The incoming Trump administration will intensify US domestic and foreign policy risks to international business in 2025. Trump intends to use his second term to disrupt and reshape world order, positioning the US for more direct and aggressive confrontation of its economic and geopolitical adversaries.
Trump’s approaches will impact two long-term trends:
First, US global power is in relative decline. Countries have other options for borrowing money, trading goods and buying tech. Rising powers are enlisting the so-called global south in alternate institutions. Advanced technologies are empowering local and global rivals and undercutting US military advantages. US soft power has been dented by democratic dysfunction and foreign policy choices. Neither party intends – let alone plans – to bring unsustainable budget deficits under control, a laxity that is eroding the financial pillar of US geopolitical dominance. A world without an obvious hegemon will be more fluid, flexible and volatile.
Trump is likely to accelerate this trend by withdrawing US forces stationed abroad, withdrawing from or handicapping key international institutions and treaties, and conditioning partnerships and alliances. Isolationist – or at least non-interventionist – political sentiment will be mainstreamed in an “America First” bureaucracy. Asia, Europe and the Middle East will need to hedge against less reliable US security commitments and respond to more confrontational trade policies – likely in ways that run counter to US interests. This includes questions about the independence of US monetary policy – a key consideration for US trade partners. Even if Trump can ramp up defence spending and deter major conflicts, the US risks squandering the force multiplication of its traditional partnerships and alliances.
Second, the US presents an increasingly complex investment climate. In addition to the pendulum swings of regulation that increasingly accompany changes in administration, political polarisation is driving divergence among federal, state and local policies. Regulatory decentralisation is strangling energy, transport and housing upgrades. Tariffs, investment restrictions, sanctions and industrial policies – many in the name of national security – are injecting geopolitical and compliance risks into trade and investment.
Trump will pursue a broad deregulatory agenda for business and, with a pliant Congress, corporate tax cuts to attract investment. The challenge for many multinationals will be squaring US deregulation with their social and environmental compliance commitments and obligations. At the same time, Trump’s sweeping trade policies – especially towards China – will require adjustment and likely relocation of supply chains. His plans to substantially reorganise (read: gut) the federal bureaucracy, meanwhile, will limit federal capacity to design and implement regulations. Opposition-controlled “blue states” will increase their efforts to counter and nullify federal and “red state” policies, driving further political polarisation and regulatory complexity.
Business implications
The closeness of the race has been remarkably stable, and companies have been preparing for a potential Trump administration throughout 2024.
This incoming Trump administration will resemble – but not replicate – the first four years. This time Trump enters office more familiar with and prepared to use the full extent of presidential authorities. And he is surrounded by a more focused, if less credentialed, cadre of partisans willing to bend and break norms in pursuit of their objectives.
While these factors will help cut through bureaucratic inertia that has stymied past reform movements, they are also recipe for rapid, unpredictable change. Businesses will need to fight for a seat at the table to ensure their interests are heard.
