As we enter 2025, the global outlook is increasingly fractured across geopolitical, environmental, societal, economic and technological domains.

Over the last year we have witnessed the expansion and escalation of conflicts, a multitude of extreme weather events amplified by climate change, widespread societal and political polarization, and continued technological advancements accelerating the spread of false or misleading information.

Optimism is limited as the danger of miscalculation or misjudgment by political and military actors is high. We seem to be living in one of the most divided times since the Cold War, and this is reflected in the results of the GRPS, which reveal a bleak outlook across all three time horizons – current, short-term and long-term.

A majority of respondents (52%) anticipate an unsettled global outlook over the short term (next two years), a similar proportion to last year. Another 31% expect turbulence and 5% a stormy outlook. Adding together these three categories of responses shows a combined four percentage point increase from last year, indicating a heightened pessimistic outlook for the world to 2027.

Compared to this two-year outlook, the landscape deteriorates over the 10-year timeframe, with 62% of respondents expecting stormy or turbulent times. This long-term outlook has remained similar to the survey results last year, in terms of its level of negativity, reflecting respondent skepticism that current societal mechanisms and governing institutions are capable of navigating and mending the fragility generated by the risks we face today.

On July 19, 2026, MetLife Stadium in New Jersey will host the finals of the first-ever tri-country FIFA men’s World Cup, hosted by Mexico, Canada, and the United States. That same month, trade policy watchers will be following a different matchup for this North American trio: the joint review of the US-Mexico-Canada Agreement (USMCA). The incoming Trump administration will need to take advantage of the USMCA’s renewal process to address strategic objectives, without putting the agreement itself at risk. Any downgrade in trade relations from new tariffs will have serious impacts on the North American economy—including on US exporters.

The USMCA is set to terminate in 2036 at the close of its sixteen-year term. When the trio meets in July 2026, they can renew the agreement for a second sixteen-year term. However, if any one of the three decide not to renew the agreement, the trio will meet every year until they either agree to renew the USMCA—or run out of time before it expires in 2036. Although cumbersome, this process is designed to provide an opportunity for the three countries to regularly adapt the terms as they see fit. No other trade agreement has such an adaptable structure, providing an unprecedented opportunity to optimize trade within North America.

It’s possible that few other trade agreements will also have as much political pressure as the USMCA in 2026, with a range of issues now attached to its renewal including immigration, shipment of illegal drugs, and concerns about Chinese goods subject to tariffs making their way freely to the United States through the USMCA. The incoming administration’s fixation on the United States’ trade deficits with Mexico and Canada is perhaps the most traditional topic under review.

The Trump administration’s proposed approach to these concerns is to create uncertainty through higher tariffs in order to negotiate better terms in the agreement. If the Trump administration does increase any tariffs on USMCA partners, except due to national security concerns, it will violate the terms of the agreement under Article 2.4. Canada and Mexico would likely retaliate by levying import duties of their own, effectively removing the free trade advantages provided by the USMCA. This will prove expensive and destabilizing for any company dependent on the highly integrated North American supply chains. These are the very same exporters on whom the administration relies for support. Before the administration would need to take that approach, it’s important to understand the economic leverage—and dependencies—each country has with the others.

At the negotiating table

Canada and Mexico rely on the US economy far more than the United States relies on either of them—although the relationship is important for all three. Mexico and Canada sold 80 percent and 76 percent, respectively, of their exports to the United States in 2023. Comparatively, 32 percent of US exports in 2023 went to Canada and Mexico combined.

The asymmetry here engenders a higher level of political importance for the USMCA within Mexico and Canada. Employment in Mexico is especially dependent on trade with the United States. When negotiations begin in 2025, Mexican President Claudia Sheinbaum will be under an entirely different level of pressure from her citizens to maintain favorable trade relations with the United States and Canada. The cards are favorably stacked for the United States to have the heaviest hand in negotiations––even without the threat of higher tariffs.

01/16/2025 | Noah Barkin & Agatha Kratz | Rhodium Group, LLC

Read the Full Expert Comment Here

01/20/2025 | David Kleimann | ODI

While the previous trade war did not lead to high inflation in the U.S., this time tariffs may expose American people to increased costs.

Conservatives in the United States have been positioning tariffs as a potent tool to boost American industry. It sounds patriotic, doesn’t it? But sometimes patriotism comes with a price. Tariffs can cause a heavy burden on U.S. consumers, increasing their household spending and causing financial anxiety.

The new U.S. President Donald Trump delayed day-one tariffs but stayed true to his campaign promise, signaling tariffs on all Chinese imports. He vowed 25% duties against Canada and Mexico starting on Feb. 1.

Tariffs generally lead to higher prices, but China could absorb some of the cost – although this has historically not been the case. Some argue that past tariffs didn’t fuel overall inflation, and that’s partially true. The Consumer Price Index rose 2.4% in 2018 but slowed to 1.8% in 2019. Price increases impact certain sectors, particularly those subject to tariffs.

But don’t mistake that for Chinese exporters footing the bill. Importers took on the burden, sacrificing their profits, but Americans still paid the price. According to the National Bureau of Statistics, 95% of U.S. tariffs were reflected in the prices of imported products as soon as they entered the American border. This means American importers paid $95 for every $100 in tariffs. Even two years later, prices remained sticky.

Research by two economists, Pablo D. Fajgelbaum and Amit K. Khandelwal, highlights why this happened during earlier trade wars: Sudden tariffs left U.S. importers stuck with pre-signed contracts, unable to adjust demand or shift the cost to consumers.

Price elasticity puzzle

In a future trade war, even with a warning, tariffs on all Chinese imports could drive overall inflation, with Trump promising to target all products, not just specific sectors. This is where price elasticity comes into play. Chinese companies can push tariff costs down to U.S. buyers in industries with rigid demand, where consumers can’t easily switch or reduce purchases of essentials, as evidence from previous trade wars suggests.

Rigid consumer behavior centered around certain products – such as ship-to-shore cranes, which the U.S. imports from China and needs for its construction purposes – almost always challenges the protectionist policy outlook since consumers end up bearing the brunt of rising tariffs. With no domestic firms producing these cranes, a 25% tariff now hits ports with at least $131 million in extra costs.

Looking ahead, the key question is how much of the tariff burden China will absorb – and for how long. Beijing is playing the long game. With the Belt and Road Initiative and stronger ties to BRICS countries, China is diversifying its trade and reducing dependence on the U.S. This makes Beijing less likely to lower prices to keep its foothold in American markets.

01/22/2025 | Özde Aykurt | Daily Sabah