Major Economic Policy Shifts in 2025 to Watch
The year 2025 had quite a bumpy start with unexpected events in 2024, including the Great Fire of California, political upheaval in Europe, and China and India's growing influence in Asia. Despite these challenges, 2025 also holds opportunities as technology, environment, and human resources reshape the world. Major markets are adapting to these changes.
Europe
Firstly, the European Union (EU) in 2025 will implement stricter controls on outbound investments in critical technologies, including AI, semiconductors, and quantum computing. As reported by Reuters, the EU plans to increase economic security by reviewing foreign investments and controlling technology exports to rivals like China. Regulations like this require technology sector businesses to evaluate their international partnerships and investment strategies carefully.
EU made policy optimization on top of their agenda.
Secondly, the EU is streamlining its regulatory framework to enhance global competitiveness. Last November, the European Commission’s President Ursula von der Leyen announced a “simplification revolution” of existing laws. The policy aims to attract global investment and facilitate EU operations by reducing reporting and harmonizing policies.
Then comes the EU's deforestation ban, now postponed to December 2025. Producers of soy, meat, and wood will need to find ways to verify that their imports are not linked to deforestation due to the significant impact this regulation will have on supply chains. The implementation delay allows companies to adapt their sourcing practices and establish compliance mechanisms, reflecting the EU's balance between environmental goals and business practicality.
China and India
In 2025, China and India implemented significant policy shifts that substantially impacted their economic and strategic landscapes. The greatest threat to the Chinese economy continues to be deflationary risks. Deflation increases pressure on goods and services to lower prices, discouraging consumers from making immediate purchases or investments. To address this, as projected by Oxford Economics, Beijing will adopt an expansionary fiscal policy and provide additional rate cuts to generate short-term demand in 2025. Furthermore, China prioritized technological self-reliance and green energy investments to align with its long-term development goals. However, for MERICS, a massive reform of policies in any sector is not likely to happen.
Deflation may sound good until it hinders purchases and investments.
Meanwhile, as Reuters reported, India sets to reduce its disinvestment target for the fiscal year 2024–25 by 40%, lowering the goal from 500 billion rupees to under 300 billion rupees ($3.47 billion). This adjustment highlighted a strategic shift from aggressive privatization to favouring other growth strategies. Simultaneously, the Indian government increased infrastructure spending by 25%, signalling its commitment to driving economic growth through domestic development projects. This infrastructure push was complemented by targeted tax reforms and tariff adjustments designed to attract foreign investments and encourage local production. (Reuters)
India strengthened its partnership with the United States on the international front, particularly in technology and defence. The two nations collaborated on integrating their technology and defence supply chains, emphasizing the need for a trusted and resilient innovation ecosystem. This partnership reflects India’s growing global presence and its efforts to position itself as a key player in international geopolitics. (White House)
The US
According to RSM, U.S. policies under President Donald Trump are set to reshape global business. Higher tariffs on Chinese imports aim to boost domestic manufacturing, but risk escalating trade tensions and disrupting supply chains. Combined with a stronger dollar, US policies may decrease US export competitiveness and increase emerging markets’ debt. Meanwhile, opportunities arise for countries like Vietnam and Malaysia as new production powerhouses in place of China.
US new tariffs on China’s exports may lead to further trade disputes between the two superpowers.
Environmentally, the administration’s focus on deregulation and support for fossil fuels may influence global energy markets, slowing the transition to renewables and affecting climate change initiatives. For The Times, this pivot could alter international investment patterns in energy and challenge environmental goals.
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While 2025 began with many trends and policies continuing from 2024, new administrators and policy changes may still cause unforeseen consequences. Businesses should remain positive but stay vigilant. Specific global risks include increased trade disputes, economic difficulties for developing countries, and slowed progress on global sustainability. Meanwhile, 2025 may also offer opportunities in emerging markets and technological advancements.
About the Author
Bert Nguyen is a Copywriter with Flynde, a global company specializing in translation solutions for businesses of all sizes.
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