Geopolitical Realignments: Key Developments in 2025

Ajsha Pllana

January 2025

Following the recent American presidential elections, nations around the world are anticipating great changes and breaks from the traditional American-led global leadership. Due to anticipated changes in tariffs, sanctions, taxes, trade regulations, stock market volatility, NATO and other global alliances, nations are expecting significant financial and political shifts and developments in the coming years.

United States

The United States has experienced heightened disagreements between the two ruling parties, the Republicans and Democrats, over the past decade. In 2025, the disagreements remain largely between Republicans as both legislative branches, the House of Representatives and the Senate, as well as the Executive branch are led by Republicans. One of the main challenges likely to arise is between Mr. Trump and Mitch McConnell, the longest serving Senate party leader in U.S. history. Whilst Mr. Trump has proposed a more isolationist foreign policy agenda, such as pulling away from NATO and reducing financial and military aid to Ukraine and other allied nations, Senator McConnell articulated an opposing viewpoint in his recent Foreign Affairs article The Price of American Retreat. There are speculations that Mr. Trump will reduce American troops stationed in Europe, though this plan ultimately failed during his first term. Senator McConnell advised the incoming Trump Administration against isolationism, noting that withdrawing would impact their progress toward achieving U.S. foreign policy objectives.

  Though Senator McConnell has voluntarily stepped down as Senate minority leader, he will be heading the Senate Appropriations Subcommittee on Defense, meaning he will control the purse strings on U.S. defense spending. He has advocated to increase the U.S. defense budget from the current 2% of GDP, perhaps to 5% as suggested by Senator John Wicker, who will serve as chairman of the Senate Armed Services Committee. Senator McConnell gives credence to President Reagan’s slogan “peace through strength,” suggesting that military power can help preserve peace in the world. Mr. Trump’s isolationist ‘America First’ agenda will thus come to be challenged vis-à-vis Senator McConnell’s penchant for America’s global hegemonic leadership goals. The future of U.S. leadership will become easier to read once Mr. Trump’s political nominations are approved and/or denied, and their respective methodology for achieving desired outcomes.

Following the election, Mr. Trump has also expressed territorial ambitions by suggesting that Canada, Greenland and the Panama Canal join the U.S. for national security reasons. These are recent surprising and unpredictable developments, and discussions around these foreign policy trends are evolving and may include negotiations surrounding tariffs and sanctions. Canada is America's largest source of foreign oil. In 2023, Mexico and Canada supplied 71% of America's oil imports, which may be used as a bargaining chip should Mr. Trump pursue a trade war. The U.S. may experience rising energy prices as a result.

Europe

European nations have watched the U.S. elections closely. Russia and Ukraine stand to gain or lose the most, depending on Mr. Trump’s isolationist agenda or Senator McConnell’s military and defense goals. As for the rest of Europe, NATO members have significantly increased defense spending since the Ukrainian War began, with many nations reaching the 2% DGP benchmark. There are current discussions to increase the benchmark to 3%, whilst Mr. Trump has called for an increase up to 5%. There has already been much progress on this front. In 2021, only six NATO member nations met the 2% target. Since the Ukraine War began, twenty-three nations now meet that target. The war in Ukraine has prompted an 18% increase in defense spending among the European allied nations. In order to maintain its relationship with the U.S. during the Trump Administration, the E.U. will likely purchase military equipment and oil from the U.S. to contribute to Ukraine and the rest of Europe. For many Europeans, a budget increase has already been considered. In response to growing threats, the European Commission has estimated that an additional 500 billion euros are needed to counter Russian attacks.

There is good reason to reconsider the EU defense budget. Democracy in Europe has encountered numerous obstacles recently. For instance, elections in Georgia, Moldova and Romania have given rise to massive street protests due to Russia’s election interference to promote pro-Russia candidates. The E.U. has rejected the recent election in Belarus, calling it neither free nor fair, and has threatened new sanctions against the government. In Germany, thousands have begun to protest the rise of the far right AfD party, ahead of the February 23, 2025 elections. In Slovakia, tens of thousands of protesters have called for the Prime Minister’s resignation over his pro-Russia policies. The color revolution in Serbia has witnessed schools, bookshops and theatres shuttered in anti-government protests. Citizens in Europe have escalated resistant calls against pro-Russian candidates primarily due to allegations of corruption. As a result election meddling and the war in Ukraine, Europeans have experienced the direct consequences of escalating energy prices and inflation. We may continue to see the rise in protests as Russia continues to pursue its imperial ambitions. The current wave of protests in Europe is reminiscent of the 2011 Arab Spring protests.

