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Global Trends

Ahead of the 2024 U.S. presidential election, countries around the world consider its ramifications for global security, international institutions and trade ties

Annual

<p><strong>Ahead of a close presidential election in November, the U.S. government will seek to shore up voter support through policies such as strengthening the U.S southern border, while the rest of the world will prepare for a potential second Trump administration that would usher in the return of trade wars and skepticism about NATO. </strong>While the U.S. election in November will not lead to a change of government in 2024, the rest of the world will start to weigh the potential implications of a Donald Trump victory long ahead of the vote. President Joe Biden will likely broaden his platform to appeal to moderate voters through new measures to support oil and gas investment and &nbsp;expanding construction on the wall along the border with Mexico. The White House will struggle to push funding for Ukraine through Congress, which will lead the Biden administration to look for other ways, such as using existing authorized funds, to help support Kyiv. While a Biden victory would entail foreign policy continuity beyond 2024, a Trump victory would likely see renewed U.S. efforts to disentangle itself from certain international issues, including a potential exiting the Paris Agreement and an end to most support for Ukraine against Russia. Trump would also shift U.S. trade policy priorities, launching more tariff threats against the European Union and China while trying to reduce the U.S. trade deficit. Trump would also express skepticism about NATO among other disruptions to trans-Atlantic ties, resulting in European countries like France pushing more heavily for strategic autonomy and reduced military reliance on the United States. Russia meanwhile would view a Trump presidency as a potential way to end the war in Ukraine on terms favorable to Moscow. And Trump would present different challenges to China than would Biden, increasing the prioritization of trade and tariff issues versus the Biden administration&#39;s focus on strategic threats from China&#39;s technology sector.&nbsp;<br />&nbsp;</p>

The World Prepares for a Close U.S. Presidential Election

<p><strong>Israel will occupy the Gaza Strip, facing an insurgency, regional instability, diplomatic pushback and domestic political uncertainty.</strong> Israel will struggle to find a civilian partner that can govern Gaza, whereas the Palestinian Authority will demand a restart of two-state negotiations that Israel&#39;s current far-right-dominated government does not have the mandate to carry out. Instead, Israel will take up a renewed military occupation of the Strip, which will end most Palestinian militant rocket attacks against Israel but also entail Israeli responsibility for the reconstruction and civil management of the territory. Remnants of Hamas militants will carry out attacks on Israeli forces throughout the year in Gaza, while in the West Bank, violence will continue and may even escalate as Hamas shifts its operations there, as well as into Lebanon and Syria. Israel will also face Hamas-led harassment on the northern border from Lebanon and Syria. Although both Hezbollah and Iran will constrain Hamas to avoid attacks that might spark another major regional war, incidents there will compel Israel to consider expanding covert and overt military operations in both Lebanon and Syria to restore deterrence. Meanwhile, Israel&#39;s actions in Gaza will be diplomatically unpopular, will likely leave Saudi-Israeli normalization frozen and will manifest in increased U.S. criticism of Israel&#39;s government. Israeli control over Gaza will also be unpopular in Israel itself, especially as an insurgency takes hold and no clear governing solution manifests. As a result, the government of Prime Minister Benjamin Netanyahu will struggle to hold itself together, with a growing likelihood of government collapse.&nbsp;</p>

Israel Takes Control of Gaza

<p><strong>China&#39;s economy will slow down in 2024, but not to the point of producing a financial crisis, which means that the impact on emerging economies will be manageable.</strong> In the face of an unusually uncertain economic outlook, China will continue to pursue macroeconomic rebalancing. Although the country&#39;s one-year outlook is fraught with greater than usual risks, the authorities will be able to maintain economic growth of about 4-5% while avoiding broader financial instability thanks to the extensive financial and regulatory instruments at their disposal as well as their willingness to provide greater policy stimulus if necessary. Should economic growth be at risk of falling below 4%, Beijing will provide greater policy support to the economy. The authorities are likely to rely on a mixture of monetary and fiscal policy expansion and focus more on supporting consumption rather than investment. China&#39;s slowing growth will impact both emerging and developing economies, but not dramatically so. Commodity-exporting Latin American and sub-Saharan African economies and China-focused East and Southeast Asian economies will experience a marginal deceleration of economic activity. If on top of China&#39;s slowdown the United States faces a deep recession (something unlikely in 2024), however, the economic impact on Latin America, sub-Saharan Africa and Southeast Asia would be much greater. Finally, if China were to go into a more sustained downturn, it would translate into a weaker currency and increased exports, which would lead to a further increase in trade tensions with its main trading partners, the United States and Europe.<br />&nbsp;</p>

