Power plays: Themes for 2025

The interplay of geopolitical rivalries, economic shifts and evolving trade dynamics will define a conflicted global landscape over 2025.

We see four key themes shaping this environment: economic angst, domestic discontent, elusive alliances, and trade troubles. These capture the fragility of global economic growth, the rise of unstable coalitions, the evolving nature of external alliances, and the intricacies of trade barriers and tariffs. Strategic adaptability will determine resilience as stakeholders navigate these multifaceted challenges, balancing national interests with global cooperation to achieve stability and growth.

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Economic angst

The anchors around the global economy — low inflation, low interest rates, international cooperation and frictionless trade — have become unmoored, introducing uncertainty to growth prospects. Structural challenges such as low productivity growth and demographic trends, compounded by the rise of protectionism and geopolitical rivalries, will hinder business investment. While we expect the global economic expansion to continue, and some regions are forecast to experience modestly higher real GDP growth rates in 2025, we see numerous risks that could dampen or even derail the expansion.

Domestic discontent

The global consequences of the electoral mega-cycle of 2024 will be more fully expressed through 2025. Many electoral outcomes will require formation of new coalitions and, in several cases, drive instability. Challenges, including economic inequality, technological disruptions and political polarization, are creating environments where traditional social contracts seem obsolete and are increasingly contested. This shift is evident in the renegotiations of labor relations, with job displacement owing to automation and globalization further fueling discontent. Workers in traditional industries are particularly vulnerable, leading to calls for retraining and upskilling initiatives to help them transition to new roles.

Elusive alliances

The geopolitical landscape in 2025 will continue to be conditioned by the pursuit of strategic advantages and major conflicts. Alliances will be more fluid as actors gradually adjust their positions in the world, impacting trade agreements, defense collaborations and diplomatic ties. Advanced markets' focus on national security and protectionism reflects a shift toward fragmentation, while emerging markets will leverage their accrued influence to rebalance global institutions. Smaller countries will mostly rely on multilateral engagements to mitigate risks from climate change and trade barriers.

Trade troubles

Conditional globalization, in which governments increasingly dictate trade flows through tariffs and export restrictions, is the trend. These tariffs are expected to disrupt traditional trade patterns and may lead to increased prices for consumers, fueling inflation. The incoming US administration will significantly influence evolution of trade dynamics, with probable increases in tariffs on Chinese imports and reciprocal measures from the EU and other countries. Increasing use of trade barriers as a means of protecting domestic industries could lead to higher costs and reduced global integration, ultimately affecting supply chains and international relations.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.