What’s coming in 2025?
Óscar Ugarteche , OBELA
There are at least four axes to look at in 2025. One first is the conflict between the great powers, where the US increased its offensive against China's production and trade. The trade war unleashed in March 2018 by Trump himself will have diverse consequences for the world. The second axis is climate change, which will have an impact on the prices of the food basket. It is an already present issue aggravated by drought floods and climate change in general. The third is the continuation of the open attack on international regulatory institutions by Washington. The fourth axis is the energy competition between the great powers and its derivative effects.
The trade war in the US-China axis tends to become more pronounced as the US technological backwardness becomes more evident. The once-world locomotive is trying to regain its old role at the cost of slowing China down, in an exercise of pulling it back to gain strength and overtake it. This strategy has several problems. The first is the Chinese technology push in the field of artificial intelligence microchips as a result of the effort to pull the country back by banning the trade of certain wafers from Taiwan with mainland China. Taiwan's TSMC is the manufacturer of most of the world's microchips that then go through various maquilas until they result in the desired product. What happened with Huawei was that it managed to innovate AI embedded in its microchips and catch up with the technology of companies like Nvidia of Silicon Valley. Thus, the Silicon Valley chip trade fell off and China produced cutting-edge circuits.
According to the Chinese Academy (https://thechinaacademy.org/the-chip-war-is-nearing-its-end-as-china-chi...), using data from the country's customs, between January and October 2024, the country exported chips worth some $128 billion and as of December, it is estimated to have closed at around $138 billion. This figure is huge, but its implications are even more profound. The Asian country has had the world's largest semiconductor market in recent decades, with annual chip purchases of around $300 billion. The shift from importing to exporting the figure noted suggests that its chip production has far exceeded the $450 billion figure, which allows the country to meet domestic demand and export the remainder. This is a blow to Silicon Valley and the North's competitiveness in this field.
The consequence of this shift in China's production is that the country has suddenly become the world's largest consumer of the rare earths required for chips and the largest investor in mining specialized in them. South America and Africa are now dominated by
Chinese capital and the US is now looking to deposits in the Ukraine, the Arctic, and Antarctica to begin to compete, although it does not yet have the refining capacity.
The second axis is climate change, which has become hotter every year for the last four years and continues the trend. It is accompanied by droughts and floods due to the emission of greenhouse gases. The country that emits the most greenhouse gases due to the use of fossil fuels is China. However, everything points to the fact that emissions have already reached their highest level and are at a plateau that should begin to fall by 2030. China is transforming the global energy landscape with an ambitious renewable energy plan, presented on October 30, 2024. Issued by the National Development and Reform Commission and other agencies, it will seek to increase annual renewable energy consumption to 1 billion tons of coal equivalent (SCE) by 2025 and 5 billion by 2030. This will have a direct negative effect on major coal-exporting countries such as Australia, Indonesia, Russia, the United States, Canada, and Chile.
On the U.S. side, the government withdrew again from the 2015 Paris Climate Agreement at the same time that it seems to be the target of the most devastating effects of climate change such as snowfall in Florida in January 2025 and the arrival of spring in February of this year in that State; as well as hurricanes, cyclones, fires and floods that have destroyed crop fields and crops in some cases.
Agriculture is highly dependent on climate and weather, as well as on natural resources such as land and water, which are also affected by climatic conditions. While changes in temperature, rainfall, or frost may extend the growing season or allow the production of new crops in some regions, in others they may hinder them.
The impact of climate change on agriculture depends on its pace and seriousness, as well as on the adaptive capacity of farmers and ranchers. It affects it variably by region, lengthening the growing season in many states, but also increasing the need for irrigation and increasing soil erosion due to heavy rains. These rains can affect water quality by washing fertilizers and pesticides into water bodies. In Central America and the Andes, there are devastating effects in terms of alluvial rainfall and anomalous temperatures with effects on population migration.
In 2023, agriculture contributed more than $1.53 billion to U.S. GDP. Livestock, corn, dairy products, and soybeans lead the sector's revenues, with this country as a key exporter of agricultural and meat products. In Europe, it contributes US$218 billion, with price rises greater than average inflation, increased by 24% in 2022, and although stabilized in 2023 and 2024, remained high. Rising costs associated with climate change will be a continuing source of inflation for the US, Europe, and the world.
