soft power data reveals that the most effective strategy for protecting economic interests is strengthening perceptions of commercial robustness, good governance, and technological innovation. These are the top global drivers of investment attractiveness.”
But here’s the crucial nuance: these drivers differ by market. “Governments can maximize impact by targeting soft power strategies to the specific drivers that matter most in key investor countries,” Haigh notes. Brand Finance’s data provides market- and audience-level insights, enabling focused approaches rather than scattershot campaigns.
This means abandoning one-size-fits-all nation branding. What attracts Chinese investment may differ from what attracts European talent or American tourists. Strategic soft power requires understanding these distinctions and allocating resources accordingly.
The Disinformation Challenge
In conflicts where information itself becomes a battlefield, how can nations ethically project stabilizing soft power while protecting economic relationships?
This year’s index presents an uncomfortable reality: Russia advanced to 14th place, up two ranks. Regimes in North Korea and Burkina Faso also shot up in rankings. How?
“While the durability of these gains remains uncertain, given the obvious misalignment between propaganda and reality, unethical approaches to communications remain very tempting,” Haigh admits. “Strong visibility, assertiveness in international communications, and tightly controlled narratives can create an impression of influence, authority, or salience.”
But there’s a trap. “Mass disinformation produced by these countries creates a hostile digital environment for other countries to communicate and engage with global audiences.”
The defense? Long-term credibility. “Nations that build strong foundations for their soft power with real-world impact, and then communicate that impact with confidence, are better positioned to counter disinformation, reassure partners, and project stability when information itself becomes a battleground.”
This is why Switzerland’s approach works—genuine stability creates authentic messaging that propaganda can’t fake long-term. South Korea’s cultural investments succeed because the content is actually good. You can’t manufacture credibility through narrative control alone.
The Fatal Misalignment
What emerging indicator best predicts a nation’s ability to navigate future shocks?
Haigh’s answer: the gap between promise and delivery. “Misalignment between expectations and delivery is always the biggest threat for any brand, including a national brand. Countries that underdeliver on their brand promise have seen the biggest losses in the index this year.”
This explains Western declines. For decades, Western nations promised stability, prosperity, and leadership. Populations—domestic and international—increasingly believe those promises aren’t being kept. The UK’s fall to fourth, Germany’s economic perception decline, France’s weakening influence, all reflect this expectation gap.
“In a global environment marked by declining trust and heightened scrutiny, any strategy for futureproofing a nation’s soft power must be built on alignment between promise and action,” Haigh emphasizes.
This is the soft power equivalent of “underpromise, overdeliver.” Nations that modestly claim and consistently deliver (Switzerland, Japan) maintain influence. Those that grandly promise and inconsistently deliver (pick your Western democracy) erode trust over time.
Our Take: Hard Power Makes Headlines, Soft Power Makes History
While policymakers obsess over the next tariff round or sanctions package, a fundamental realignment of global influence is happening beneath the surface. The Brand Finance data reveals a world where hard power is becoming a liability as often as an asset, and where strategic investment in attraction and persuasion delivers compound returns that coercion simply cannot match.
The U.S. decline—steepest among all 193 nations—isn’t about military weakness or economic collapse. It’s about reputational erosion from hard power overuse. Every tariff, every sanction, every “America First” declaration chips away at the intangible assets that actually drive long-term influence: trust, attractiveness, preference.
China’s rise isn’t really about Belt and Road or military expansion. It’s about a deliberate, multi-year bet on soft power that’s actually paying off. When international business leaders now rank China as easier to work with and offering better growth prospects than a lot of Western economies, that’s not just Beijing’s PR machine at work, it’s perception backed by enough reality to be credible.
The European situation is maybe even more telling. These countries spent decades building soft power the hard way: good governance, real prosperity, consistent values. But once people both at home and abroad start thinking your government can’t actually deliver on the basics anymore, that whole reservoir of goodwill evaporates surprisingly fast. You can’t just run on your reputation from the ’90s when your current performance doesn’t back it up.
Here’s what makes this dangerous for the traditional powers: soft power takes forever to build back. You can’t announce a new policy or launch a branding campaign and magically restore trust. It takes years of actually doing what you say you’ll do. But losing it? That can happen pretty quickly, especially now when every government failure gets broadcast globally in real time.
The countries that are winning right now aren’t necessarily the wealthiest or the most powerful militarily. They’re the ones that figured out influence comes from being attractive, not threatening. Switzerland doesn’t intimidate anyone, but it tops more rankings than practically any other country. Japan isn’t projecting military force around the world, yet it climbed to third overall just by being consistently reliable and credible. South Korea managed to weather a constitutional crisis because its cultural exports had built enough goodwill to absorb the hit.
And look—this isn’t some idealistic vision of how the world should work. It’s just math. Soft power is cheaper than hard power, the returns compound over decades, and the advantages stick around. A dollar spent on student exchanges or cultural programs buys you influence that lasts for years. A dollar spent on sanctions buys you resentment that lasts just as long.
The Question No One’s Asking
The real question isn’t whether soft power matters—the data settles that. It’s whether Western governments can adapt fast enough to prevent the influence gap from becoming permanent.
Right now, policy debates focus almost entirely on hard power tools: more sanctions, tougher tariffs, bigger military budgets. These have their place. But the Brand Finance index reveals that while the West debates which stick to use, competitors are offering carrots, and winning.
China’s not trying to conquer markets with tanks. It’s making itself economically indispensable and managing perceptions well enough that people want to work with it. The UAE isn’t forcing anyone into partnerships. It’s becoming the place where investors and talent actually want to go because it offers stability and openness. Japan’s not twisting anyone’s arm. It’s just consistently delivering on governance, innovation, and quality until people trust it by default.
The real problem is that building soft power requires exactly the things democratic politics struggles with: patience and a willingness to look weak in the short term. Trust takes years to build. Keeping promises requires saying no to popular but unsustainable policies. Admitting you screwed up and fixing it requires the kind of maturity that doesn’t play well in election cycles.
But the alternative is pretty grim—watching your influence bleed away while you’re stuck holding increasingly expensive hard power tools that fewer and fewer countries actually care about anymore.
Brand Finance’s index isn’t just some academic ranking for policy wonks to argue about. It’s basically an early warning system showing you which countries are building the kind of influence that’ll matter in twenty years and which ones are still trying to win with yesterday’s playbook.
The real question is whether the people making decisions are even paying attention.
