The world in 2025

By the end of 2025, the sun will have set one out of four times on the 21st century. On the planet, there will be 8.23 billion people—about 70 million more than at the end of 2024. More than 80 million cars, 150 million bicycles, and 230 million new computers will be produced. Over 500 billion will be spent on armaments, but more than double that amount on education and over three times as much on healthcare. Over two million books will be written, and more than 130 trillion emails will be sent.

The global economy will continue to grow. After the 3.2% expansion forecast for 2024, the IMF expects similar growth in 2025, supported in part by a favorable monetary cycle. Most of the growth will come from Asia, emerging markets, and the United States, while Europe is still expected to lag behind.

Trump’s New World Order

The year 2025 will begin with Donald Trump’s inauguration. Alongside Elon Musk, he will try to establish a new course for American politics. Once the time for proclamations is over, it will be crucial to see which of the many campaign promises that propelled him to victory will dominate the agenda. One priority will be protectionist trade policies, which could speed up the realignment of global power balances. It won’t take many months to see the intensity and effectiveness with which Washington’s new diplomatic stance will be put into practice.

The possibility of a trade war does not sound appealing. If the tariffs promised during the election campaign were really applied, we would face a scenario of global commercial conflict. The last comparable case goes back to the 1930s, when the United States introduced tariffs as high as 60% on more than 20,000 imported products. The goal, promoted by Congress, was to protect jobs threatened by the crisis that started in 1929. Other countries responded with new taxes on US exports, paralysing global trade. The result? Unemployment in the United States doubled, and the recession lasted for several years.

It is unlikely we will see a similar scenario in 2025. The general consensus is that Trump neither wants nor has the capacity to impose indiscriminate tariffs on imports from any country. However, it is unlikely that the promises made during the campaign will be completely abandoned. In 2025, selective tariffs could be introduced, with China as the main target. Such a move could redefine global economic dynamics: rather than an outright trade war, we will likely see a subtler conflict in which China and the United States use trade as leverage to shape their own spheres of influence.

Yet Trump’s rise to the White House does not bring only bad news for the global economy and investors. Tax cuts, public budget reductions, and deregulation: the new administration may implement policies that encourage US corporate investment, solidifying America’s global leadership in innovation. If the administration focuses on growth policies, American industry could further strengthen, yielding benefits for investors in the years to come.

Will the AI revolution continue?

Even in 2025, Artificial Intelligence (AI) will remain the driving force behind global investments. It is likely that more advanced language models will be developed and released, speeding up automation and encouraging the development of innovative products. However, AI’s success will not be free of challenges: the availability of quality data, rising energy costs, and the race for computing infrastructure are significant hurdles.

Major tech companies like Microsoft, Google, Nvidia, and Amazon will continue to lead the investment race. The effects of this competition will be seen not only in financial markets but also in the increasing concentration of technological power. As for the markets, investors will be less driven by hype and more focused on AI’s concrete ability to increase productivity and generate sustainable profits. For companies, the main challenge will be to effectively integrate AI into their business processes. The arrival of new systems in 2025 could lead to more widespread adoption of the technology, with a corresponding impact on productivity. If AI delivers on its promises, it could become one of the greatest accelerators of economic growth in modern history.

Will politics find its way?

The year 2024 was disastrous for incumbent governments. Election results sharply penalized leaders around the globe, regardless of political affiliation. We witnessed the English Conservatives suffer one of the heaviest defeats in their history. In Europe, the governments in Germany and France fell, with Berlin heading toward early elections in February. In the United States, Kamala Harris’ results were disappointing. In South Africa, the Congress party lost its majority after about 30 years. Even in India, despite economic growth exceeding 7%, Modi’s party failed to secure an absolute majority.

It seems that politics has lost its ability to offer convincing answers to voters. Moreover, there is a growing divide between the expectations needed to win elections—where the electorate tends to reward increasingly radical and ambitious agendas—and the real capacity of national governments to influence people’s lives and tackle the many political and social problems of our time. The long tradition of political studies on the crisis of sovereignty—starting with the French historian Michel Foucault and continuing with Japanese business theorist Kenichi Ohmae’s analyses of globalization—has addressed the ineffectiveness of modern governments.

Looking at the trajectory of many governments, a recurring pattern emerges: the electorate places its trust in platforms promising ever more radical change, but these promises clash with governments’ growing difficulty in implementing real changes quickly. This phenomenon shortens electoral cycles, making it even harder for governments to adopt effective policies that require medium- and long-term planning. An elected government can lose support in no time, and parties that have dominated the political scene for decades can vanish within a single term. In 2025, beyond the early German elections, the electoral calendar is less crowded. Nevertheless, if governments do not begin to meet citizens’ expectations, the spiral eroding the foundations of global democracies will continue to tighten.

End of conflicts or escalation?

We enter 2025 with the international situation still simmering. The war in Ukraine continues, and conflicts in the Middle East show no signs of letting up. Where are the major international crises heading? Donald Trump has promised to end the fighting once he takes office. Although this is not an unrealistic prospect, it’s essential to understand how he intends to achieve it. Securing a ceasefire from Vladimir Putin by granting Russia victory on its main strategic objectives is not complicated. It will be interesting, therefore, to see whether Washington opts for disengagement or takes a leadership approach.

