Robert Kahn, Managing Director of Geo-Economics at Eurasia Group, shared his insights on the geopolitical and market outlook for 2025. Here’s a breakdown of his perspectives on major global issues.
Eurasia Group, founded by Ian Bremmer in 1998, is a leading political risk consultancy. It helps businesses and investors navigate global market risks by providing unbiased analysis of political and economic trends. With a “politics first” approach and offices worldwide, the firm empowers clients to make informed decisions in an unpredictable geopolitical landscape.
1. Trump 2.0 Presidency: A Double-Edged Sword
Kahn foresees a significant but uncertain impact on the U.S. economy and markets under Trump’s second term. While markets appear optimistic, he warns of potential turbulence:
- Tariffs: Major increases in tariffs on China, Mexico, Canada, and Southeast Asia could disrupt global trade. He predicts tariffs on Chinese imports could double to 25%, leading to the most protectionist U.S. trade environment in a century.
- Unpredictable Leadership: Trump’s volatile decision-making style could heighten uncertainty, despite the presence of experienced advisors.
2. U.S.-China Relations: Strained and Unstable
Kahn expects a significant deterioration in U.S.-China relations in 2025.
- Trade Tensions: Escalating tariffs and retaliatory measures from China could disrupt supply chains and U.S. businesses operating in China.
- Broader Risks: While Kahn rules out direct conflict over Taiwan, he warns that differences in trade, technology, and security could cause global ripple effects.
3. Russia-Ukraine Conflict: Ceasefire in Sight, But Fragile
A ceasefire in Ukraine is likely in 2025, but long-term peace remains elusive.
- Short-Term Hope: The Trump administration might pressure both sides into negotiations.
- Challenges: Key issues, like Ukraine’s security and territorial disputes, remain unresolved, making any ceasefire unstable.
4. Middle East: Growing Complexity
The Israel-Gaza conflict has expanded to include Iran, Hezbollah, and Lebanon.
- Market Impact: Despite the ongoing violence, global markets have been largely unaffected due to stable oil flows. However, the risk of escalation remains high.
- Future Scenarios: Kahn sees a 25% chance of Israel, with U.S. support, targeting Iran’s nuclear facilities in 2025, which could disrupt oil markets and regional stability.
5. Western Europe: Political Volatility
Countries like Germany and France are grappling with rising populism and internal divisions.
- Germany: Policy flip-flops, like abandoning and revisiting nuclear energy, reflect deeper struggles in addressing energy and economic crises.
- France: Political instability threatens Macron’s government as populist movements gain momentum.
6. Market Outlook: Prepare for Uncertainty
Kahn stresses the importance of scenario planning in navigating the volatile geopolitical landscape.
- Disruptions: Tariffs, immigration policies, and fiscal measures could reshape global markets.
- Underestimated Risks: Markets may currently seem optimistic, but Kahn predicts disruptions will become evident by mid-2025 as these policies take effect.
Conclusion
Kahn’s analysis highlights the interconnectedness of geopolitics and markets. From trade wars to regional conflicts, the coming year is set to challenge traditional market assumptions. Businesses and investors need to stay adaptable, anticipate potential shocks, and prepare for a complex global landscape.