Key Issues Covered by ISA in March 2025
The United States Turns Inward
While it was expected that the election of Donald Trump would result in an inwards turn by the United States, the pace and the scope of the US' turn inwards has shocked the world. On the geopolitical front, President Trump has criticized many of the US' leading allies, while openly backing Russian President Vladimir Putin. Economically, the United States has imposed, or will impose, major tariffs on most of its leading trade partners, potentially triggering a global trade war. Meanwhile, this inwards turn has coincided with an effort to dramatically reduce the size of the federal government in the United States, a move that has triggered chaos and uncertainty for many key government bodies in the US. With the world's dominant power experiencing such upheaval, the impact on international security and the global economy is potentially massive.
Uncertain Times for the Global Economy
After growing by 3.2% in both 2023 and 2024, the potential for an economic downturn in 2025 has risen substantially. This is due to factors that have been in place in recent years, (such as inflationary pressures) and factors that have emerged this year (such as the threat of a global trade war). With the world's three leading economies suffering from political upheaval (the United States), domestic market weakness (China) or long-term stagnation (Europe), there are fears that the global economy could slow dramatically in the coming months.
Russia Increases the Pressure on Ukraine
As United States President Donald Trump increasingly appears to be siding with Russia in the war in Ukraine, there are growing concerns that Ukraine's ability to hold off Russia's armed forces will weaken considerably in the coming months. Moreover, it appears that the US intends to force Ukraine to accept a peace deal with Russia that would be in many ways disadvantageous to Kyiv. Europe is likely to step in to try and increase its support for Ukraine, but it is divided and lacks the military power of the US. As a result, Russia is likely to launch new offensives in the coming months to put itself in a stronger position to dictate a peace deal with Ukraine.
Inflation Won't Go Away
Not long ago, it was expected that inflationary pressures would have eased substantially by now, boosting consumer confidence and allowing central banks to accelerate their pace of interest rate cuts. Instead, inflation rates have not only refused to fall as expected, they have even increased in many key economies. Now, with the threat of a global trade war looming and with food and housing costs rising in many leading economies, the threat of even higher inflation rates in the coming months has risen substantially. Should inflation rates rise even more than expected, the likelihood of a large-scale global economic slowdown will rise considerably.
A More Aggressive China
While the United States is turning inwards, its only serious rival for global supremacy, China, is growing much more assertive on the global stage. This is most evident in the Asia-Pacific region, where China has been carrying out a series of aggressive military exercises in the waters off of Taiwan, the Philippines and even Australia. This has raised fears that China is intending to strengthen its position in the disputed waters of the South China Sea or other areas of the Pacific Ocean. Worse, China might even be contemplating taking advantage of the increasingly-isolationist United States to be preparing for an invasion of Taiwan.
Global Trade in Jeopardy
With the Trump Administration in the United States following through on many of its threats to impose tariffs on imports from several of the world's leading economies, the potential for a global trade war has risen substantially. Furthermore, as exports to the United States have been a key driver of economic growth for many leading economies in recent years, these countries will be forced to be more aggressive in seeking out export growth in other leading markets, something that could trigger more protectionist measures from other countries, In short, the outlook for global trade has dimmed substantially this year, and could further worsen in the months ahead.