In the event of disengagement, Europe would face the challenge of managing the situation in Ukraine on its own. However, at present, the main European governments do not seem to have the political capital needed to undertake such an effort. In 2025, the issue of European security will become increasingly central to political debate. Washington has already made it clear that its allies need to increase military spending. The difference compared to previous years is that Trump might use trade tariffs as leverage to persuade European states to come to a decision.

Meanwhile, it seems more likely we will see a ceasefire in Gaza and in conflicts in the Middle East directly involving Israel. However, even an end to the fighting—while good news for the ongoing humanitarian crisis—would not necessarily be a step toward regional stability.

Another potential hotspot is the South China Sea and Taiwan. Although China’s bellicose rhetoric has intensified in recent months, the timing does not yet seem favorable for Beijing to consolidate control of the island in the coming year. Nevertheless, in such a fluid international scenario, the political conditions for escalation could arise.

Europe at a crossroads

The year 2025 looks challenging for Europe. Economic growth forecasts for the Old Continent are among the lowest in the world. Lack of economic momentum puts pressure on public budgets, forcing governments into austerity measures at a time when investment would be needed. The idea of overcoming the risk of stagnation through a new investment program no longer seems feasible in the current political context.

With the Franco-German leadership weakened by embattled heads of government, optimism for the European project is fading. This is evident in the difficult negotiations to renew the European Commission, which are increasingly driven by the national interests of each member state. The upcoming election cycle could bring Euroskeptic forces to power, with the German elections in February providing the first test. However, even parties historically in favour of the EU—like the German Christian Democratic Union (CDU), which could return to power, and the European Social Democrats—seem to lack the pro-European enthusiasm that marked the first two decades of this century.

Some analysts fear that the coming years could pose an existential threat to the EU, which finds itself in a geopolitical squeeze. On one side, Vladimir Putin underscores Europe’s dependence on Washington for security. On the other, Donald Trump does not seem particularly interested in maintaining privileged relations with European partners.

China: a year of recovery?

In 2025, Beijing hopes to reverse the trend of slowing economic growth. The structural roots of the Chinese economy’s problems include a development model overly dependent on the real estate sector and on debt. In recent years, government efforts to correct the most extreme imbalances have contributed to accelerating a crisis of consumer confidence.

Demand crises are particularly difficult to manage. Even a government that exercises strong control over the economy—like China’s—must contend with market forces and with the possibility that people lose confidence and decide to delay spending. In 2025, Beijing will use every fiscal and monetary tool available to curb the recessionary spiral in an international climate complicated by trade tensions with the United States and a strong dollar.

Despite the challenges, one should avoid jumping to catastrophic conclusions. The Chinese government has enough instruments to address the problems slowing its economy. However, if these measures do not succeed in the coming year, concerns about China’s future economy will grow, as it could end up stuck under the weight of its own imbalances.

Will 2025 be India’s year?

In 2025, India may experience a turning point. After record growth over the last two years, India’s economy will surpass Japan to become the world’s fourth-largest. This growth has been partly supported by public investments promoted by Prime Minister Modi’s government, aimed at modernizing the country’s infrastructure and shoring up electoral support. However, the election cycle ended with the Prime Minister’s party—despite positive economic results—losing its absolute majority.

In the coming years, we could see signs of economic maturation, with growth propelled by private investments that should lead to higher-quality development. Moreover, India could benefit from its close relationship with the United States. In a scenario of trade war between China and the US, Indian industry could gain market share, triggering a virtuous cycle of economic development.

Will CO₂ emissions peak in 2025?

Many expected global CO₂ emissions to start falling in 2024. Unfortunately, this did not happen. However, 2025 may mark the historic peak of global CO₂ emissions. According to the Global Carbon Project report, emissions from fossil fuels and cement rose by around 0.8% in 2024, reaching a record 37.4 billion tons of CO₂ (GtCO₂), an increase of 0.4 GtCO₂ compared to 2023.

Total CO₂ emissions—including those from changes in land use—are also set to hit a new record, reaching 41.6 GtCO₂, up 2% over 2023. Part of this increase can be attributed to emissions related to land use, which were unusually high due to intense fire activity in South America. However, in the long run, emissions from land use have decreased by about 28% from their late 1990s peak, with a significant reduction over the last decade.

In 2024, emissions fell significantly in the European Union (−3.8%) and slightly in the United States (−0.6%), while they rose slightly in China (+0.2%) and saw a substantial increase in India (+4.6%) and the rest of the world (+1.6%, including international transport and aviation). If global emissions remain at current levels, the remaining carbon budget to limit global warming to 1.5°C will be used up in the next six years. The budgets for limiting warming to 1.7°C and 2°C will be exhausted in 15 and 27 years, respectively.

The year 2024 was also when China overtook Europe in historical CO₂ emissions. However, it may be precisely from Beijing that a crucial contribution to reducing global emissions could come. China might use the fight against climate change as a tool to strengthen its global leadership amid growing competition with the United States.

Learn More

If you’d like to delve deeper into these crucial topics and understand how our management team is approaching 2025 and beyond, read our new Strategic Asset Allocation paper. Our financial advisors are always here to assist with any questions about the strategic positioning of our portfolios and to help you plan your financial journey for the year ahead.