Outlook 2025: through the noise

A handful of key geopolitical factors will dominate 2025, and while at first glance they may appear to be a mixed bag, if taken collectively, the path through the noise becomes CLEAR.

The year is likely to be characterised by five factors: an increasing cascade of distinctive geopolitical issues; a more leaderless global order; key geopolitical issues enduring beyond 2025; the occasional asymmetric geopolitical shock; and the ongoing, albeit increasingly challenged resilience of the international system – or CLEAR, for short.

The noise generated by the Donald Trump-led administration in the United States will likely saturate media coverage in 2025 and create market volatility. But that won’t always result in policy impact. Clarity on the motivations behind tariff activity in the US – and the impact they will have on the market in 2025 – should become more visible in April.

But it’s not all about Trump. The year 2025 will be pivotal for geopolitical factors globally, including conflict in Ukraine and the Middle East as well as elections in Germany. You can watch me share my thoughts  on video below.

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Noise

It's important to make a distinction between Trump's commentary and the policy action that follows - or doesn't. Executive orders from his term so far have shown a focus on inward economic and migration flows, climate and energy independence, populism, and most recently, tariffs.

Trump's tariff agenda – notwithstanding recent tariffs targeting China and paused tariffs targeting Canada and Mexico – will be better understood around April, when a review into US trade relationships is due for completion. Key appointments to the US Trade Representative's office will also be illustrative.

The motivations behind such moves are diverse. February’s tariff announcements focussed on border control, but explicit attempts to balance the US’s various trade deficits are likely in the future. There’s a growing idea in the administration that being involved in the US market should come at a cost, and tariffs are an effective measure for payment. There’s also an attraction to the leverage tariffs can bring when it comes to foreign policy, which we saw with Canada and Mexico.

These motivations should also become clearer in April. Until then, markets will ponder what may stop Trump from considering further tariffs. Will it be Wall St fluctuations? Will tariffs be rolled out, and then adjusted, based on the reaction? Will a more systematic and incremental approach emerge?

Pivotal

Structural dynamics in the US-China relationship remain skewed towards escalating competition. But cyclical dynamics are going to be influenced by how Trump decides to engage Beijing.

Beijing would prefer a grand bargain, I think, on economics and security, but this is unlikely in 2025.  More likely – but not guaranteed – is a series of smaller economic agreements.

Away from the US, 2025 will be a pivotal period for conflict in Ukraine and the Middle East, but decisions from Russia will likely have more impact on the course of the Ukraine conflict than Trump's. Any negotiation process could take several months, and a lasting ceasefire is unlikely before 2026.

It’s a big year for Europe, with fractious politics in France and an election in Germany – all the while dealing with the actions of Russia, weakening economic fundamentals and concerns over shifting US policy. On balance, I think Europe is more likely to band together to deal with those threats in 2025 than fracture.

The Middle East faces a period of deep geopolitical flux and is seeking a new settling point. Israel has the initiative and will almost certainly seek to further degrade Iran and its allies, encouraged by pressure on Iran from the US – at least in the first half of 2025. A more open war between Israel and Iran remains unlikely, given some of the developments of the last few months.

Cameron Mitchell is Head of Geopolitical Risk at ANZ

This story is part one of a two-part video discussion.