ISA Monthly Issues to Watch - December 2025
The Fallout from a Year of Trade Tensions
2025 will be remembered as the year when globalization was challenged in the form of trade barriers erected primarily by the United States, as the US imposed tariffs on imports from nearly all of its leading trading partners. So far, the impact of these tariffs has not been quite as bad as feared. However, it is expected that the impact of these tariffs will become more noticeable in the coming months, particularly as larger share of the cost of these tariffs is passed on to consumers, as businesses have so far borne most of their impact. At the same time, shifting trade patterns could result in more countries erecting trade barriers to protect their local industries, particularly against soaring imports from China.
Endgame in Ukraine?
December will be a critical month for the conflict in Ukraine. Russia’s armed forces are maintaining their pressure on the ground and in the air. On the ground, Russian forces appear to be on the verge of finally seizing control of the strategic city of Pokrovsk in eastern Ukraine. In the air, Russian drone attacks have increased in size and ferocity. Meanwhile, the diplomatic pressure on Ukraine has been ramped up as well. This is due to a new peace proposal from the United States that mirrors many of the demands that Russia aimed at Ukraine when the war began in 2022, with the US pressuring Ukraine to accept this highly unfavorable deal. Whatever is decided, this will certainly be another difficult winter for Ukraine.
Inflation for Some, Deflation for Others
Inflation rates have remained stubbornly high for many major economies in recent months, influencing both economic policy and the standing of many governments among their voters. In the United States, where the latest inflation data is missing, inflation rates have hovered near 3% in recent months. Other major economies such as Japan, the United Kingdom and Brazil are also suffering from persistent inflationary pressures that refuse to abate. In contrast, the world’s two leading emerging markets, China and India, are dealing with deflationary pressures. The threat of deflation has been in place in China for more than a year, but has suddenly emerged in India, where food prices have fallen dramatically.
Will the US Attack Venezuela?
All eyes are on the southern Caribbean Sea, where the United States has been building up a massive naval force to threaten the regime of Venezuelan President Nicolas Maduro. As the US is making no effort to disguise the size and firepower of this naval force, it clearly hopes that this show of force will result in President Maduro being overthrown from within Venezuela. However, it appears increasingly likely that, should President Maduro refuse to relinquish power, the US will launch attacks on targets inside Venezuela. All of this is evidence of the Trump Administration’s determination that the United States will reassert its influence on political and security affairs across the Americas.
Delayed US Economic Results
Entering the last month of the year, there continues to be a great deal of uncertainty over the health of the United States economy. Much of this uncertainty is the result of the recent government shutdown in the US, which has led to many of the US’ most important economic data releases being delayed, or outright cancelled. This has not appeared to concern the Trump Administration. Moreover, the US economy was estimated to have expanded by 4% on an annualized basis in the third quarter of this year, a stronger pace of growth than had been expected a few months ago. Nevertheless, with many threats facing the US economy, uncertainty remains high, making it more difficult for businesses and investors to make strategic decisions.
Chile’s Election of Extremes
In last month’s first round of voting in Chile’s presidential election, two candidates from the extreme ends of Chilean politics made it into this month’s run-off presidential election. Jeannette Jara, the Communist candidate in this election, won the largest share of the vote in the first round (26.9%). However, it is the far-right candidate, Jose Antonio Kast, who won 23.9% of the vote in the first round, who is the clear favorite to win the presidency of Chile in the second round of voting, as he gained the backing of other right-wing candidates after the first round. If the polls are accurate, Chilean politics is about to move much further to the right, even as Chile, like most of Latin America, remains extremely polarized.