2025 Forecast

2025 is gonna be a wild ride. Strap in.

American Politics

There is no way to forecast 2025 without starting with American politics, and attempting to forecast American politics in 2025 is a near impossibility because we're dealing with irrational actors across the incoming Republican majority. I've gone over the constraints facing Trump and the Republicans in some detail, but the short version is that the Federal government will be largely paralyzed thanks to the Republicans razor thin margin of victory. There's even a fair to middling chance that by January 20th the House will be unable to select a Speaker, meaning that Trump would be unable to be sworn in as the 47th President for an indeterminate amount of time, leaving the powers of the office to the President Pro-Tempore of the Senate, most likely Chuck Grassley, assuming the 91 year old Iowa Republican doesn't die or the Senate breaks from tradition to install a younger member of the caucus. Should this happen, the MAGA movement and Trump will likely through a tantrum over a perceived attempt by the “Deep State” to deny Trump the Presidency.

Even if all goes well, and Johnson is able to save his skin by the certification on January 6, Trump will be unable to enact most of his legislative agenda with A 219-215 majority before Matt Gaetz's replacement is elected in April. And given that this majority will be whittled down to 217-215 with Michael Waltz's cabinet appointment and Kay Granger living in a nursing home, Trump's first 100 days will likely be some of the most legislatively unproductive of any administration. This is before you take into account that every Congress sees a handful of resignations or deaths, further imperiling Trump's agenda. Trump will try to push things forward unilaterally, but he's already facing infighting within his inner circle from figures like Elon Musk. Where Trump will be able to act with less pushback will be the implementation of his tariff regime, and at least some version of his anti-immigrant push that is already having political blowback among his supporters. As the year progresses, the blowback will get more severe, particularly as Trump's policies hit the economy hard.

The Economy

I'm gonna keep saying this, as much for my benefit as for anyone else's: traditional economic rules no longer apply. So much of what screwed up my forecast for 2024 was that I failed to appreciate what that meant. I've attempted to rectify this, but in 2025 let's just say nobody's gonna need data to see that thing's will be worse this time next year.

Labor Shortage

In 2024 the Labor Shortage didn't get as bad as it could have gotten, but in 2025 it will get as bad as it can possibly get thanks in large part to short sighted, xenophobic policies in the world's major economies. The US will be the clearest example of this trend, but Europe is already making a critical mistake by encouraging Syrian refugees to return to their country of origin now that the Syrian Civil War has concluded its latest phase. Any reduction or reversal in the flow of immigrant labor, be it through border closures, deportations, or hostile policies that constrain the ability of immigrants to get hired or change jobs will increase supply chain interruptions and drive up inflation. But even if there is no change to immigration policy 2025 will be the first year post-peak retirement, the so-called "Silver Tsunami," so inflation will continue to rise while productivity falls across the economies of the advanced industrialized world.

Tech Sector Risks

The Big Capital Crunch is becoming inescapable, and tech is the most vulnerable sector of the economy to any constraint in the supply of investor capital. Large Language Model (LLM) products like Midjourney and Chat GPT managed to survive 2024, but only after more losses and failing to deliver on promised improvements to the technology. Smarter people than I can explain this better, but it basically boils down to two things:

1. We've essentially run out of human-generated data for LLMs to train on

2. Training LLMs costs a fortune because they have to run a ton of servers to do it, and these programs don't deliver a product that will offset the cost of running them.

That's why you have Silicon Valley "thought leaders" talking about increasingly hair-brained applications of the technology like replacing teachers with Chat-GPT. As capital is further constrained in 2025 and next generation LLM products fail to deliver on what was promised, eventually financial institutions will start to dump their stake in AI companies, which will kick off a crash comparable to when the Dot Com bubble burst in the early 2000s. This will have severe knock-on effects with Tech and eventually housing, however this could take up to a year or more to manifest.

