GuShiio.com 
Today we are also talking about the new year, that is, the outlook for the world in 2025. In 2024, the biggest uncertainty factor recognized by everyone is the US election. By November last year, this uncertainty factor was confirmed. Trump was elected and started his second term last month. What is the biggest uncertainty factor in 2025? That is Trump himself. At least most think tanks and research institutions think so now. When they analyze and predict, they put the changes that Trump may cause in a primary position.
But I also want to tell you here that even if you don’t consider Trump’s personality and influence, the world has actually come to a certain crossroads. Various variables are concentrated together, and they are increasingly coming to a point where directional choices are required. For example, will the geopolitical landscape develop further towards confrontation and war or towards easing and peace? Where will the now extremely popular artificial intelligence take the world? Will efforts to combat climate change continue or reverse? Can the recovery of the world economy continue? In fact, the situation in 2025 will enable us to better see the trends of these major issues.
Well, what will the overall situation of the world be like in 2025? From the perspective of major global think tanks, they generally like to look forward to the new year at the end of the year or the beginning of the year. Now that reports of this type have basically come out, today we will sort out these reports and look forward to the overall situation in 2025. First, let’s take a look at the direction of the world economy in 2025.
1. How will the world economy go in 2025?
For the world economy in 2025, let me first give an overall impression, that is, major global think tanks are basically cautious, neither optimistic nor pessimistic. Let me first introduce some forecast data here. These data do not come from think tanks, but from some authoritative international organizations, such as the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD).
The International Monetary Fund predicts that the growth rate of the world economy in 2025 will be 3.2%, the same as in 2024. The OECD predicts that the world economic growth rate in 2025 will be 3.3%, 0.1% higher than in 2024, which is basically the same. The US economy will grow by 2.4%, lower than 2.8% in 2024, and the EU economy will grow by 1.1%, higher than 0.9% in 2024. However, the OECD predicts that the growth rate of Germany, the largest economy in the EU, will drop to 0.7% (I will interject here that the German central bank’s own forecast is even more pessimistic, only 0.2%). At the same time, China, the world’s second largest economy, may also see a slight slowdown in economic growth in 2025. At the same time, global debt levels may rise sharply.
These figures actually roughly outline the world economy in 2025. In general, the world economy as a whole is still in a state of slow progress, and downward pressure still exists. Judging from the think tank reports, their forecasts have basically not deviated from this direction.
The Oxford Economics Institute has a report predicting the macroeconomic trend in 2025, titled “Key Themes in 2025: Global Resilience Gives Way to Uncertainty”. This report is very short, only 6 pages, but its views are more representative. Let’s take a look at it together.
First, it emphasizes that the world economy in 2025 will remain stable on the surface. Just like the GDP growth rate we talked about earlier, it is basically the same as in 2024. But there are undercurrents underneath. The tariff policy of the Trump administration and China’s resistance will make the flow of the world economy more blocked. Partial interruption of trade flow, price fluctuations and various policy tools have added great uncertainty to the world economy in 2025.
Second, the report believes that the US economy will remain strong, but other developed economies will perform generally. The report said that various data show that the current development trend of the US economy is good. Although Trump will significantly increase tariffs after taking office, the import and export trade of the United States in 2025 may not be greatly affected. Because he cannot raise tariffs all at once, it should be a gradual increase, and it also involves some legislation, which also takes time. In this case, the negative impact of Trump’s tariffs in 2025 may not be fully reflected in time, and the US economy will remain strong.
But in comparison, the performance of other developed economies (such as Europe) may be much weaker. The report said that this is not only because of the problems of the economy itself, but also because of some uncertainties brought about by US policies. For example, if Trump takes risks in the Middle East and puts extreme pressure on Iran, which eventually leads to a surge in global oil prices, Europe, which is highly dependent on imports of oil and natural gas, will be very passive. In addition, Trump will put pressure on Europe to further increase military spending. What’s going on? Let me add a few words here: NATO, which is led by the United States, has a military spending standard, which is that military spending must reach 2% of GDP, but the military spending of many European countries has not met the standard for many years, so the United States has always accused these countries of not making any efforts and just free riding. After the outbreak of the Russia-Ukraine conflict, the military spending of many European countries has increased, but there are still a few countries that have not met the standard. Trump is very concerned about this matter. Not only did he say that he would focus on those countries that did not meet the standard, but he also said that he would further increase NATO’s military spending standard from 2%. In this way, the military spending of many European countries may rise further, and the financial pressure will also increase. Therefore, the report says that the strong economy of the United States in 2025 is in a sense at the expense of the interests of other developed countries.
