ISA Monthly Issues to Watch: April 2025
The Spread of Tariffs
Since taking office just ten weeks ago, the Trump Administration has imposed a wide range of tariffs on most of the United States’ leading trade partners. Furthermore, US President Donald Trump has vowed to enact even larger tariffs on the US’ trading partners later this week, causing a great deal of concern and uncertainty throughout the global economy. In the US, these tariffs are expected to fuel new inflationary pressures, and these tariffs have raised the likelihood of a recession in the US in 2025 to 40%. Outside of the US, these tariffs are threatening to lead to sharp downturns for export-dependent economies and industries. Worse, should these tariffs continue to spread to more countries and industries, the threat of a full-scale trade war will rise substantially, something that could dramatically slow global economic growth later this year.
The United States’ Role in the World
The Trump Administration’s use of economic and military threats against many of the United States’ leading allies has left these countries feeling abandoned by their long-time ally. Nowhere is this more evident than in Canada, where anti-US sentiment has been stoked by the actions and words of the US president. Likewise, allies in Europe are scrambling to face a world in which they are no longer protected by the United States, and might even be opposed by the US on certain issues (such as Greenland). This has left the US’ allies in Asia concerned that they might not have full US backing in a potential future conflict with China. Instead, the US is taking a more Gaullist approach to global affairs, in which the US has no friends, only interests. Nevertheless, there is little doubt that, while the US is an immensely powerful country, it is more powerful with strong allies by its side.
Q1 2025 Economic Results
Over the course of April, many of the world’s leading economies will release their initial GDP growth estimates for the first quarter of this year. These include the United States, China and the European Union. In the US and Europe, economic growth rates are expected to be relatively low, with the US’ run of strong growth coming to an end and Europe’s run of sluggish growth continuing. In China, recent economic stimulus measures will keep growth rates near the government’s 5% target, but trade concerns will weigh heavily on the Chinese economy. Meanwhile, there are likely to be quite a few anomalies in the first quarter’s economic data as businesses are scrambling to produce and ship their goods ahead of expected tariff increases in the United States and elsewhere.
The Importance of Economic Competitiveness
There is little doubt that we are living in an increasingly-competitive world. As such, this means that the world’s more competitive economies will have a sizeable advantage over those economies that are struggling with their level of competitiveness. For example, highly-competitive economies such as the United States, Singapore and Switzerland will be better-placed to generate long-term growth in such an environment than those countries that have lost ground in terms of competitiveness, such as Brazil, Italy or South Africa. This will likely spur a new round of deregulation, as well as increased investment in high-growth sectors of the economy, such as the tech sector, as countries seek to boost their overall level of competitiveness.
Israel’s Wars
It was expected that Israel’s conflicts would come to an end in 2025, bringing a higher degree of stability to the eastern Mediterranean. Instead, Israel is engaged in active conflicts with three of its neighbors. In Gaza, fighting between Israel and Hamas has resumed, causing incredible hardships for the 2.1 million people trapped in that territory. In Lebanon, Israel and Hezbollah are once again engaged in tit-for-tat attacks on one another. Finally, Israeli armed forces have seized territory in southern Syria as that country’s new government struggles to bring all of that country under its control. This has led to expansionist calls from Israeli hardliners, who view this as a unique opportunity for Israel to expand its borders with the backing of the Trump Administration in the United States.
Too Few Businesses Are Ready for AI
Despite the fact that artificial intelligence (AI) has been in the public eye for years, too few businesses are utilizing AI to increase their productivity. Worse, many businesses remain unprepared for the spread of AI agents, which will transform the global workforce in the months and years ahead. For those businesses that have failed to utilize AI, time is running out, for many of their existing and future competitors are utilizing AI and AI agents to dramatically increase their productivity and performance. As such, businesses need to be fully aware of the opportunities and threats posed by AI and to immediately implement strategies to adopt AI in their business activities.