A new report from the World Economic Forum (WEF) has predicted a decade of turbulence for the global economy, indicating that the risks of war, climate change, and an intensifying competition for economic power will have a profound impact on international trade.
The report, titled “Global Risks Report 2025,” was produced by the WEF in collaboration with Marsh McLennan and Zurich Intelligence Group, drawing on the knowledge and expertise of an eclectic group of 900 leaders from academia, business, government, international organizations, and civil society, who were surveyed between September and October 2024.
Seeking to understand the concerns and expectations of global leaders, the survey conducted by the WEF asked respondents about the potential risks the world may face in the near, medium, and long-term future, encompassing one, two, and 10 years.
Nearly 90 percent of these influential voices forewarned that the upcoming two years could bear witness to further turmoil, with a moderate to high risk of a global catastrophe, showcasing a gradual but significant increase in this estimation when compared to the previous year’s findings which stood at 84 percent.
War, extreme weather, and economic tensions, including tariffs and sanctions, emerged as the top three potential hazards identified by respondents in the Global Risks Report 2025.
These three risks, which have already demonstrated their ability to disrupt supply chains in recent years, as seen in incidents such as the Houthi raids on shipping in the Red Sea, US tariffs on China, and the escalating costs to insurers due to natural disasters, now stand as biggest threats to global stability and economic prosperity.
Amidst an increasingly unstable geopolitical landscape, state-based armed conflict, or war, was identified as the most significant threat by survey respondents, reflecting their deep-rooted concerns regarding the Russian invasion of Ukraine and ongoing hostilities in the Middle East, alongside fears of a potential military confrontation between China and Taiwan.
Mitigating The Potential Fallout From Conflicts
To mitigate the potential fallout from conflicts, the Global Risks Report 2025 suggests that businesses adopt a strategy of diversifying their supply chains, not only to reduce their reliance on vulnerable suppliers but also to safeguard their reputations by avoiding controversial trade relationships during wartime.
Geoeconomic competition, ranked third in perceived risk for 2025, emerged as a significant trade-related concern, with the WEF report warning that the intensifying rivalry between nations is leading to “supercharged economic tensions” that could imperil global stability and prosperity.
Placing third in the hierarchy of perceived risks for 2025, geoeconomic competition among nations emerged as another significant threat to global trade, with the report noting that this increasing rivalry is escalating into supercharged economic tensions.
The report warned of the potential consequences of continued protectionism, predicting that the persistent use of tariffs to shield domestic industries around the world could accelerate the decoupling of countries, with nations increasingly forming alliances around the United States or China.
Reinforcing this argument, the report cited data from Global Trade Alert that points to a rise in trade divisions, which have, in turn, driven up the cost of doing business to levels not seen in over a decade.
Amidst mounting global tensions, the report identifies the Trump administration’s threats against key trading partners—China, Mexico, and Canada—as a pressing concern. The report stresses that although these threats might serve as mere bargaining chips, they also send a clear message to the world that protectionism is likely to deepen under the Trump presidency.
Furthermore, the report warned that if trading partners choose to retaliate against these measures, it could ignite a full-blown trade war that would not only engulf the US and its targeted partners, but also impact numerous other countries that are not directly involved in the dispute.
The report also envisions a widespread adoption of blanket tariffs, implemented not just as countermeasures but indiscriminately targeting all trading partners, resulting in a drastic contraction in global trade.
Should the US impose punitive tariffs on Chinese exports, the report posits that it could trigger a flood of Chinese products into the European market, leading European countries to follow suit with their own tariffs, setting off a chain reaction across Latin America and beyond.
Beyond tariffs, the report discussed the potential for government intrusion into industrial policy, warning of a growing trend toward export subsidies and trade restrictions purportedly justified on grounds of national security.
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