Tariffs

Donald Trump has promised an aggressive tariff regime, surpassing that of his first term in that it will be truly universal. While there will no doubt be plenty of loopholes for Trump and his friends to exploit, for most people this will mean at least a few thousand dollar markup to their cost of living for the year, which, given rising credit card debt, the existing inflationary spiral from the labor shortage, and the diminishing personal savings rate, will invariably lead to more defaults on credit card debt, student loans, mortgages, etc. Moreover, as Trump's plan is to use Tariffs to increase domestic manufacturing by making it prohibitively expensive to purchase imported goods, any increase in demand to domestically produced goods will only make the demand for labor more intense leading to domestic price spikes. So unfortunately, if you live in the US, expect this year to be particularly harsh on your wallet.

World Food Crisis

Whether or not you've been paying attention to it, the World Food Crisis caused a significant amount of pain to the developing world in 2024, and while farmers have managed to somewhat offset the loss of fertilizer supplies and grain from Ukraine and Russia, the El Nino cycle has created new challenges for farmers that will continue to fuel unrest. Anti-immigrant policies in the US and Europe, and a new tariff regime will create new challenges that the Global South hasn't had any time to acclimate to, and some opportunities. Immigrant populations will seek new destination countries nearer to their home countries, reducing the cost of labor, but also the number of mouths to feed. Meanwhile a reduction in the agriculture labor pool in the United States promises to reduce the output of cereals, of which the US is one of the world's largest exporters. Finally the tariff regime will reduce US imports of foreign imported foodstuffs (mostly from Mexico), driving down prices globally. Its difficult to make any kind of a forecast of what this will look like for ordinary people in the Global South with an irrational actor in the White House, but the instability this will create will likely wipe out any potential gains in global food supplies.

International Politics

2025 well be one of the more chaotic years post-COVID as Russia's struggles to maintain any illusion of strength, the Middle East enters a new chapter of violence, and the United States comes under the leadership of irrational actors and a paralyzed legislature. We are entering the beginning of a new age of poachers.

Middle East and North Africa

For good or ill, the close of 2024 upended the status quo of the last decade in the Middle East and North Africa. A Turkish and American backed coalition of militants successfully took Damascus and expelled Assad and the Russians from the country. This group styles itself as pluralistic and more interested in getting life back to normal than simply installing itself as the newest batch of bastards to run Syria, but the situation isn't nearly so rosy. Firstly, Turkey and the Arab population of Syria have some unfinished business with the Kurdish-led Syrian Democratic Forces that presently occupy most of Northeastern Syria, and Turkey considers the SDF's ties to the PKK terrorist cell to be unacceptable. So prepare for tensions to boil over and a new phase of the Syrian Civil War, or rather the smaller Rojava conflict. That conflict will likely involve direct intervention by Turkey, but the US will probably limit its involvement as it seeks to keep the new Syrian coalition united as buffer against Iran.

Iran bet big on destabilizing the emerging Arab-Israeli Alliance via its proxies in 2024, but the year could not have ended worse for them. While most people were focused on Israel's ground incursion into the Golan Heights or their burgeoning occupation of Gaza, the more consequential move by Israel was a series of Air Strikes carried out from 8 December to 16 December. This was the largest air operation in Israel's history, and while Israel initially claimed these strikes were to destroy Assad's chemical weapons infrastructure, the true goal was to destroy Syrian air power and air defense systems. Israel intends to turn into a " sterile defense zone" according to Defense Minister Katz, effectively eliminated the main deterrent to pre-emptive air strikes against targets in western Iran. With the skies cleared over Syria, Israel can now execute long range strike missions with Aerial refueling without worrying about its tankers being shot down, or the attack being spotted and reported to Iran by the Assad regime, or needing to go to the Americans for help. With its hands freed, Israel can now strike Iran whenever it wants, the scope of the conflict being limited only by how confident/reckless/desperate the Israeli leadership is feeling. The opportunity created all but guarantees an Iran-Israeli Air War, as Israel will not want to give Iran any time to bolster its own air defenses or possibly cut deals to establish new such defense systems in Iraq and Rojava, although these last two options are unlikely given Iran's frosty relationship with the Kurds and the growing schism with Iraq. As stated earlier, Israel no longer needs the United States for this war to occur, but I suspect Trump will at least offer some air support if only for domestic political concerns and to destroy Iran's ability to arm proxies across the region. The more significant factor will be the degree to which the Saudis and the UAE involves themselves in this conflict, as they stand to benefit more than most if Iran's military is crippled so close to their borders. There is even the potential for Iraq's involvement, although I think at most they would simply not aid the Iranians. Israel will not escape this war unharmed. Iran will launch conventional missiles at Israel in response, both from its territory as the attack is carried out, and via what remains of their Hamas and Hezbollah proxies. The window of opportunity for Israel is fairly brief, so this war will likely occur in the first quarter of 2025.

