The coming year stands to be a turning point in global affairs. Seismic shifts across political, economic, and social landscapes will converge to create a volatile and unpredictable environment. From escalating great power rivalries to the persistent ripple effects of climate change, from groundbreaking technological disruptions to the deepening divides within and between societies, 2025 promises no shortage of challenges and opportunities.
This year’s risk outlook contains our Top 5 Themes, Top 5 Risks, and Top 5 Wildcards. Each details the potential trends and challenges that are likely to define 2025. This post details PRISM's Top 5 Wildcard Risks to watch in 2025. Read our Top 5 Risks and Top 5 Themes.
Welcome to the crossroads of risk and resilience. Let us explore what 2025 has in store.
TOP 5 WILDCARDS
TRUMP GOES TO CHINA
A wildcard for 2025 is the potential for a grand bargain between Donald Trump and China, offering a rare upside in the geopolitical landscape. Such a deal—rooted in Trump's transactional approach—could unwind tariffs, stabilize trade relations, and ease sanctions in exchange for Chinese cooperation on key issues like fentanyl exports, reshoring select industries, and boosting US imports. This détente would mark a significant shift, potentially ending the most persistent driver of geopolitical instability and economic friction over the past several years. It is far from the likeliest scenario, but Trump prides himself on unpredictability. Plus, he loves deals – and China has plenty to offer.
The impact could be transformative for global supply chains. Reducing tariffs would lower input costs, restore predictability to long-term contracts, and reinvigorate cross-border trade flows. Key sectors such as consumer electronics, automotive, and agriculture could benefit from improved market access and reduced barriers. The easing of tensions also deflates inflationary pressures by stabilizing commodity markets and reducing the risk of retaliatory trade measures.
While the geopolitical rivalry between the US and China would not vanish, the return to pragmatic economic cooperation could unlock growth opportunities, de-risk supply chain dependencies, and allow companies to invest in innovation and expansion. This wildcard represents a chance for businesses to capitalize on renewed global trade stability and economic growth in 2025.
PANDEMIC: PART II
Pandemics are constant wildcard risks, but the probability that a disease with global reach will once again emerge and infect millions in 2025 is on the rise. Scientific advancements and international cooperation have made immense strides in understanding and addressing significant public health risks over the last century. However, these advancements have also coincided with new challenges that only make the emergence of new pandemics more likely. Warmer weather from climate change and rapid urbanization leads humans and once-foreign animal species to encroach on each other’s habitats, creating new vectors for infectious disease transmission.
Already, the world is addressing public health threats from the avian flu (H5N1), Marburg virus, mpox, human metapneumovirus (HMPV), and other infectious diseases. Any of these diseases could evolve and become a global public health crisis, as could a yet-unidentified threat.
Historically, global public health efforts have helped reduce the risk of infectious diseases spreading and becoming global health crises. However, the erosion of global public health leadership and increasing distrust between governments make containing such threats an ever-growing challenge. Moreover, the COVID-19 pandemic’s lingering economic, social, and political impacts, increased skepticism toward public health interventions (e.g., vaccines), and rising public distrust in government globally will mean many leaders will be loath to adopt the measures needed to meaningfully prepare and contain public health threats that could slow the spread of disease.
POP! GOES THE AI BUBBLE
The state of AI leads many to point to comparisons with the dot-com bubble. The risk of an AI market crash cannot be ignored as many indicators suggest hype outpaces reality, implying vast overinvestment, unrealistic expectations, and eventual disillusionment. Companies across industries have poured billions into AI development and integration, often chasing transformative promises that may fail to materialize at scale or within projected timelines. As the competitive landscape saturates and monetization proves elusive for many, a wave of failed projects, layoffs, and collapsing valuations could trigger a broader tech market correction.
The supply chain impact of an AI crash could ripple across sectors reliant on advanced algorithms, automation, and predictive analytics. Businesses that over-leverage AI for efficiency gains may face operational setbacks, while those underinvested in human capital could find themselves vulnerable to labor shortages and productivity losses. Additionally, key suppliers of AI hardware—semiconductors, GPUs, and data infrastructure—could see demand plummet, exacerbating economic instability in tech-heavy regions and driving price instability for these key pieces of hardware.
BOND VIGILANTES SHAKE DOWN THE US ECONOMY
The strength of the United States economy over the last four years is impressive and surprising. Despite high inflation and interest rates, global uncertainty, and significant economic policy change, it significantly outperformed its peers and continues to do so.
However, in 2025, economic conditions in the US could change – and rapidly. Cyclical economic trends are always expected, meaning slowdowns and recessions are always possible. However, a new risk is emerging for the US economy: an outright fiscal crisis sparked by bond vigilantes – investors rejecting a country’s monetary or fiscal policy actions by selling its bonds and driving their yields higher.
The most notable recent example of bond vigilantes’ work is the United Kingdom’s fiscal and economic crisis in late 2022, sparked by former Prime Minister Liz Truss’s “mini-budget.” The sharp increase in projected government debt sent bond yields soaring, and the impacts continue to weigh on the country's economy.
The US has never faced the wrath of bond vigilantes, but that could change in 2025, given the prospect that the government will enact unfunded tax cuts and pursue economic and trade policies that ultimately reduce government revenues and even drive inflation higher. If the risks associated with US government debt rise beyond investors’ tolerance or long-term expectations of inflation rise, demand for Treasuries would slump, and borrowing costs would rise. As a result, the US government's fiscal position would be further strained and require either increased tax collection (unlikely under a Trump administration) or significant cuts to government spending. Downstream in the economy, higher Treasury yields would drive borrowing costs throughout the economy (e.g., corporate bonds, private borrowing costs, mortgages, etc.) to rise, ultimately dragging down economic performance – the degree to which would be highly uncertain.
RUSSIA RETURNS TO THE GLOBAL ECONOMY
The endgame of the Ukraine war is on everyone’s mind, with both parties showing signs of exhaustion. Former U.S. President Donald Trump has vowed to end the war "within 24 hours," a promise later adjusted to "within six months." From a supply chain perspective, a central question is whether any peace deal will include lifting sanctions on Russia in exchange for a resolution.
If sanctions are lifted as part of a peace agreement, many companies that had previously withdrawn from the Russian market or scaled back operations will likely reconsider their positions. However, re-entering Russia after years of sanctions could pose logistical and reputational challenges. Companies would need to navigate a complex regulatory environment and manage the risk of backlash from stakeholders who view any normalization of relations with Russia as controversial.
The lifting of sanctions could also create new sourcing opportunities, particularly in sectors like raw materials, energy, and high-tech manufacturing. Russian oil, gas, and other commodities are of significant interest to countries and industries struggling with energy supply disruptions due to the war. If Russia is reintegrated into global trade networks, companies may be able to diversify their supply chains and tap into lower-cost resources that were previously off-limits. Companies would need to weigh these advantages against geopolitical risks and the potential for renewed sanctions or instability in the future.