What's Happening?
A new, more intense phase of global trade war is anticipated in 2025, driven by China's manufacturing power, U.S. trade policy, and global industrial policy. China has signaled readiness to counter U.S. tariffs, export controls, and sanctions more impactfully than before. The U.S. is expected to use 'economic statecraft' to attract investment and protect industries, potentially leading to more incisive tariffs targeting strategic sectors. Governments worldwide are scaling up industrial policies to compete with geopolitical rivals and secure strategic supply chains.
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Why It's Important?
The trade war poses a top risk to business in 2025, with national security becoming the guiding principle of international trade and investment. The fragmentation of financial systems and supply chains complicates technology choices and threatens globalization. Companies must make supply chains more resilient to geopolitics, understanding their current and future geopolitical exposures. Public policies may condition market access but also provide access to new subsidies and tax incentives.
What's Next?
As trade tensions ramp up, companies will need to engage with the policymaking process and consider industrial policies that may condition market access. Tariffs and export controls may include carve-outs or exemptions for certain business activities. The geopolitical competition and national security calculations will drive industrial policies into more corners of the global economy.
Beyond the Headlines
The trade war highlights the importance of balancing national interests with global cooperation. Companies must pay close attention to public policies and consider when and how to engage with the policymaking process. Industrial policies may condition market access but also provide access to new subsidies and tax incentives.
