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 Themes to watch in 2025 and their impacts on global risk. Come back for our Top Risks and Wildcards.
Welcome to the crossroads of risk and resilience. Let us explore what 2025 has in store.
TOP 5 THEMES
TRUMP 2.0: DISRUPTION, INFLATION, & TARIFFS – OH, MY!
Political developments in the United States lead our 2025 risk outlook, which is no surprise. The incoming administration’s main policy priorities—including trade, tax, and immigration policy—paired with the continued erosion of checks on presidential power present significant uncertainty about the trajectory of the US political system, economy, and global engagement. The coming year faces a higher risk of elevated inflation, economic underperformance, and increased social unrest.
The global impacts of policy change might be the most profound. Trump’s domestic and foreign policies could prove highly disruptive, impacting global economics, the trajectory of ongoing and simmering conflicts, and more. The outlook for the conflicts in the Middle East and Ukraine is increasingly uncertain. Global supply chains are still adjusting to post-pandemic changes and will be shaken up again. Trump’s economic policies threaten to cause economic challenges for foreign governments, particularly emerging markets.
A NEW WORLD OF NATIONALISM
Amid an increasingly uncertain global climate, a new, more intense wave of nationalism will emerge in the coming year as domestic and international politics become more fraught and unstable and economic challenges persist or even worsen.
The global resurgence of nationalism will generate new domestic challenges in countries worldwide. The trend will strengthen far-right political parties, generate new economic uncertainty, endanger the availability of labor by impacting migration, spark unrest, and lead human rights risks to emerge. As a result, we expect looser ESG regulations, new tariffs, increased border checks, and other significant policy changes.
For international politics, this trend brings a greater risk of conflict – both armed and through other forms like trade. Relationships between governments will grow tense as governments aim to protect their national interests and stave off domestic political discontent emerging from an increasingly volatile geopolitical environment.
TRADE-ING BLOWS
The coming year will see significant changes in the global trade environment. Supply chains and trade policy changed immensely in the years following the COVID-19 pandemic. However, disruption, tariffs, and regulations are set to bring about further change. Donald Trump’s trade policy agenda, economic underperformance in China, shifting supply chains to Southeast Asia, and other factors will accelerate uncertainty and disruption in the global trade system in 2025.
The emergence of new, intense trade wars between the US and its trading partners—both adversaries and allies—will push governments globally to adopt more protectionist policy agendas as they try to adapt to a more hostile US trade policy and persistent overcapacity in China. The US and its trading partners will enact tariffs as they seek retaliation. In China, excess production capacity, deflationary conditions, stimulus, a weakened currency, and other factors will expose the country’s exports to more aggressive and protectionist trade remedies.
Tariffs and their disruptive impacts on trade are a concern for 2025; however, unlike in the past, governments will expand their toolkit to address hostile trading partners using non-tariff measures, including export taxes and restrictions, discriminatory administrative and regulatory rules, and other measures. China has long employed a broader range of tactics to address trade disputes with partners, but US trading partners will soon start adopting some of its tactics.
The impacts of an increasingly hostile global trading environment—both through tariff and non-tariff policy actions—will bring further shifts in supply chains, new sources of added costs and disruption, and increased uncertainty.
ESG IS DEAD. LONG LIVE RLT.
Many companies are rebranding their ESG efforts in the new political environment. In 2025, we should look for specific elements within ESG that will remain durable. We call this a shift from ESG to RLT (renewables, labor, and transparency). These three parts of the ESG movement are backed by the most straightforward and pragmatic arguments, which will be needed to remain resilient to broader ESG backlash.
Renewables: It is no longer just regulation that drives people to renewables. Fueled by technological progress, prices are falling, and deployment is accelerating, plus existing rules (i.e., new legislation is not needed). The shift to renewables makes economic – not just ethical – sense.
Labor: Labor remains a critical focus, driven by anti-China sentiments expanding restrictions on human rights in the supply chain. Alongside ever-expanding labor rights, union and strike activity must be managed carefully. This is not just about ending exploitation—it is about managing disruptions internally and navigating geopolitical tensions externally.
Transparency: Mandatory due diligence and disclosure regulations, even if watered down in places like the EU, will force significant advancements in transparency. This will provide the veneer of ESG progress without politically charged elements requirements in areas like DEI or broader environmental initiatives that may conflict with economic growth.
BROKEN EUROPE
Europe has been the largest beneficiary of the international order and is the least prepared for the more anarchic world replacing it.
Geopolitical Risks: The second Trump administration is already questioning the NATO alliance when the Russian threat is resurgent. Rising tensions with China over trade and technology further compound the geopolitical threat.
Energy and Economic Security: Dependence on external energy sources, an incomplete transition to renewables, and high costs have left Europe vulnerable to eroding competitiveness and supply disruptions
Internal Divisions: Populist movements and political polarization are ushering in new far-right governments, undermining the European policy consensus. The US “MAGA” movement has shown a willingness to turbocharge political turmoil in key European countries.
Lack of leadership: The German and French governments, traditionally leading reform, are seriously weakened, and EU institutions move slowly. Europe may find a way to respond to challenges, but it will not happen overnight.
There is a real risk that the European Union and its politics will face further strain, with increased fragmentation impacting political alignments and policy objectives. As a result, companies will face extreme regulatory uncertainty as the policy environment shifts right.