Key Issues Covered by ISA in February 2025
Has a Global Trade War Started?
The decision by the Trump Administration to impose tariffs on imports from China and to postpone planned tariffs on Canada and Mexico came as no surprise, nor has the threats of additional US tariffs on imports from the European Union and other trade partners. The responses of these US trade partners, and the potential for more aggressive trade policies by these major exporting economies, will determine whether or not these disputes expand into a global trade war that would have massive repercussions for the global economy. Should this occur, many export-dependent economies will fall into deep recessions, and even less export-dependent economies will experience much lower rates of growth as well as higher levels of inflation.
Germany's Election Will Lead to a Shift to the Right
According to recent polls, the center-right CDU-CSU alliance is posed to win this month's parliamentary elections in Germany, while the far-right Alternative for Germany (AfD) is set to finish in second place for the first time in its history. While the CDU-CSU has ruled out forming a coalition with the AfD, it will almost certainly head Germany's next coalition government. This, combined with the AfD's rising support, will continue the sharp rightwards shift in German politics that has been triggered primarily by fears over immigration trends in Germany and across Europe.
Diverging Economic Competitiveness
In recent years, global economic growth has been driven by a small number of economies and industries. This is due to the sharp divergence in economic competitiveness and productivity among the world's leading economies and industries. For those that have been on the wrong side of this competitiveness and productivity split, their outlook has worsened as the era of globalization is coming to an end. Instead, the emerging era of economic and geopolitical hyper-competition is exposing the weaknesses of less-competitive economies and industries, leaving them vulnerable to further slowdowns in the coming years.
The Threat of Another Major War in Central Africa
The recent territorial gains by the M23 rebel group in eastern parts of the Democratic Republic of Congo, including their seizure of the city of Goma, has raised fears of another large-scale war involving many Central African countries. Already, Rwandan troops are present in eastern Congo, supporting the M23 rebels. More countries could become involved, particularly as the Congolese government can no long control many areas of that vast country. The last time there was a major African war on Congolese territory between 1998 and 2003, more than five million people were killed.
The Impact of AI on the Global Labor Market
Slowly but surely, artificial intelligence (AI) is beginning to have a major impact on the global labor market. This is happening in two ways. First, many jobs are being replaced by AI, a trend that is certain to accelerate in the coming months. Second, having skills in using AI is quickly becoming a must-have when securing a new job in a variety of different fields. While this trend is accelerating, it is likely to explode as the use of AI agents spreads rapidly over the next couple of years, and this dramatic shift in the labor market could cause massive economic and societal disruptions.
Trump's Outsized Impact on the World
It is no surprise that United States President Donald Trump has had a massive impact on global affairs, domestic policy and the world economy in just his first two weeks in office. Moreover, his administration appears to be not only seeking to enact most of the policies that they championed on the campaign trail last year, but they appear to be attempting to completely transform politics in the United States. So far, there has been little to stop them from this power grab and political transformation, and Republicans will remain in charge of all levels of federal political power in the US until at least early 2027.