As the world enters a new chapter of globalisation, the geopolitical landscape is undergoing significant changes that are influencing economic growth, supply chains and technological advancements. This article by guest author John Ferguson, Global Head - New Globalisation at Economist Impact, delves into three critical areas: the outlook for global growth, inflation and interest rates; the impact of geopolitics on supply chains and investment; and the strategies for navigating President Trump's second term, particularly in the context of artificial intelligence.

1. Outlook for global growth, inflation, interest rates and the main risks

Global growth for 2025 is projected to remain steady at 2.7%, according to the Economist Intelligence Unit, reflecting a stable yet cautious economic environment. Inflation is anticipated to continue its gradual decline, but the risks remain tilted to the upside[1]. Meanwhile, interest rates are expected to stay higher than in the 2010s, driven by tight labour markets and supply chain and risk management costs.

One of the most significant risks to the global economy is the introduction of new tariffs by President Trump. These tariffs are likely to disrupt trade flows, increase costs for businesses, and contribute to inflationary pressures. The potential for trade wars and retaliatory measures adds another layer of uncertainty, which could dampen global growth prospects. 

In this complex economic environment, businesses must adopt strategies that mitigate risks associated with higher interest rates and potential inflation spikes. This includes diversifying investment portfolios, hedging against currency fluctuations, and maintaining liquidity to manage unexpected financial shocks.

2. Impact of geopolitics on supply chains and investment

Geopolitical tensions, particularly between the US and China, are reshaping global supply chains and investment strategies. The increasing rivalry between these two economic superpowers has led to a re-evaluation of globalisation's benefits and risks. Companies are therefore adopting strategies such as friendshoring and dual supply chains to mitigate risks associated with geopolitical instability.

Friendshoring involves relocating supply chains to countries with which a company has friendly relations. This approach aims to avoid sudden changes in the business environment for global companies operating in their key markets. Dual supply chains, on the other hand, involve maintaining parallel supply chains in different regions to ensure continuity in case of disruptions. While these strategies enhance resilience, they also introduce inefficiencies and higher costs, which were not prevalent in the previous era of globalisation.

The shift towards friendshoring and dual supply chains is driven by the need for risk management in today's global economy. Businesses should therefore invest in robust supply chain management systems, leverage data analytics for better visibility and establish strong relationships with multiple suppliers to navigate these challenges effectively.

3. AI and strategies for navigating President Trump's second term

The second term of President Trump brings both challenges and opportunities, particularly in the realm of AI. Trump's administration has made AI development a top national imperative, aiming to enhance US leadership in this critical technology[2]. However, this focus on rapid innovation comes with its own set of challenges, including regulatory uncertainties and the need for robust risk management.

Companies must adopt proactive risk management strategies to navigate this complex environment. Understanding the geopolitical positions of neutral markets is critical as we expect the business environment for neutral markets to become more complicated in the near term. As export controls and compliance requirements continue to grow, businesses will need to stay informed about regulatory changes and invest in compliance programs. Additionally, artificial intelligence is likely to be a key battleground in this geopolitical era. Staying updated on President Trump’s approach to AI – especially export controls of US technology - will be crucial[3]. To ensure that AI technologies are used responsibly and the benefits shared widely, global cooperation in AI development and governance is essential to address ethical, safety and development concerns.

Conclusion

Businesses must navigate a complex and dynamic geopolitical landscape characterised by rapid technological advancements, heightened geopolitical tensions, and climate change risks. They will therefore need to develop proactive risk management strategies, diversify their supply chains and leverage AI. Staying agile and informed will be key to managing the challenges and seizing the opportunities presented by this evolving environment. Leadership and team culture will also be critical for success. Leaders who can focus on growth while addressing this uncertainty, and combine this with an open and agile team culture, will be best placed to thrive in globalisation’s new chapter.

John Ferguson – Global Head - New Globalisation at Economist Impact

John leads the research on New Globalisation at Economist Impact. In this role, he spearheads and develops comprehensive studies on trade, geopolitics, technology, finance, and economics. As the global economy is being transformed by the unprecedented convergence of shifting geopolitics, climate change, and an AI-driven industrial revolution, John’s research provides clients with crucial insights to navigate these structural shifts.

His work is instrumental in guiding conversations towards global progress and helping clients adapt to an evolving economic landscape.

Further reading

If you'd like to learn more about the current changes in international trade and how tariffs resulting from President Trump's administration will impact your business operations, listen to Gowling WLG's recent podcast, "Navigating tariffs: what to do in times of change".

Footnotes:

[1] IMF World Economic Outlook Update, January 2025
[2] Bloomberg Law, Under Trump, AI Development Is Set as a Top National Imperative
[3] Australian Institute of International Affairs, AI Under Donald Trump: What the New Executive Order Tells Us About America's Policy Approach