Let’s look at the third point. Global inflation has fallen moderately, but the inflation pressure in the United States is relatively large. The report said that global inflation showed a trend of moderate easing in 2024, and the same trend is predicted in 2025. But the situation in the United States will be different, because the economy is strong, and the Trump administration may significantly increase tariffs, and at the same time further loosen fiscal policy (that is, the government will spend more money), so the inflation pressure in the United States will still be relatively large in 2025. What will be the result of this moderate easing of global inflation? The report said that the central banks of many countries have a relatively large space to cut interest rates. It should be said that this is very clear. But you should note that there is another turn in the report here, saying that although there is a relatively large space for the implementation of monetary policy, the effect of its implementation is likely to be unsatisfactory.
This is the fourth point of the report. The policy to stimulate the economy in 2025 depends mainly on fiscal policy, not monetary policy. Why? The report said that it is mainly because everyone has expectations for monetary policy (such as central bank interest rate cuts), which have been digested by the market in advance, so the effect will not be obvious. As for fiscal policy, the market’s expectations are not so clear. More importantly, 2024 is an election year, and many countries are already under the rule of new governments, so it is very likely that countries will introduce new fiscal measures in 2025. In a word, the report believes that the stimulus to the economy in 2025 will mainly rely on fiscal policy rather than the monetary policy of the central bank.
At this point, you will find that this report is relatively rough, but it still gives some relatively certain trends. However, what we are more concerned about is definitely China’s own economic trends. In this regard, the Oxford Economics Institute also has a report specifically analyzing China’s macroeconomics in 2025, titled “Key Themes of China’s Economy in 2025: A “Half-Full Cup” Economy Driven by Policies.” We will explain this “half-full cup” later.
This report believes that the Chinese economy faces three major challenges in 2025: the first is deflationary pressure. The report says that their latest expectations for China’s deflation are slightly relieved than before. The previous inflation rate forecast was only 0.2%, and now it is 0.4%. But overall, deflationary pressure is still a major challenge that the Chinese economy must face in 2025. The second is the pressure of insufficient domestic consumption. The report said that starting from the third quarter of 2024, China’s retail sales were better than expected, and some policy support (such as “trade-in” for consumer goods, etc.) also began to play a role, but China’s total consumption in 2025 was still in a state of slow recovery, and insufficient consumption would be another important challenge facing China’s macro-economy. The third challenge is external uncertainty, mainly the tariff policy of the Trump administration. The report did not discuss this in detail, but I can provide a view from Goldman Sachs, a world-renowned investment bank. Goldman Sachs believes that the Trump administration may increase import tariffs on Chinese goods by an average of 20%. In this case, it may have a 0.7% drag on China’s economic growth. Regardless of whether this estimate is accurate or not, this pressure should be said to be very obvious.
After talking about the main challenges facing the Chinese economy in 2025, this report from the Oxford Economics Institute also pointed out that there is also an obvious positive trend in the Chinese economy, that is, policy investment will increase significantly in 2025. The report said that from September to December 2024, China’s policy efforts to cope with economic pressure are rapidly increasing. According to this trend, in 2025, not only will monetary policy continue to stimulate the economy, but more importantly, fiscal spending will also be further expanded (Oxford Economics estimates that it may increase by more than 8%). At the same time, China will continue to invest in related manufacturing industries to ensure industrial competitiveness, especially electric vehicles, batteries and renewable energy industries will continue to maintain a leading position.
At this point, the meaning of “half full glass” in the title of the report is actually very clear. That is, in 2025, China’s economy will be a coexistence of challenges and opportunities, just like half a glass of water. You can be pessimistic and see it as half empty, or you can be optimistic and see it as half full. Under the current circumstances, it may be more appropriate to see it as “half full”.
