While global trade is forecast to grow in 2025, globalisation remains under threat as geopolitical competition drives the fragmentation of financial systems and supply chains, while complicating technology choices. Here are some reasons:
China. In late 2024, China unleashed fiscal and monetary stimulus to boost consumption and investment, but a strong manufacturing sector remains central to its economic strategy. Policy support for priority industries has seen growing capacity and fierce competition amid weakening domestic demand, fuelling downward price pressure and strong exports from the world’s largest manufacturer. The scale and breadth of China’s manufacturing prowess means that such trends impact a wide range of countries and sectors.
China appears braced for intensified trade warfare from the US in 2025 and has multiple tools to counter tariffs, export controls and sanctions. It has used them selectively and cautiously throughout years of rising US trade restrictions but has sometimes been less restrained with other countries. China has signalled that it could deploy these tools much more impactfully than it has done hitherto. As US-China tit-for-tat escalates, third countries and multinationals will be caught in the middle. Europe in particular will be hit by both direct and indirect impacts of the escalation – and the EU will likely give as good as it gets in terms of imposing trade restrictions.
US policy. USA in 2025 will build from a more protectionist baseline. With a strong US dollar denting export competitiveness, “economic statecraft” will be used to attract investment, create jobs, protect industries and safeguard national interests.
A blanket increase in US tariffs would trigger retaliation and dent domestic and global growth prospects. At the very least, companies can expect more incisive tariffs targeting strategic, sensitive and symbolic sectors.
Tighter US restrictions on technology trade in the name of national security will continue via export controls, import bans, scrutiny of foreign investment and, in 2025, outbound investment screening. The rapid pace of technological change will encourage either broader or more frequent regulations, often reaching into foreign supply chains.
Global industrial policy
Governments in 2025 will scale up industrial policies to compete with geopolitical rivals, secure strategic supply chains, and cultivate critical sectors. This is part of a more general move towards state intervention in the economy.
Geopolitical competition and national security calculations will drive industrial policies into more corners of the global economy in 2025 – new strategic and sensitive technologies, to be sure, but also increasingly into the infrastructure and services of everyday life as these are progressively digitalised. Reviewing technology choices will need to be done through a geopolitical lens.
What it means for business
As trade tensions ramp up in 2025, companies will need to make supply chains more resilient to geopolitics. This means understanding supply chains in terms of their current and future geopolitical exposures – not just their operational, regulatory, or integrity risks. Companies should know how to spot emerging scenarios that could threaten key supplier or customer relationships.
Companies also need to pay close attention to public policies and consider when and how to engage with the policymaking process. Industrial policies may condition market access, but these also provide access to new subsidies and tax incentives. Tariffs and export controls can include carve outs or exemptions for certain business activities and transactions.
By George Nolas