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Rising political tensions, governmental policy changes and new technological shifts have created broad concerns among experts about the current and future state of global authority. In the face of this uncertain political landscape, political risk consultancy Eurasia Group’s Top Risks 2025 report offered several key predictions for geopolitical and economic risks in the coming year.
U.S.-China Relations Could Threaten Global Economic Expansion
Global markets were hopeful for economic growth in 2025, but an ongoing tariff dispute between the world’s two largest economies could threaten that goal. In early February, President Trump increased tariffs on Chinese imports by 10%. China then retaliated by implementing a 15% tariff on coal and liquefied natural gas products and a 10% tariff on crude oil, agricultural machinery and large-engine cars imported from the United States.
As the United States and China search for a middle ground, the report predicts, “Neither China nor the U.S. will seek a crisis this year as the leaders of both countries try to focus on domestic issues. [Chinese President] Xi faces serious economic challenges, growing social stability concerns and a military in disarray. For his part, Trump is not interested in causing a stock market crash at home and would like a deal he can sell as a win.”
The turbulence around tariffs is not confined to the United States and China. “Trump’s policy mix will also strengthen the dollar and keep U.S. interest rates higher, increasing pressure on the rest of the world when it is least equipped to handle it,” Eurasia Group predicted. “As imports become more expensive and capital flows out of emerging markets, many central banks will face an unwelcome choice: hike rates to defend their currencies at the expense of growth or cut them to support growth but fuel inflation.”
Trump’s Policies May Undermine the Robust U.S. Economy He Inherited
Currently, U.S. output is above pre-pandemic levels, unemployment is low and inflation is on track to return to the Federal Reserve’s 2% target. However, Trump’s immigration agenda includes reinstating programs that could lead to the deportation of an estimated 3.5 million people during his four-year term. “Reduced illegal immigration and mass deportation will shrink the U.S. workforce, drive up wages and consumer prices and reduce the productive capacity of the economy,” according to the Eurasia Group. “Businesses in the sectors most reliant on migrant labor, such as agriculture, construction and hospitality will be hit especially hard as workers become scarcer.” Coupled with the fact that undocumented workers are also consumers and taxpayers, the report additionally noted that the crackdown could hurt demand growth and widen the federal deficit.
Other Trump policies around deregulation and tax cuts may offer temporary growth but will likely not be enough to offset the tariff and immigration policy changes. “The combination of higher deficits, inflationary pressures and a smaller workforce will compel the Federal Reserve to keep interest rates higher for longer this year than it would have otherwise, in turn strengthening the dollar and holding U.S. growth back further,” the report said.
Russia Remains Focused on War
Eurasia Group predicted Russia may pursue policies in 2025 that would continue to undermine the U.S.-led global order and take hostile steps toward EU countries that continue to support anti-Russian policies. While the group expected a ceasefire in Russia’s war against Ukraine, the report noted that is not the same as a peace agreement as Russia may still want Ukraine to cede territory. “After the cessation of the fighting, Russia will be in a somewhat stronger position relative to both Ukraine and NATO—having achieved at least some of its territorial goals,” the report stated. But EU countries and Russia will still pursue hostile diplomatic and security policies toward one another, knowing that a peace agreement is beyond reach and that a ceasefire is tenuous and unlikely to last.”
As a result, throughout the year, Russia may continue to interfere in the domestic politics of countries it views as adversarial, use cyber and other tools to influence the outcome of elections and continue attempts at arson and assassination. Additionally, Russia may meddle with GPS systems at airports and use Telegram to instill pro-Kremlin views in citizens of other European countries in the hopes of turning them against their own country’s government.
The Eurasia Group noted that Russia is likely to prioritize its relationships with Iran and North Korea. “Moscow will need weapons and troops to pursue the war before the ceasefire and rearm after it,” the report explained. “In return, Russia will provide both countries with advanced weapons technologies, increasing their ability to disrupt geopolitics.”
Israel and Iran Continue Adversarial Relationship
Since the attacks on October 7, 2023, Iran’s geopolitical position has continued to deteriorate as the country dealt with the Hamas defeat, a near wipeout of Hezbollah and Bashar al Assad being driven from power in Syria. Iran retains missiles and drones, albeit with limited usability against Israel. “Iran also has its nuclear program, which has made it a threshold state with the ability to ‘dash to the bomb’ in about six months—though it would likely need at least a year to develop a warhead small enough to fit onto a missile,” the report said. “But any move to build a weapon would likely be quickly detected and provoke swift American and Israeli preemptive strikes.”
For Israel, Iran’s weakness presents a unique opportunity. The report noted that Israeli Prime Minister Benjamin Netanyahu is emboldened by the past year of military successes and is “riding a domestic popularity high.”
“Israel is eager to strike while the iron is hot, but it lacks the weaponry to destroy Iran’s underground facilities," the report noted. "The chance to take down Iran’s nuclear program and possibly help bring about regime change will tempt Trump and the Iran hawks in his team. A successful strike against Iran could help secure Prime Minister Netanyahu’s political standing, so there could be more Israeli efforts, with or without Trump’s help, to further degrade Iran’s allies in the Middle East.
If the Iranian regime is threatened from within, Eurasia Group predicted its leader will be tempted to broaden the conflict to distract attention. "With less to lose and limited capacity to rebuild their proxies, they may also decide it is finally time to build a bomb as their only means to restore deterrence if diplomacy within the U.S. and the West ultimately fails," the report said. "Even if Tehran genuinely wants to strike an expansion deal, there is a strong chance that Trump will judge its talks to be cheap—or be convinced of it by his hawkish advisers and Netanyahu—and proceed to bomb Iran's nuclear program before it can dash for a weapon."
AI’s Unregulated Growth Leads to Uncertainty
AI could soon become even less regulated. Many of the considerations in former President Biden’s policies presented guardrails that curbed government use of AI tools that were found to discriminate based on gender, race or disability. President Trump has already signed an executive order rescinding Biden-era AI policies and called for departments and agencies to “revise or rescind all policies, directives, regulations, orders and other actions taken under the Biden AI order that are inconsistent with enhancing America’s leadership in AI,” according to the White House.
Further, the Eurasia Group noted, “Trump’s administration is set to empower Silicon Valley veterans like David Sacks, Peter Thiel and Marc Andreessen, who view AI guardrails as ‘woke,’ cumbersome and impediments to the U.S. in its geopolitical competition with China.” Since unified federal regulation around AI now seems unlikely, the patchwork of existing or proposed state legislation will create confusion for companies doing business in multiple states.