At this point, the objects we involve are all countries and regions. Some students may ask, does the think tank report analyze the development of the industry in 2025? Frankly speaking, we have not seen such a fine-grained forecast analysis at present, but there are still reports on the future medium and long-term industry development. McKinsey & Company, the global consulting industry leader, released a report in December 2024 titled “2024 in the Chart”, which involves this kind of forward-looking industry forecast. This report believes that in the next decade or so, the development of the world economy will largely depend on some growth industries, which will reshape the world economy. So what are the industry fields? This report lists a total of 18, from artificial intelligence, cloud services, electric vehicles, etc., to nuclear power plants. According to its forecast, by 2040, these 18 industry fields will generate operating income of 29-48 trillion US dollars, of which profits will reach 2 trillion-6 trillion US dollars. Of course, these industry fields are still very different in terms of revenue and profit scale. I put their respective situations on the PPT. You can take a look and see if there is an industry field you are in or that you care about.
Well, here, the outlook for the world economy in 2025 is basically over. But to be honest, this is only about the economy. As you know, one of the biggest characteristics of the current era is that both the economy and technology are strongly influenced by geopolitical factors. In many cases, geopolitics is often the most critical variable. So when we look forward to 2025, an important task is to figure out the development trend of the geopolitical situation in 2025.
Okay, let’s move on to the second part.
2. What is the geopolitical situation in 2025?
On January 3 this year, the European Council on Foreign Relations (ECFR) issued a report titled “2025, the year we are better at making mistakes: (subtitle) the top ten foreign policy trends in the coming year”. This report is of course looking forward to 2025 from the perspective of Europe, so some of these ten trends may not be so relevant to us, such as Europe may face a new wave of refugee shocks, Germany’s February election will form a grand coalition government, and the relationship between the UK and the EU will become closer, etc. But some predictions are related to global affairs, so let’s focus on them.
The first item in the report is about Trump. It says that some people believe that after Trump takes office in 2025, his “America First” approach will lead to huge divisions and conflicts in the Western world, but in fact this possibility is not great. On the contrary, the strength of the Trump administration in 2025 will be reflected in the Western world, and many governments and political forces will follow Trump. At this point, the language of the report is quite sharp. It says that the governments of most European countries (including some non-European countries, of course) will either sincerely welcome Trump’s coming to power or pretend to welcome Trump’s coming to power in 2025. Europe’s response to Trump’s re-election is to surrender preemptively and then bargain cautiously. On the whole, other Western countries, including Europe, will show obedience to Trump. One result of this is that by the end of 2025, the positions of the Western Group of Seven on many issues will evolve from the current center-left to the right, and they will lose most of their interest in global issues such as climate change and world food security. You see, this judgment is quite interesting.
Another important prediction is about the conflict between Russia and Ukraine. It clearly states that in 2025, under Trump’s mediation, Russia and Ukraine can achieve a ceasefire. But this ceasefire is only quasi-peace. Because neither side believes that this is the final solution, both sides will reorganize their armaments and economies to prepare for the next war.
Regarding the situation in the Middle East, the report predicts that Israel and Iran will continue to confront each other, but the situation is generally controllable. Israel’s target of attack is still Iran’s proxy, and it will not directly attack Iran’s nuclear facilities as many people predict. On the Iranian side, 2025 will be a year for its continued advancement of its nuclear program, but Iran is unlikely to declare itself a nuclear state. In other words, it is unlikely that the two sides will have a showdown in 2025.
As for the Sino-US relations that we are most concerned about, the report certainly also made a special prediction. It believes that trade frictions (mainly tariff wars) between China and the United States in 2025 are inevitable, but the situation is still controllable, and this friction is also accompanied by interactions and negotiations between the two countries. By the end of 2025, the negotiations between China and the United States to end trade frictions will make progress, and China and the United States also understand that the so-called “decoupling” is only relative and partial, not a real cutting of interests.
At this point, you will also find that the report’s predictions for political diplomacy (or geopolitical situation) in 2025 are generally neutral. On the one hand, it clearly acknowledges negative trends, but on the other hand, it believes that they will not break the bottom line.
Interestingly, after giving the top ten trends in foreign policy, the report also attached two “easter eggs”, which are two predictions about technology. The first one is about artificial intelligence. The sentence is very short, so I just read it directly: it says that “the artificial intelligence bubble has partially burst, resulting in a significant loss of market value for extremely expensive AI companies. This setback is only temporary, but it provides a brief respite for the rest of us, allowing them to get rid of the constant hype about the AI-driven future.”
The second item is “quantum computing”. The report predicts that quantum computing will become another technical topic discussed by the public in 2025, but at the same time, the uncertainty of quantum computing itself still exists. In other words, the report believes that it will be difficult for quantum computing to make a real breakthrough in application in 2025.
It should be said that this report is very optimistic about technology.