China's Slowdown Impacts Commodity-Dependent Low Income Countries

<p><strong>Western material and financial support for Ukraine&#39;s war efforts will fall due to resource and political constraints amid an apparent stalemate on the frontline through 2024, but a cease-fire between Moscow and Kyiv or even substantive negotiations are unlikely. </strong>Major gains on the battlefield for either side are unlikely in 2024 due to resource and manpower constraints amid increasing entrenchment along the frontline, which will prevent them from amassing sufficient forces for a significant breakthrough. Still, Moscow will continue attempts to encircle Ukrainian strongholds along the frontline in order to cast the Biden administration&#39;s support of Ukraine as a failure and hurt its chances at reelection in 2024. Meanwhile, Ukraine will attempt to make tactical gains to convince the West that sufficient weapon supplies can allow it to resume taking ground. Political and financial constraints to ramping up production will mean that Ukraine will only receive enough weapons to continue defending itself rather than conduct offensives capable of inducing Moscow to enter negotiations. Ukraine will remain uninterested in negotiations because there are still no signs the West can provide security guarantees strong enough to deter future Russian aggression, meaning that a ceasefire would give Russian forces time to regroup and prepare for a potential future offensive. Moscow will gain confidence that its strategy of degrading Ukraine by means of ramping up the Russian military-industrial complex and employing shadow mobilization will enable it to win a war of attrition in Ukraine as the West struggles to supply Ukraine sufficiently, thereby eventually forcing Ukraine and the West into negotiations in 2025 or later.</p>

The War in Ukraine Grinds On but Cease-Fire Negotiations Remain Elusive 

<p><strong>Taiwan&#39;s January elections will likely prompt Chinese retaliation that fuels U.S.-China competition and accelerates regional supply chain diversification and defense spending.</strong> A likely win by William Lai of the Democratic Progressive Party (DPP) in Taiwan&#39;s Jan. 13 presidential election would spur Chinese retaliation. Following the January election or inauguration in May, China could launch live-fire military drills near Taiwan that imitate (but do not enforce) blockade conditions. China could also partially suspend the cross-strait Economic Cooperation Framework Agreement, raising tariffs on Taiwanese goods like petrochemicals and textiles but not on chips or other high-end electronics, which China needs for its own industrial development. These threats to physical and supply chain security will erode political will in the United States and Europe to limit economic competition with China, increasing the chances of additional trade and investment restrictions. Beyond immediate election retaliation, China will escalate other forms of military coercion throughout 2024 (including incursions into Taiwan&#39;s extended airspace and naval exercises east of Taiwan), raising fears of war and shipping disruptions and driving military spending across Asia. A Chinese invasion of Taiwan remains unlikely in 2024 &mdash; partly due to China&#39;s incomplete military modernization and reliance on global imports of critical technologies &mdash; but business fears about war will contribute to supply chain diversification from China and Taiwan to Japan, Southeast Asia and India. In the low likelihood scenario that a more accommodative opposition party beats the DPP in January, China will ease economic and military coercion against Taiwan through 2024, lowering concerns about conflict and Washington&#39;s tensions with Beijing.<br />&nbsp;</p>

Taiwan Election to Raise Business Risks, U.S.-China Tensions and Asia's Defense Buildup

<p><strong>Europe&#39;s largest countries will experience political turbulence throughout 2024, with frequent intra-coalition disputes in Germany and Italy and a difficult coexistence between government and Parliament in France. </strong>In Germany, the already fractious coalition government will increasingly struggle to implement legislation as internal divisions grow. Intra-coalition tensions will increase over spending priorities following a constitutional court ruling that hinders the reallocation of 60 billion euros from pandemic funds, which will also expose the government&#39;s budgetary maneuvers to more legal and political challenges, further complicating policymaking and increasing political instability. Additionally, a likely far-right victory in state elections in East Germany will further complicate government parties&#39; ability to compromise as their popularity wanes. In France, a divided Parliament will continue to complicate government efforts to pass legislation, which means economic and social reforms will be watered down or shelved altogether. Government plans to pass labor reforms may prompt further demonstrations and strikes, while difficult negotiations over a controversial immigration reform will increase the risk of a government collapse. A likely strong performance from the far-right at the EU elections could put further pressure on French President Emmanuel Macron, possibly leading to government reshuffles. In Italy, worsening economic conditions, as well as electoral calculations among ruling coalition members ahead of EU elections, will likely reduce government cohesion in 2024. Should economic conditions deteriorate significantly and the government prove unwilling or unable to implement necessary fiscal and economic adjustments, the risk of a technocratic administration taking over in 2024 would increase, though new elections remain unlikely.</p>

