US Election

Red Herrings

Trump Fails: Over time, Trump’s transactional foreign-policy approach will weaken US alliances, erode America’s influence on the global stage, heighten geopolitical volatility, and make the world a more dangerous place. But in 2025, Trump is score likely to score victories than to fail.

Europe Breaks: Economic malaise, security threats, and defense shortcomings will test Europe’s unity in 2025. But as with the Eurozone crisis, Brexit, the pandemic, and Russia’s 2022 invasion of Ukraine, the EU will likely overcome, or at least muddle through, these latest challenges.

Global Energy Transition Stalls: The return of Donald Trump has raised anxieties in sustainability circles that the global energy transition will be thrown into reverse this year. But the global energy transition survived the first Trump administration, and it will survive the second, especially since it has much more momentum now than in 2017.

Risk #10: Mexican Standoff

Mexican President Claudia Sheinbaum has a strong mandate and few checks on her executive power. Still, she will face formidable challenges this year in her relations with the Trump administration at a time of ongoing constitutional overhauls and fiscal stresses at home. Her diplomatic and governance skills will soon be tested.

Risk #9: Ungoverned spaces

The deepening G-Zero leaves many places thinly governed. Conflict in the Middle East has left ungoverned spaces within Gaza, the West Bank, Lebanon, Syria, and Yemen. In Africa, the aftermath of the war in Ethiopia and the ongoing civil war in Sudan have worsened humanitarian conditions. In Myanmar, more than three million civilians have been displaced since the coup in 2021. In Haiti, political turmoil, civil unrest, gang violence, and natural disasters compound the misery of its people. These neglected spaces and people won’t pose broader geopolitical risks in 2025, but the consequences of the neglect will eventually be felt far beyond the countries directly affected.

Risk #8: AI unbound

Some notable AI governance initiatives came to fruition in 2024. Still, without strong, sustained buy-in from governments and tech companies, they will not be enough to keep pace with technological advances. The deteriorating state of global cooperation resulting from the G-Zero leadership vacuum compounds these risks.

This year will mark another period of relentless technological development unbound by adequate safeguards and governance frameworks. Given the incentives to build ever more powerful AI, meaningful constraints will likely emerge only when developers hit hard limits on data, compute, energy, or funding access. Until then, the technology’s capabilities and risks will continue to grow unchecked.

Risk #7: Beggar thy world

The US-China rivalry will export disruption to everyone else this year, short-circuiting the global recovery and accelerating geoeconomic fragmentation at a time when global growth is tepid, inflation remains sticky, and debt levels stand at historic highs.

New governments promising better times ahead will face harsh realities as global economic pressures turn political. Many emerging and frontier economies must decide between raising taxes or slashing spending. Even within the G7, budget battles toppled a French government last year, and Canada's finance minister resigned over fiscal disputes. Few countries face imminent risk of sovereign default, but cracks in government stability will undermine investor confidence.

Risk #6: Iran on the ropes

The Middle East will remain a combustible environment in 2025 for one big reason: Iran hasn’t been this weak in decades. The country’s geopolitical position has been dealt a series of devastating blows in recent months. Israel has crippled its most potent proxies—Hamas and Hezbollah. Iran’s ally, Bashar al Assad, has been driven from Syria.

Tehran is wounded, but it still has a massive missile and drone arsenal, and it could be provoked into another direct exchange of missiles with Israel. Any accident or miscalculation that kills a significant number of Israelis or Americans could trigger an escalatory spiral with material implications for the supply and price of oil.

Risk #5: Russia still rogue

Russia is now the world’s leading rogue power by a large margin, and Vladimir Putin will pursue more policies that undermine the US-led global order despite a likely ceasefire in Ukraine. Russia will take hostile action against EU countries with cyber, sabotage, and other “asymmetric attacks”; it will also build on strategic military partnerships with Iran and North Korea in 2025. Putin will continue attempts at arson and even assassination while using Telegram to propagate pro-Kremlin views across Europe. Russia will do more than any other country to subvert the global order in 2025.

Risk#4: Trumponomics

In January, Trump will inherit a robust US economy, but his policies will bring higher inflation and lower growth in 2025.

First, Trump will significantly hike tariffs to reduce America’s trade deficits, leading to fewer affordable options for many goods and increased US inflation. Higher interest rates and slower growth will result. The dollar will strengthen, making US exports less competitive. Some countries targeted by Trump will retaliate, raising the risk of disruptive trade wars. Second, the Trump administration could deport up to one million people in 2025 and up to five million over four years.

Reduced illegal immigration and mass deportations would shrink the US workforce, driving up wages and consumer prices and limiting the economy’s productive capacity.

Risk #3: US-China breakdown

Trump's return to office will unleash an unmanaged decoupling in the world’s most important geopolitical relationship. That, in turn, risks a major economic disruption and broader crisis. Trump will set new tariffs on Chinese goods to pressure Beijing for concessions on a host of issues, and China’s leaders, despite real economic weakness at home, will respond more forcefully to prove to both Trump and China’s people that they can and will fight back. Tensions over Taiwan will probably rise, though a full-blown crisis remains unlikely in 2025.

Technology policy will be the true frontline in this conflict. Battles over trade and investment in everything from semiconductors to critical minerals will erupt in 2025.

Risk #2: Rule of Don

Trump will enter office more experienced and better organized than in 2017. He will populate his administration with loyalists who better understand how the federal government works. He will have consolidated control of Congress and a 6-3 conservative Supreme Court majority.

From this solid foundation, Trump will purge the federal bureaucracy of professional civil servants and replace them with political loyalists, particularly at the Justice Department and the FBI. The erosion of independent checks on executive power and an active undermining of the rule of law will leave more of US policy dependent on the decisions of one powerful man rather than on established and politically impartial legal principles.

Democracy itself will not be threatened. The US isn’t Hungary. But Trump’s indifference, and in some cases hostility, to longstanding American values will set dangerous new precedents for “political vandalism” by future presidents of both parties.

Risk #1: The G-Zero wins

The G-Zero world is an era when no one power or group of powers is both willing and able to drive a global agenda and maintain international order. We’ve lived with this lack of international leadership for nearly a decade now, but in 2025, the problem will get much worse.

Expect new and expanding power vacuums, emboldened rogue actors, and a heightened risk of dangerous accidents, miscalculations, and conflict. The risk of a geopolitical crisis is now higher than at any point since the 1930s or the early Cold War.

Russia and China remain challengers to the Western-led security order, though in very different ways. Rising inequality, shifting demographics, and warp-speed technological change have persuaded a growing number of citizens in advanced industrial democracies that “globalism” hasn’t worked in their favor. And the world’s military superpower will again be led by the only post-WWII president who rejects the assumption that a US global leadership role serves the American people.

This Top Risk is not a single event. It’s the cumulative impact of the deepening G-Zero leadership deficit.