DW analysis: Five major global economic challenges expected to directly affect global prosperity

How the year 2025 will turn out for the world economy depends primarily on one person: Donald Trump, president of the world's largest economy. This means that further developments, even beyond 2025, are unpredictable and difficult to appreciate.

The consequences of the so-called “American concept of pre” will extend far beyond US borders and Trump humors will change the global order we know.

Happiness, globalisation, and distant wars will be settled mainly in Washington's American capital. New is only the uncertainty and chaos that can accompany such decisions.

Trump has questioned international co-operation and has sharply criticised allies and NATO. New business alliances and self - oriented America can have wide consequences. Lack of a clear US leader role will enable countries like China, India and Russia to fill military, political and economic gaps.

2. Customs, Trade Fights, and Higher Prices
Companies prefer to plan in advance, and hence the threat that may come from customs growth is disturbing. Trump sees his idea as an opportunity to punish other countries for US trade deficits. “Customs Word is the most beautiful word in dictionary”, he said in October.

During the 2024 election campaign, Trump threatened with a total fee of 10 per cent to 20 per cent for all goods imported in the US and up to 60 per cent for Chinese goods since his first day in office. Recently, he has said he targets a 25 per cent fee for all goods from Mexico and Canada. A fee of 10 per cent would be imposed for Chinese goods. Mexico, meanwhile, has threatened customs duties for American products. China can do the same. Canada's prime minister visited Trump in Florida to prevent that from happening.

For companies involved in global supply chains, an increase in customs taxes would be bad news. They would harm America's neighbours and would likely destroy the Free Trade Agreement between the US, Mexico and Canada (USMCA), which was completed during Trump's first term.

Currently, about 80 per cent of Mexican exports and over 75 per cent of Canadian exports go to the US. More than half of American imports of fruits and vegetables come from Mexico. The US imports wood and millions of barrels of crude oil from Canada every day.

Eventually, American consumers will face higher prices or empty shelves in stores. There are rumours claiming Trump would use the tariff threat mainly as a negotiation tool. But such a bluff can lead to revenge measures and rapidly escalate into a global trade war.

3. Imigration in world criticism

It is not only goods that can face a wall of punitive tariffs. Global migration is also facing more and more walls, literally. The heads of state and government worldwide feel the need to show that they control their borders by acting more harshly toward immigrants. This will make the world less open and less dynamic.

During the US election campaign, the Republicans pledged to carry out the largest “export in American history”. Trump adopted that idea.

In addition to deportations and a harsher stay on the border with Mexico, he promised in an interview in early December that he would lift automatic citizenship for all those born in the US.

The American president has broad powers when it comes to irregular migration. However, most of his proposals are expected to end in court. It also has the power to make legal migration difficult, limiting the number of migrants or complicating the visa-giving or Green Cards process.

Keeping immigrants away from them or returning them to countries of origin would affect the country's labour market. The harvest can rot and entrepreneurs can move to other countries.

A more closed border with Mexico will affect people from Latin America, especially from places like Cuba, Haiti and Venezuela.

The United States is not the only ones who resist migration. The European Union has promised to fight against irregular migration. Italy is trying to address refugee asylum demands in Albania, and in the upcoming elections in Germany, immigration will be an important topic.

4. War in Ukraine, Middle East and Beyond

During the transition in 2025, the world is facing a series of armed conflicts. These wars have caused disaster and humanitarian disasters. In addition, they consume funds that can be used more productively.

Trump has declared he will finish Russia's war in Ukraine within 24 hours. It could disrupt the American financial assistance that has held the country on foot since the invasion three years ago. Since the US is Ukraine's largest sponsor, it could force Ukraine to sit at the negotiating table.

Israel's war against Hamas, which is taking place in the Gaza Strip, and recently in Lebanon, also continues and can spread further. In Asia, the People's Republic of China continues to seek rights over democratic Taiwan, which fears an imminent invasion.

For decades, the US leadership has shaped world politics. However, Trump has questioned America's role as “world police officer”. If America does not help its allies to protect themselves, this decades of inherited policy may be extinguished. Such new world order may encourage Iran or North Korea to test the limits of their military action.

5. Will the World of Artificial Intelligence now explode (IA)?

The ChatGPT launch by OpenAI at the end of November 2022 marked the start of a broader use of Artificial Intelligence (IA). Within a few weeks, the platform reached 100 million users.

However, The IA has changed the lives of employees and businesses only gradually. Using this technology for drug development or supporting military protection remains a major challenge. Companies should determine how and when to use the IA and encourage their employees to embrace it.

To keep up with developments, IA bidders are investing massively in large data centres. Large amounts of energy are needed to cool and keep them functioning. Microsoft is supporting plans to resume a nuclear power plant in Pennsylvania, while Google is investing in small nuclear reactors to supply its data centres.

Will it be 2025 when IA will finally bring about the change promised by its supporters? Investors, developers, and users will have to wait to see if all this energy consumption will be justified or just ask the ChatGPT for this. /DW