Policy Gridlocks in Germany, Italy and France

<p><strong>The U.S. will expand technology restrictions on China, benefiting India, Malaysia, Vietnam and other Southeast Asian countries seeking to attract investment.</strong> The Biden administration will expand restrictions on China, including annual updating and expanding of controls on the export of equipment used to manufacture high-end semiconductors and on the export of high-performance chips for training artificial models. The United States is also likely to expand some of the sectors it targets, adding quantum computing, for example. It will also expand the types of restrictions it uses, such as implementing an outbound investment screening mechanism. Chinese companies meanwhile will likely announce new deals to stop using Western suppliers as Beijing incentivizes its domestic companies to use domestic suppliers even when the latter&#39;s products are inferior to imports. This will contribute to even more decoupling as Chinese companies increasingly seek self-sufficiency. More Western companies, particularly in the electronics and semiconductor sectors, will take steps to reduce their own reliance on suppliers from China, boosting growth in alternatives like Malaysia, India and Vietnam.&nbsp;</p>

Tech Sector Supply Chain Decoupling Continues as U.S. Restrictions Expand

<p><strong>In South Africa, political uncertainty ahead of the general elections will exacerbate risks of unrest and limit prospects for reform, while the African National Congress&#39; waning popularity means that the party may not maintain its parliamentary majority, which would delay the implementation of much-needed reforms.</strong> In advance of elections in mid-2024, South Africa will likely experience increased political violence and unrest as tensions rise and opposition groups lead demonstrations against the ruling African National Congress (ANC). While escalation akin to the July 2021 unrest is unlikely given security forces&#39; preparedness, some violence and looting will likely trigger supply chain disruptions and perceptions of lawlessness, which will reinforce investor hesitancy. The ANC&#39;s record low levels of support mean that the electoral outcome is highly uncertain; however, the party&#39;s political dominance and the absence of alternative parties with a realistic chance of unseating it means that the most likely outcome is a narrow ANC parliamentary majority. This would enable President Cyril Ramaphosa&#39;s re-election and likely portend five more years of economic malaise and piecemeal reforms amid party disunity. If the ANC loses its parliamentary majority but retains a plurality, it would likely attempt to govern on its own. Still, it may be forced to seek coalition agreements to reelect Ramaphosa and pass its agenda, but this would force policy compromises that would further hamstring the president&#39;s reform agenda. The loss of the ANC&#39;s majority would very likely usher in a period of political chaos as parties jockey for influence. In a less likely scenario, the ANC wins a plurality but fails to make stable agreements with opposition parties, likely facilitating political volatility and/or deadlock. Finally, in the least likely scenario, the ANC loses a plurality of seats in an unexpected electoral defeat, leading an opposition party (likely the Democratic Alliance) to attempt to form a minority government. However, this would depend on the margin of victory and would be constrained by opposition from the ANC and other parties, likely leading to a period of extended political disorder.&nbsp;<br />&nbsp;</p>

Momentous General Elections in South Africa 

<p><strong>In India, the government will focus on economic development and welfare policies to secure re-election in the April-May general elections, but the risk of inter-communal violence will increase before and after the vote.</strong> Prime Minister Narendra Modi&#39;s Bharatiya Janata Party (BJP) is likely to win India&#39;s general elections in April-May, as the party&#39;s popularity remains high. Leading up to the vote, electoral rhetoric surrounding religious, ethnic and caste issues will likely intensify as the BJP&#39;s Hindu-nationalist rhetoric exacerbates religious divisions, causing the likelihood of violent episodes across states to increase. Modi will center his campaign and post-election strategy on economic and welfare programs to improve women&#39;s living conditions, reduce youth unemployment and address farmers&#39; grievances. Despite the increased spending on these programs, the government will continue to seek fiscal responsibility. Throughout the year, the government will also introduce policies to boost domestic manufacturing and stabilize high food prices amid spikes in inflation and climate-related setbacks to agricultural production. In terms of foreign policy, India will continue cooperation with the United States to ensure regional stability across the Indo-Pacific region and counter China&#39;s growing influence. Thus, in 2024, India and the United States will likely cultivate military-to military-ties aimed at bolstering defense cooperation and India&#39;s industrial base. Despite potential limitations such as India&#39;s ties with Russia and a foiled attempt to assassinate an American and Canadian dual citizen and Sikh separatist on U.S. soil, these are unlikely to sever or significantly disrupt ties. India-China relations will remain a complex blend of economic collaboration and rivalry, with tensions persisting over competition for regional influence. India will likely persist in reducing its reliance on China in efforts to increase domestic manufacturing in sectors like technology and defense to develop India&#39;s industrial base. India may also seek support from allies such as the United States and Japan to substitute some of its imports of China-dependent goods like electrical equipment.</p>

2024 ANNUAL FORECAST: A GLOBAL OVERVIEW

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