Iran's troubles don't end with a potential decapitating strike from their west. Afghanistan and Iran have not resolved the fresh water supplies from the Helmand and the Sistan Basin, and the risk of conflict will only grow as the tail of last year's La Nina cycle fuels drought in that region. Pakistan is also launching air strikes against the Taliban's Afghanistan that are unlikely to decline. Worse yet, in the wider Baluchistan region that straddles the borders of all three countries, and attacks against Iranian, Pakistani, Taliban, and even Chinese troops and civilian contractors has only grown, mostly from the Balochistan Liberation Army (BLA). If Iran is distracted by a war in its west, expect the BLA to carry out a more ambitious attack and for Pakistan to be the primary source of retaliation. Further, if Iran's response is even somewhat muted, expect other separatist groups and Islamist militants like ISIS-K to up their activities in the region. These attacks will likely coincide with civil unrest not only in Balochistan, but in the heart of Iran itself, and could threaten the survival of the regime. Finally, with Iran's ability to supply proxies limited by distractions within its own territory, expect Hamas, Hezbollah, and the Houthis to grow more desperate before they start to lose ground. Israel will feel emboldened to tighten the grip on not only Gaza, but to move against the West Bank with the tacit endorsement from the United States, and possibly to formally annex their expanded zone of occupation in and around the Golan Heights.

Former Soviet Union

The Fall of Assad has left Russia scrambling to maintain the illusion that they are a global power, both to deter action from foreign rivals and for home consumption. The loss of their naval position at Tartus constrains their ability to support proxies in North Africa, forcing air and naval assets to reposition to Benghazi, partly because they can't return to the Black Sea without being sunk by Ukrainian drones. Moreover, the C5+1 talks and broader strategic shift among Central Asia has continued to decouple the region from Russia, Georgia is experiencing riots and demonstrations in response to its puppet government wanting to deepen ties with Moscow, and Trump isn't even toeing the party line on ending the Ukraine war with the subjugation of Ukraine. On the home front the Russian war economy has finally started to fall apart, the Russian Ruble faces hyperinflation barely held back by devastating rate hikes from the central bank, the country is losing more of its critical military infrastructure to long range weapons, both NATO-built and those made within Ukraine, and Ukraine still hasn't been dislodged from Kursk.

In 2025 things are going to get worse for Russia as more countries and non-state actors sponsored by Russia begin to appreciate the depth of Russian weakness. Ukrainian strikes into Russia proper will only grow, supported by European allies that will grow less timid about confronting Russia but not at the pace anyone wants. Russia's economy will continue its decline, they will continue to fail to achieve any version of victory in Ukraine, and because of this Russian brutality against Ukrainians and local dissent will only get more severe. Ukraine, and other forces opposed to Russia, will grow more bold, but the only thing that will determine an end to the war in Ukraine at this point is the willingness for Russian and now North Korean troops to keep fighting. We should also watch for mercenary groups made up of Assad's former forces from Syria, but its not certain if Russia could actually pay and supply these forces for their numbers to matter. So as always, watch for defections, desertions, and defiance from within the ranks.

