As President Trump takes office on January 20, he will face multiple global hotspots and others that have the potential to erupt in 2025. The Russia-Ukraine war, nearing its third anniversary next month, not only continues but has been further complicated by the addition of North Korean troops to buttress the Russian side. The Middle East simmers as Israel’s fight to cripple its enemies and free the hostages continue. China-Taiwan remains at the top of the list of potential crises this year, and it also will be prudent to keep a close eye on the Chinese economy, which has been in slow-motion free fall over the past several years. The sudden shifting of governments and leadership changes occurring across the globe, including the fall of the Bashar al-Assad regime in Syria, the sudden political instability in South Korea brought on by President Yoon’s impeachment, and Canadian Prime Minister Trudeau’s resignation set a tone of unpredictability and uncertainty as President Trump begins his second administration.
U.S. Trade & Economic Policy
A top priority will include setting the stage for trade negotiations, possibly by using tariffs and export controls, either selectively or broadly, with an emphasis on China and the European Union. On the campaign trail, Trump proposed 60% tariffs on Chinese imports and a 10% tariff on imports from other destinations. The blanket 10% tariff could be used during a second Trump term as an opening negotiating position with countries with a significant trade imbalance or for other purposes like prohibiting the import of Chinese cars from Mexico.
Trump could continue to impose strict tariffs and maintain Section 232 duties under the premise of national security to protect domestic industries more aggressively, potentially reducing steel quotas further. Businesses involved in global supply chains, particularly with ties to China or countries engaged in circumvention schemes, could face new tariffs or enforcement actions under existing trade laws.
In a post-pandemic environment, supporting North American manufacturing is seen as a critical part of the “near-shoring” strategy to counter Chinese economic influence while ensuring that Beijing does not use it to circumvent tariffs. Canada would be exempt from Trump’s tariff policies under the USMCA. The USMCA is due for review in 2026, but countries can withdraw from the agreement early with 6 months’ notice. Trump could use the review provision and short withdrawal period to extract additional concessions from Canada and Mexico. While Canada and Mexico are largely in favor of renewing USMCA, Trump will likely use the opportunity to negotiate improved market access in both countries for U.S. companies. Similarly, it could also open the door to address labor agreements across North America that enable the continent to compete better in manufacturing industries.
Trump’s economic security focused grand strategy will likely concentrate on strategic decoupling and diversifying the supply chains for semiconductors and legacy chips in a way that benefits the U.S. directly through reshoring fabrication plants and indirectly by insulating the global supply from geopolitical pressures.
Conflict Zones and Prioritization
Trump likely will seek negotiations for a ceasefire or settlement to the war in Ukraine. This may take the shape of early outreach to both Kyiv and Moscow, or Trump may coordinate with Ukraine to “escalate to de-escalate” in order to achieve a better bargaining position, this could include increased military assistance to Ukraine and stronger sanctions on Russia and its enablers. Since the election, Russian forces have continued offensive operations trying for incremental, but steady, territorial gains along the eastern front, Ukraine has heavily fortified and entrenched its positions along the line of contact, resulting in heavy casualties and severe troop shortages on both sides.
In the Middle East, Trump will focus his policy on Israel and the Gulf states. Trump will be supportive of Israel’s campaigns against Iran, Hamas, and Hezbollah. Mike Waltz, Trump’s incoming national security advisor, stated that the ceasefire between Israel and Hezbollah is because of Trump’s victory and that Iran “is the root cause of the chaos & terror that has been unleashed across the region. We will not tolerate that status quo of their support for terrorism.” The incoming administration will reconstitute maximum pressure on Iran, including pressuring China to stop purchasing more than 90% of Iran’s oil exports. Trump will also push the rumored Saudi Arabia-Israel peace deal, along with a U.S.-Saudi defense agreement, and an expansion of the Abraham Accords.
American Alliances & Partnerships
Similar to his first term, Trump likely will publicly call for U.S. allies and partners to spend more on their own defense budgets rather than rely solely on American military protection. On January 7, Trump stated that NATO members should spend 5% of their GDP on defense spending, well above the 2% benchmark that not all members have met. The target of these efforts will likely be key NATO allies such as Germany, France, and the UK. However, with the threat from China increasing, Trump is likely to also call for Indo-Pacific allies and partners like Australia, Japan, South Korea, the Philippines, and Taiwan to spend more as well.
Taiwan may be the most concerning geopolitical flashpoint for the incoming administration. Though Trump has not engaged in rhetorical hardline support for Taiwan, indications are that the second Trump administration’s Taiwan policy will largely be in continuity with that of his first administration and the Biden administration. As in his first term, Trump is likely to support arm sales to Taiwan and elevating Taipei’s diplomatic position. However, Trump also is likely to view Taiwan related issues as inextricably linked to broader negotiations with Beijing on trade and security.
Great Power Competition
Trump historically has placed heavy emphasis on his personal relationships with world leaders and his personal interactions with Chinese President Xi Jinping likely will follow this same framework.
On trade, the deployment of Section 301 tariffs to counter aggressive Chinese economic practices now appears to have broad support across both political parties in the U.S. Over the past few years, a consensus has begun to emerge in Washington, that tighter trade barriers and restrictions on imports from China are likely to continue in a Trump administration. The tariffs are likely to escalate tensions between Washington and Beijing. In May 2024, China’s Ministry of Commerce condemned the tariffs in a statement, saying that China “firmly opposes this” and called the Biden administration’s decision “typical political manipulation” that would “seriously affect the atmosphere of bilateral cooperation.”
President Trump’s nominees for key cabinet positions suggest a stronger, more confrontational U.S. policy towards China may take hold next year. Secretary of State nominee Marco Rubio is a longtime China hawk who has repeatedly and consistently warned of CCP aggression and the need for the U.S. to boost its own industrial strength in order to outcompete China. Rubio’s harsh condemnation on China in 2020 during the COVID pandemic led Beijing to sanction him and ban him from entering China. Mike Waltz similarly has viewed China as a threat to the whole of U.S. society. Waltz has twice said the CCP is in a “cold war” with the United States.
Technology Policy
President Trump’s tech policy is likely to focus on free speech issues such as addressing perceived censorship of conservative viewpoints on digital platforms. President-elect Trump’s selection of Andrew Ferguson to be FTC Commissioner suggests the next administration will focus on addressing the perceived censorship of conservatives on digital platforms. Ferguson has called for the FTC to “focus antitrust enforcement against Big Tech monopolies, especially those engaged in unlawful censorship” and said that big tech companies appear to censor in “lockstep” on issues like COVID, transgenderism, and the Hunter Biden laptop story.
The second Trump administration is expected to dismantle many of the regulatory and oversight hurdles FTC Chair Lina Khan put in place for mergers. Trump officials generally oppose FTC authority to write regulations prohibiting competitive tactics, such as banning noncompete agreements. Incoming FTC Chair Andrew Ferguson has dissented from some of the FTC’s enforcement actions during his tenure at the agency, which began in April. It is likely that the Trump Administration will repeal or replace the Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence within the early days of the new administration.
Trump will likely maintain a strong position on putting an end to global regulatory practices targeting U.S. companies, such as the DMA. Key influencers within the Executive office of the President are expected to be Stephen Miller and James Blair.
Several key influencers in President Trump’s orbit, including Donald Trump Jr. and Elon Musk, have recently endorsed the Kids Online Safety Act.
Though Speaker Johnson has cautioned that there is still work to be done on the legislation, it is possible that Trump could publicly push for its passage during the year.
AGS will closely monitor the incoming administration’s policies and priorities and keep clients informed of important developments.
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