Investing.com – BCA Research on Geopolitical Trends for 2025

BCA Research has outlined three geopolitical trends anticipated for 2025, influenced by key factors including policies under Donald Trump’s second term, economic actions by China, and rising tensions in the Middle East.

View #1: 'Trump Cuts Taxes, Hikes Tariffs'

BCA predicts that the U.S. Congress will implement tax cuts by late 2025, providing a fiscal boost of roughly 0.9% of GDP in 2026. This aims to energize the domestic economy amid a global trade war initiated by President Trump, primarily targeting China with tariffs. While Trump asserts that higher import taxes will balance the budget, BCA warns that these tariffs could reduce household incomes by 2.9%-6.3%, negating tax cut benefits and potentially hindering business investments reliant on international supply chains. BCA anticipates that these tariffs won’t fully fund the tax overhaul, leading to increased fiscal deficits and stress on consumers and businesses.

View #2: China Will Boost Spending

To combat U.S. tariffs, China is likely to respond with substantial domestic stimulus and strengthen trade with non-U.S. partners. BCA suggests that Xi Jinping may leverage external pressures for economic reforms, thereby solidifying domestic support. China is expected to provide short-term relief through targeted fiscal measures while retaining significant stimulus for potential global economic downturns. Increased military activities, especially concerning Taiwan, are anticipated as part of China’s strategy to enhance its geopolitical standing amid rising global tensions. BCA advises investors to establish early warning systems due to unpredictable military incidents.

View #3: Geopolitical Risk Shifts From Russia To Iran

As the conflict in Ukraine nears a ceasefire in 2025, BCA forecasts a shift in geopolitical risks towards the Middle East, specifically the intensifying conflict between Israel and Iran. The report indicates a 75% chance of military escalation due to Iran’s nuclear aspirations and the effects of U.S. sanctions. With Iran likely enhancing its regional defense, Israel is positioned to act against Iran’s nuclear program. Trump's potential return to office could heighten these tensions due to his administration's stringent sanctions and foreign policy adjustments, amplifying instability in the region.