Europe

While Europe will attempt to offset any reduction in arms from the United States to supply the Ukrainians, don't expect an immediate shift in strategic outlook after Trump takes office. European leaders will try to use Trump's purported strategic disengagement from Europe and overtly hostile trade policy to position themselves as the true leaders of NATO, however its doubtful anyone will be able to agree on which country should actually lead the bloc or even if a change to the nature of the alliance is even possible given the political paralysis in France, the potential chaos of coalition building following elections in Poland, Germany, and Romania. At time of writing, far right parties in these countries are expected to perform far better than in previous cycles, but are unlikely to win majorities or even win enough seats to be desirable elements of governing coalitions. Side note, while the elections in Germany are important, the elections I'm watching most closely are in Poland, Ireland, and Moldova. Poland stands a very real chance of at least blunting the rise of its far-right in its upcoming Presidential election, while Presidential and legislative elections in Ireland have the potential to bring Irish unification to the forefront of UK-Irish politics in 2025. Finally the elections in Moldova hold particular importance because of its relationship to Russia. In October of 2024 Moldova voted in favor of EU membership by a slim majority, while just last week Russia cut off natural gas supplies to its proxies in Transnistria and is debating a pullout of the 1,500 or so troops still in the country. If the pro-EU PAS party can maintain its majority after this summer, Russia risks the loss of another group of proxies.

Beyond the EU, I don't expect things to get any better for the UK in 2025. Keir Starmer and the Labour party have been unwilling to offer any substantive change to UK policy, and while the country's only hope of ending its economic decline is a trade deal with the US, its unlikely Labour will agree to any terms offered under the Trump administration. Unfortunately, this means the UK far right will only continue to rise in 2025. That said, I don't expect the UK or EU/NATO member states to reverse course on Ukraine this year, if anything Trump's hostility to the bloc will likely deepen ties and increase the discussion around a European Army... just don't expect it to come to anything more than that this year.

Mexico and Canada

Donald Trump is preparing for a trade war, and possibly actual war with two of America's biggest trading partners. Trump has called for the US to annex Canada and to launch military incursions over the US-Mexican border against the Cartels, and partly to control the flow of immigration. As we are not dealing with a rational actor, it is difficult to determine just how serious the threat to Canada actually is, but the threat to Mexico is more plausible. Firstly, what Trump is calling for is quite popular not just among the MAGA base, but also among a certain breed of right-wing policy wonks, meaning he will face little internal resistance to the idea. Secondly, Trump considers reducing or reversing immigration to the US to be his highest priority, as it was a centerpiece of his campaign. Thirdly, while annexing a nation the size of Canada comes with all manner of logistical and diplomatic hurdles, what Trump has proposed to do with Mexico is actually pretty familiar territory for the United States, and could be a carried out with limited resources. It will be a disaster for the US economy, will fail to dislodge the Cartels, and probably lead to some embarrassing deaths of American troops, but that hasn't stopped the US from staring a war before.

As for the trade war Trump is proposing, that is a far more real and serious threat to both Mexico and Canada. Over 75% of all exports from Mexico and Canada go to the United States, and exports account for 34% of Canada's GDP, and 43% of Mexico's GDP. So the proposed 25% tariff would almost certainly send both nations into a recession. Mexico has a new President who can push back against the United States, but Canada is having an election next October that Trudeau's Liberal Party will likely be crushed as a result of the US-Canada crisis. Pierre Poilievre and the Conservative Party would most likely win that election, but I suspect Bloc Québécois and other minor parties would surge as a result of the crisis. Tory rule in Canada could open the door to a new trade deal with the US, but negotiations wouldn't produce any results until at least 2026. Mexico has already threatened retaliatory tariffs, and incoming President Claudia Sheinbaum is far more likely to implement them than Trudeau. Firstly Trudeau is a little busy getting ready to lose an election while Sheinbaum is at the start of her term and thus has more freedom to act. Secondly while Sheinbaum will be publicly opposed to US violations of Mexican territorial sovereignty, in whatever form that takes, she's more likely to cooperate with Trump behind the scenes on the cartels while using the trade war as political cover. To what degree Trump understands how tariffs actually work, he has historically be indifferent to a reduction in trade with major US trading partners and its economic effects. This gives both powers a lot of room to maneuver this year... to the detriment of literally everyone.

China

China faces multiple ongoing crises in 2025, but the risk of any kind of an economic slowdown in the US is by far the most immediate threat facing the PRC. Secondary to this crisis is the risk of a deflationary spiral brought on by a recent policy shift from Xi Jinping, or more accurately Xi's inability to get reliable economic data from within his own government following years of political purges. China's economic weaknesses are fairly well known at this point, and if you've been following me for a while you know my opinions on them, so I won't repeat what's been said a thousand times before. What I will say is that Trump doesn't have to do anything for China's economy to experience a lot of pain in 2025, and he's almost certainly going to do whatever he can to make life for China worse for China because at this point that's well established US foreign policy.