The majority of Europeans have rejected far right leaders that echo retrospective policies of the Soviet Union and Yugoslavian era. The wave of protesters is advocating for a united Europe with Eurocentric social policies. For example, the European Central Bank has called for a speedy integration toward the E.U. Capital markets to build the infrastructure and companies necessary to compete in the global economy, marking a significant shift away from current European national egos. The development of robust capital markets within the European Union has the potential to increase competition with Wall Street. This indicates yet another shift in global markets.

Asia

China is the leading actor in Asia, leading with its economy. However, due to targeted sanctions imposed by the United States during the Biden Administration and the European Union for helping Russia in its war against Ukraine, as well as tariffs to be imposed by Mr. Trump, China has lost nearly seven trillion dollars from its stock market since 2021. Mr. Trump has declared that he will impose further tariffs, which promises an additional source of uncertainty for global markets. Subsequent to the imposition of tariffs during the first Trump Administration, China allowed the yuan to depreciate. A significant devaluation of the Chinese yuan, similar to that observed in 2018, would have repercussions with the U.S. markets. However due to U.S. restrictions on Chinese exports, a weaking yuan may not be as advantageous to China this time around.

The longstanding issue of Taiwan may suddenly become an issue that moves to the forefront. So far, the United States has created a buffer for Taiwan by aiding the nation with military aid. However, with Mr. Trump’s ‘America First’ isolationist foreign policy stance in which he promises to retreat from military involvement abroad, China’s Xi may see this as an ample opportunity to fulfill his promises of the Taiwan-China “reunification” process. There is a dichotomy at play however, as Project 2025, the Presidential Transition Project thought by many to be used a guide by the Trump Administration, clearly outlines a deterrence plan to help Taiwan remain independent. Ukraine serves as a key indicator of how Xi may approach the delicate Taiwan issue. China may use Russia’s success or failure in Ukraine as a guide for their own decision-making process regarding Taiwan. Suggestions have been made by the incoming Trump Administration that Ukraine may be advised to concede territory to Russia, making the China-Taiwan war increasingly more likely to come to fruition.

Middle East

The Palestinian-Israeli conflict has captured the attention of world in the past two years. Recently, President Biden announced a ceasefire deal signed between Israel and Hamas, though both parties have been reluctant to agree to a long-term peace plan and some attacks have continued.

Though Mr. Trump has recently expressed displeasure with Israel’s Netanyahu, the Israeli-U.S. relationship remains strong and will likely remain strong during the next administration. Mr. Trump’s son-in-law Jared Kushner’s private equity firm has agreed to its first Israeli deal. This may help promote greater relations between the U.S. and Israel.

In order for Palestine to enjoy more democratic nation-building processes, it would likely require foreign peacekeeping efforts and humanitarian aid for the rebuilding process. The international community has not announced a concrete plan for such a requirement. In fact, Mr. Trump has urged Middle Eastern nations to accept Palestinian refugees from Gaza. A power vacuum may arise that creates space for new foreign powers to assert their influence.

Latin America

Venezuela, like the aforementioned European nations, has experienced election-related conflicts. Nicolás Maduro has been serving as President of Venezuela since 2013. In 2024, Edmundo González ran for President against Maduro and claimed to have won the election. Maduro refused to step down and has declared himself winner. As a result, the opposition protested Maduro’s claims of re-election win. Both the E.U. and the U.S. imposed sanctions against Maduro and other government officials, and have supported González as the true winner. The repercussions of election interference difficulties have been felt globally, signaling potential future challenges.  

Technological warfare and a world war

Elections in the past decade have impacted billions of people around the world and have been a source of chaos, impacting global markets. Global demonstrations against local and international elections have erupted in numerous countries. Much of the election-related chaos has stemmed from claims of rigged elections and election interference by foreign adversaries. Sophisticated new technological developments have contributed to these claims, with hackers using technology to undermine elections, in addition to electrical grids and underwater sea cables that support interactive telecommunication signals.

Jamie Dimon, CEO of JPMorgan Chase, America’s largest bank and the world’s largest bank by market capitalization, has stated that World War III is already underway. Modern cold wars are increasingly defined by cyberattacks, information warfare, and other forms of technological conflict. A proxy war is being fought in Ukraine, with Ukraine receiving military aid from the U.S. and E.U. on the one hand, and Russia being aided by China, North Korea and Iran on the other. The war in Ukraine resulted in an energy and oil crisis that personally impacted billions of people by severe increases in energy prices. Will this turn into a hot war? Time will tell. Historic geopolitical shifts are very likely to be emerging.