What changes will the new year bring to the global economy? The planet is facing a number of challenges – whether they are related to the economy, wars or Artificial Intelligence.

1) Donald Trump is back in the White House

What 2025 will be like for the global economy depends primarily on one particular man: Donald Trump, who was re-elected president of the most economically powerful country on the planet.

It is uncertain how Trump’s re-election will affect developments, just as the general ramifications of the doctrine of “America First” – both inside and outside American borders – are equally uncertain. In Washington, the most critical decisions are made, those that determine the developments in war zones and the well-being of much of the world.

It is possible that Trump will bring chaos with the decisions he will make. Besides, the newly elected American president likes to question international cooperation and discredit NATO. The creation of new trade alliances and the potential for the US to become more inward-looking could have decisive consequences on the global economic and political scene – and it is possible that countries such as China, India and Russia will be given the opportunity to pay the military, political and economic vacuums that will be created due to US introversion.

2) Tariffs, trade wars and higher prices

Businesses want to be able to plan for at least the medium term – which is why the prospect of tariffs has caused so much concern. Trump believes that in this way the US trade deficit will be transferred to other countries. “The word ‘duty’ is the most beautiful word in the dictionary,” he said last October.

During his election campaign, Trump threatened that from his first day in the White House he intends to impose tariffs of 10-20% on all goods imported into the US, as well as tariffs of 60% on products imported from China .

However, he recently clarified that he wants to impose tariffs of 25% on products from Mexico and Canada and 10% on those from China. Mexico has threatened to retaliate, while China could do the same. The Prime Minister of Canada visited Trump in Florida in order to resolve the whole issue.

The imposition of higher tariffs would be quite unpleasant news for all businesses that have an international supply chain. In addition, such a decision would significantly harm the US’s neighboring states, as well as essentially nullify the free trade agreement between the US, Mexico and Canada that was signed during Trump’s first term.

Currently 80% of Mexican and over 75% of Canadian exports go to the US. At the same time more than 50% of US fruit and vegetable imports come from Mexico, with the US also importing lumber and millions of barrels of crude oil from Canada every day.

If higher tariffs were indeed imposed, this would mean significantly higher prices for American consumers, but also possible shortages of certain products. Many claim that Trump will simply use the threat of higher tariffs as a bargaining chip – such a bluff could, however, bring retaliation and at any moment lead to the outbreak of a global trade war.

3) Immigration again in focus

Another reason why the planet will probably become overall less “open” and less dynamic is that the heads of states and governments are now focusing more on limiting immigration and protecting their territory.

In the US, during their election campaign, the Republicans promised that they would carry out “the largest action of deportations in the history of America”. In addition to the deportations and the stricter guarding of the border with Mexico, Trump promised in a recent interview that he would abolish the jus soli, that is, the right of those born in the US territory to automatically receive American citizenship.

Trump has a lot of room to enact measures to limit immigration and refugee flows to the US. However, most of his proposals will probably require the approval of the judiciary. In any case, if Trump does end up drastically limiting immigration flows, it could affect the domestic labor market as well as people immigrating to the U.S. from countries like Cuba, Haiti and Venezuela.

In addition to the US, its intention to limit illegal immigration has also been made clear by the EU – Italy seeks to transfer the execution of asylum procedures to centers in Albania, while immigration is at the center of political debates in Germany as well in the run-up to its elections February.

4) Wars in Ukraine and M. East

Entering 2025, the wars in Ukraine and the Middle East are still raging, with a tragic toll of hundreds of thousands dead and wounded. These two armed conflicts have caused serious humanitarian crises and cost a lot of money.

Trump claims that when he takes office, he will be able to end the war in Ukraine in just 24 hours. But how will he achieve this? The American president could cut off the financial support that the US sends to Ukraine – and without it the latter will be forced to sit down at the negotiating table.

At the same time Israel’s war against Hamas, which is now unfolding not only in the Gaza Strip but also in Lebanon, could escalate further. As for Asia, China continues to claim Taiwan, which is increasingly afraid of the possibility of a Chinese invasion.

5) An even greater rise of artificial intelligence?

OpenAI’s public release of ChatGPT at the end of November 2022 sparked the wider use of artificial intelligence (AI). Within a few weeks ChatGPT reached more than 100 million users.

Until now, IT has not brought rapid changes to the life and everyday life of ordinary workers and medium enterprises. However, this is expected to change: businesses want to take full advantage of the potential of IT, and companies active in IT technologies and applications are planning huge investments in data centers to further develop the industry.

In fact, since such centers consume huge amounts of energy, companies such as Microsoft and Google are even turning to alternatives such as nuclear power to meet their energy needs.

Will 2025 be the year artificial intelligence goes big? Investors, industry players and IT users alike will have to wait and see if all that energy is worth it in the end – or they can just ask ChatGPT.

The only thing that is certain, however, is that 2025 will be a year full of uncertainties, but also many – let’s hope pleasant – surprises.

Edited by: Giorgos Passas