As for Taiwan, I think the risk of an attack from the PRC is fairly minimal in 2025. Xi's window of opportunity was in 2022, and at this point that should be obvious to even someone as cloistered as Xi. That said, if Xi is willing to make as boneheaded an economic move as a deflationary spiral with his country's economy stretched to the brink, we can't make any guarantees about what else he might do this year.

South America

In South America the situation in Venezuela will only get worse as Venezuelan refugees will be some of the first people to be deported from the US, limiting destinations from a country undergoing national collapse. This will add pressure onto Venezuelan President Maduro, already facing a more organized opposition after his nakedly fraudulent electoral victory this year. Maduro has continued his calls to annex the Essequibo region of Guyana, but the threat of civil war is likely to limit his ability to act beyond largely ceremonial moves like building a small outpost just over the border and bridge to supply a handful of troops. Further South, Argentina is entering 2025 with historically low inflation, and the fastest month-to-month wage growth in living memory. This has been part of a string of policy shifts from the Milei administration to shift Argentina away from a protectionist/anti-investment economy and attract more private sector investment to Argentina. This will be largely unaffected by a Trumpian tariff regime, however it will hit a wall as global capital continues to contract. Whether Argentina hits that wall in 2025 is not yet clear.

Space

2025 promises to be an eventful year in spaceflight as more robotic missions head to the moon, SpaceX increases the number of Starship test flights, and NASA finds itself in the middle of a deeply stupid political fight. Artemis II has been pushed back to 2026, the first segment of the Lunar Gateway has been pushed back to 2027, and NASA is under scrutiny for cost overruns and perpetual delays of both its SLS rocket and the return of astronauts launched aboard the Boeing Starliner capsule now stranded on the ISS. Even if Musk is pushed out of Trump's orbit in 2025, NASA will have no choice but to rely even more on SpaceX for launch services as it is now inescapably clear that Boeing is incapable of delivering reliable products on time and on budget. I don't know if SLS will be cancelled in 2025, it would be a little silly if they did considering the success of the Artemis I uncrewed circumlunar flight, but Artemis II may very well be the last mission to use SLS.

Unfortunately, the public's ignorance about how NASA actually works and the left's (rightful) contempt for Musk means that there will be a truly stupid debate about keeping SLS flying because people seem to think the alternative is NASA being privatized. If you're confused, let me spell it out for you: Every rocket NASA has ever flown was built by a private contractor, SLS was built by Boeing and Rocketdyne, Starship is built by SpaceX, no matter what side you take you're endorsing one corporation run by assholes over another. The difference is: SpaceX rockets more reliable, are built at scale, and are a lot cheaper. It basically comes down to the fact that SpaceX is willing to absorb the PR issues associated with testing its vehicles to failure. Because SpaceX is less risk averse for the sake of trying new things, they attract the best engineers and technicians in the industry, while Boeing is notoriously run by MBAs who don't care about engineering, and NASA is institutionally incapable of taking big risks due to the fact that their budget comes from people who need to get elected. This will be exemplified next year if SpaceX is able to achieve a successful uncrewed lunar landing with the Starship Human Landing System (HLS) variant. Personally, I think they have a high chance of achieving that goa. More importantly will be that further testing of Starship in 2025 will see more successes and the refining of the launch system. In 2024 we had 5 integrated test flights (IFTs) that took Starship to orbit, re-entry, and a successful recovery of its super heavy booster stage; in 2025 SpaceX is targeting 25 test flights. Booster catches will become uneventful, and more than likely they'll be able to get at least one, probably multiple, catches of the Starship spacecraft. If SpaceX's progress is anything like that of 2024, they may be confident enough to conduct a cargo launch with Starship, more than likely for Starlink satellite internet satellites. But I fully expect new companies to emerge to take advantage of this platform, and with any luck, I'll be working for one of them next year.