Navigating Choppy Waters: Geopolitical Risks and Economic Uncertainties Facing the United States in 2025 and Their Global Impact

We explore some of the key geopolitical and economic risks facing the United States in 2025, analyze their potential impact on global risk, and highlight critical themes that organizations must consider to build resilience and thrive in an uncertain world.

These themes and more will also be discussed in detail at the upcoming #RISK Digital North America online event on January 30th, during the session ”Geopolitical Risks and Economic Uncertainties in 2025” at 3:30 PM - 4:00 PM EST / 12:30 PM - 1:00 PM PST.

The US at a Crossroads: Domestic Challenges with Global Implications

The United States’ internal political and economic climate will have significant ripple effects across the globe. Domestically, the US faces issues like:

• Political Polarization and Governance: Deep political divisions within the US could impact policy implementation and create uncertainty regarding the future direction of regulations in key areas like trade, technology, and the environment.
• Inflation and Interest Rates: While inflation has shown signs of easing, it remains a concern. The Federal Reserve’s monetary policy decisions in response to inflation will have global implications, impacting borrowing costs, investment flows, and currency valuations. How the new administration deals with the national debt could impact investor confidence and create economic instability.
• Economic Slowdown Concerns: There are ongoing concerns about a potential economic slowdown or recession in the US, which could dampen global growth and impact trade and investment flows. The Federal Reserve will be aiming to avoid this with their monetary policy, any slips could prove costly.

These domestic challenges have the potential to significantly impact global markets and contribute to broader economic uncertainty.

Geopolitical Hotspots and Shifting Alliances:

Beyond its borders, the US is entangled in a complex web of international relationships and faces numerous geopolitical risks:

• US-China Relations: The relationship between the US and China remains a critical factor in global stability. Trade disputes, technological competition, and geopolitical rivalry over Taiwan and the South China Sea create ongoing risks for businesses operating in both countries and globally.
• Russia-Ukraine War and its Aftermath: The war in Ukraine has had far-reaching consequences, including energy price volatility, supply chain disruptions, and a reshaping of geopolitical alliances. The long-term implications of this conflict will continue to be felt in 2025.
• Middle East Instability: Conflicts and political instability in the Middle East, particularly in relation to Iran, Israel, and other regional powers, can impact oil prices, trade routes, and global security.
• North Korea’s Nuclear Ambitions: North Korea’s continued development of nuclear weapons and ballistic missiles poses a threat to regional stability and could lead to increased tensions with the US and its allies.
• Cyber Warfare and Espionage: State-sponsored cyberattacks and espionage campaigns are a growing threat to businesses and governments worldwide. The US is both a major target and a significant actor in this domain.

Key Themes for Businesses to Consider:

Supply Chain Resilience

The need to diversify supply chains, reduce reliance on single countries or regions, and enhance transparency and traceability will remain paramount. Nearshoring and friend-shoring are likely to gain further traction.

Cybersecurity as a Strategic Imperative

Cybersecurity will continue to be a top priority, with organizations needing to invest in advanced threat detection, incident response, and data protection measures. The human element of cybersecurity will also be crucial, with a focus on training and awareness programs.

ESG Pressures and Opportunities

Environmental, social, and governance (ESG) factors will continue to grow in importance, driven by investor demand, regulatory pressures, and societal expectations. Companies will need to integrate ESG considerations into their risk management frameworks and demonstrate a commitment to sustainability. There are however, differing views on ESG which will create uncertainty in policy and approach to ESG.

Data Privacy and Localization

Navigating the complex web of data privacy regulations, including cross-border data transfer restrictions and data localization requirements, will be a major challenge for businesses operating internationally.

The Rise of Economic Nationalism

Businesses will need to adapt to a potential rise in economic nationalism and protectionist policies in various countries, which could impact trade, investment, and supply chains.

Technological Disruption

Rapid advancements in technologies like artificial intelligence, blockchain, and quantum computing will create both opportunities and risks, requiring organizations to adapt their business models and risk management strategies.