“The campaign will focus foreign policy on managing crises, distracting US attention from non-urgent issues and geographies. Trump’s thirst for deliverable ‘wins’ before the election, meanwhile, will amplify foreign leverage in trade and security relations,” Control Risks wrote in a recent report.
Eurasia Group, which has designated US politics as the top risk for the first time in its annual assessment of the state of the world, warns that the election will be the most divisive in over a century, with the outcome likely to be viewed as illegitimate by roughly half the population. The analysts expect the result to be contested, no matter which candidate triumphs.
“The 2020 election is an American Brexit — a maximally polarized vote where the risk is less the outcome than the political uncertainty of what the people voted for,” Eurasia Group says in its report. “It’s uncharted political territory, and this time in a country where uncertainty creates shock waves abroad.”
In preparing its report ahead of the Davos meeting, the World Economic Forum surveyed 750 global experts and decision makers who named economic confrontations and national political polarization as the top risks in 2020.
Taken together, the reports depict a world facing thorny problems with few obvious solutions. Increasingly fractious politics in developed countries is undermining the rules that have underpinned trade and globalization for decades, giving elected leaders license to act unilaterally and stoking conflicts such as the trade war between the United States and China.
US Treasury Secretary Steven Mnuchin, who will attend the Davos meeting, rejected the idea that the upheaval in American politics is a threat.
“I don’t think it has any impact on the world economy,” Mnuchin told reporters on Wednesday, adding that other political issues such as Britain’s departure from the European Union and last year’s deadlocked elections in Israel were similarly inconsequential.
A decade ago, most risk analysts were worried about financial issues such as asset bubbles, according to John Drzik, a contributor to the World Economic Forum report and chairman at research firm Marsh & McLennan Insights. Those worries have been replaced by new, more complicated challenges that are often linked.
“In 2020, we have a combination of negative trend lines that we’ve not experienced in generations. This deteriorating environment is much more likely to produce a global crisis,” warned analysts at Eurasia Group.
Tensions cooled after US troops avoided casualties in an Iranian reprisal attack on bases in Iraq and Trump dialed down his rhetoric. Analysts think that Iran, which has severe economic problems and a restive population at home, will now seek to avoid open conflict with the United States while opportunistically striking back against American interests.
“Iran will continue to disrupt tanker traffic in the Gulf. Tehran also has a penchant for hitting adversaries in unpredictable, asymmetric ways, including through its robust offensive cyber capabilities and proxy network across the region with the capacity to target the citizens and assets of the United States and its allies,” assessed the Eurasia Group.
Climate in crisis
“The near-term impacts of climate change add up to a planetary emergency that will include loss of life, social and geopolitical tensions and negative economic impacts,” the group warns in a report discussing its survey.
Drzik said that climate change dominates the top of the longer range ranking because experts and investors are getting better at understanding and measuring the risks involved. And they are also recognizing that while climate change will put some companies out of business, it also means new opportunities.
— Joe Johns contributed reporting from Washington.