ISA Monthly Issues to Watch - August 2025
The Economic Fallout from the US’ Trade Deals
As the deadline approaches for President Donald Trump’s global tariffs on imports into the United States to go into effect, the US has managed to reach trade deals with many of its leading trade partners. These include deals with China, the European Union, Japan, the United Kingdom and several other trade partners. However, the US has yet to reach trade deals with other leading trade partners, including Canada, Mexico, India and South Korea. If deals are not reached soon, each of these countries faces higher tariffs on their imports into the United States than those countries that have already reached agreements with the US. Regardless, it is clear that the United States will be imposing much higher tariffs on nearly all imports into the US in the months and years ahead, with major ramifications for the US and global economy that could include higher inflationary pressures in the US and a major shift in global trade and investment flows around the world.
The Political Fallout from the US’ Trade Deals
United States President Donald Trump’s second term in office has been among the most chaotic and direction-changing periods in modern US politics. This includes some successes, but also a series of major setbacks that have resulted in President Trump’s approval rating falling from 47% when he took office in January to just 37% today. Of course, the president’s team is hailing the recent trade deals with key US trading partners as a major win for the president, but the truth is that we will not know the full impact of these deals for months, if not years, to come. At the same time, these deals have undoubtedly damaged the United States’ relations with many of its key economic and security partners. As long as these partners remain dependent upon the US as a consumer market or as a provider of security, there will likely be little immediate fallout from these trade deals. However, should the US become less indispensable in the future, these deals could leave the United States much more isolated than it was before.
What We Learned from the Global Economy So Far in 2025
In recent days, we have seen some of the first estimates of economic growth for several of the world’s leading economies for the second quarter of this year. During that period, the United States economy expanded by 3.0% on an annualized basis, a little faster than expected due to distortions caused by declining imports. Meanwhile, the European Union’s economy also did a little better than expected, expanding by 1.4% on a year-on-year basis, despite sluggish growth in Germany, France and Italy. China’s economy expanded by 5.2% on a year-on-year basis, despite fears of a larger slowdown. All of this suggests that, so far, the global economy is a little healthier than expected, even as fears of a global trade war remained in place. This has led to many economists raising their growth forecasts for 2025 as a whole. Nevertheless, there are still significant concerns that trade disruptions could slow growth in many key economies in the months ahead.
Has Israel Gone Too Far?
Over the past two years, Israel has scored some impressive military victories. For example, it humiliated Iran (a country with nearly ten times as many people as Israel) in a twelve-day war earlier this year, while neutralizing rival militant groups in the region such as Hamas and Hezbollah. However, Israel has lost much goodwill in recent months due to its actions in Gaza, where a massive humanitarian crisis is underway, as well as in Syria, where it has clashed with that country’s new government. In fact, only the United States remains fully behind Israel, and even there Israel has been losing public support of late. If Israel fails to bring an end to the suffering in Gaza or continues to intervene in Syria’s sectarian unrest, it could find itself facing a much more united front in the Middle East and around the world. As the same time, Israel’s internal political divisions are widening, and this could usher in an era of severe political disfunction inside Israel in the months ahead.
Will Inflation Resurface?
Inflation rates will be closely watched in the coming weeks to determine how big of an impact the United States’ significantly-higher tariffs on imported goods and its recent deals with key trade partners are having on the global economy. In the United States, inflation rates have risen for two consecutive months and are expected to continue to trend upwards in the coming months due to the impact of higher tariffs. Meanwhile, economies such as Japan, Brazil, Mexico and the United Kingdom are also facing renewed inflationary pressures. In contrast, China continues to face the threat of deflation, and there are concerns that growing barriers to trade could worsen the threat of deflation in the world’s second-largest economy in the months ahead.
Pokrovsk in Jeopardy
For the past year, Russia’s armed forces have been attempting to take control of the strategic town of Pokrovsk in eastern Ukraine, and have suffered massive losses in terms of personnel and materiel in the process. However, Russian armed forces have been able to enter that city in recent days, and are attempting to encircle the city at the same time. Should Ukraine’s armed forces be driven out of Pokrovsk, some of their key supply lines in eastern Ukraine would be severed. Furthermore, Russian forces would then be in a position to launch attacks against many other strategic targets in eastern Ukraine. Russia hopes that such a development would finally break the deadly stalemate along the eastern front lines in Ukraine, something that could dramatically alter the state of the conflict between Russia and Ukraine.