The US withdrawal process from the United Nations bodies and the discrediting of them by ignoring the cease-fire calls of the Secretary-General, the General Assembly, and the Security Council in Gaza, leaves a world order without arbitrators. The WTO has been nullified since the US did not allow the renewal of the judges of the arbitration tribunal. That country's disruption of the world economic order between 2018 and 2019 threatened the very existence of the Geneva-based body, which has its hands tied to intervene in trade wars. As of December 11, 2019, its Appellate Body was paralyzed. The cause was Washington's refusal to appoint new judges. The consequence was that fourteen disputes, at the appellate level, remained in limbo.
Six years later, at the G20 Foreign Ministers' meeting in Johannesburg on February 26, 2025, China reaffirmed its support for the free trade system with the WTO at its core and supports its reform, according to Foreign Minister Wang Yi. In a meeting with WTO Director Ngozi Okonjo-Iweala during the G20 in Johannesburg, Wang stressed China's commitment to multilateralism and the international order. In the face of the rise of protectionism, he stressed the need to promote globalization, trade liberalization, and global economic recovery. The WTO thus stands between the two great powers, but if the US is not willing to abide by the rulings of international tribunals, the WTO is a dead body. Broadly speaking, the US has declared the UN system useless during the Gaza war and with the re-election of President Trump has withdrawn from several bodies including the World Health Organization, the Human Rights Council and UNESCO as well as the Paris Agreement. It will possibly withdraw from others which will strengthen China's role in the international system.
Among the direct consequences of U.S. protectionism is the impact on the automotive market with fewer U.S. made vehicles being built in Mexico, European, Korean, and Japanese vehicles being sold in the U.S. The capacity to cover this supply contraction will be able to level out in the future if companies invest in the U.S. to manufacture what they cannot import without tariffs. US automotive production is essentially fossil fuel vehicles with very little production of hybrid and electric vehicles with virtually no production of renewable energy buses. U.S. steel manufacturing is twelve times smaller than that of China, resulting in high unit costs, which will result in much more expensive vehicles
A direct effect of Musk's entry into active politics has been the discrediting of the brand that is now associated with racism and white supremacism, which has lost competitiveness as the BYD brand has been bequeathed and higher volumes of German and British EV brands have been manufactured. As a sample, US-based Tesla is the only company that lost market share in Europe where they fell by 45% in January 2025, while overall EV demand in Europe grew by 37% in 2024, driven by German and UK manufacturers, essentially Mercedes Benz, Audi and BMW and Mini Cooper.
Energy competition has intensified. In all scenarios put forward by the International Energy Agency published in October 2024, global energy demand growth is slowing down thanks to improvements in efficiency, electrification, and the rapid expansion of renewable energies. They estimate that nearly half of the cars sold worldwide will be electric by 2030, although delays in charging infrastructure or policy implementation could slow this growth. In this general scenario, the US is focused on fossil fuels and to the rhythm of President Trump's "Drill, baby, drill" wants to control the Arctic and its gas reserves, Antarctica and its own, and all of the Middle East whose countries have now shifted to China as the main buyer, as a result of economic sanctions. The effect of the economic sanctions is to raise the price of crude oil in a period of falling prices due to the ongoing process described by the IEA.
Whether or not they can exploit the deposits in the Levant, off the coast of Gaza, will depend on whether or not they manage to totally depopulate Palestine in the Gaza area. The US bet on fossil fuels to compete with Russia, which naturally, by geography, is Germany's gas supplier, is part of the complication of the various wars that the US has promoted or participated in in those parts of the world. In any case, oil in Latin America belongs to public companies with some exceptions and unless pressure is exerted for further privatization, with possible success perhaps in Peru, Latin American oil activities will serve for energy security rather than for fiscal performance as in their peak years in the 1970s. The pressures to privatize oil in this context in Latin America are driven by US interests in preventing China's control in this field. The paradox is that China is, or is on the way to becoming, the world's main oil exporter by buying crude from sanctioned countries plus its investments around the world, especially in Africa, and refining at home. India is going in the same direction. The price of sanctioned oil is lower than the international market price.
Finally, the cooling of the global economy as a whole split between Asian growth and near-zero growth in Western countries will leave the pattern of commodity trade to be led by Asian demand and demand for coal to fall. Demand for copper and other minerals will continue to rise with the entry of the US as a strong new investor in Ukraine in the long term. In the short term, this does not have much significance in terms of prices. The inflationary impact of the US economic recovery will lead to an increase in the Fed's reference rates and with it, all those of the Western world. The fracture between the dynamics of the East and the stagnation of the West will grow with the tensions that derive from this.