The world is moving toward crisis and a state of "geopolitical depression" as the presidency of Donald Trump accelerates divisions among citizens and the unraveling of the global order, risk consultancy Eurasia Group warns.
Liberal democracies are suffering from a deficit of legitimacy not seen since World War II, and today's leaders have largely abandoned civil society and common values, Eurasia Group says in its annual assessment of top geopolitical risks. The breakdown in norms opens the door to a major event that could rock the global economy and markets.
"In the 20 years since we started Eurasia Group, the global environment has had its ups and downs. But if we had to pick one year for a big unexpected crisis — the geopolitical equivalent of the 2008 financial meltdown — it feels like 2018," according to Eurasia Group President Ian Bremmer and Chairman Cliff Kupchan.
U.S. global power is "sputtering to a stall" as the Trump philosophy of retrenchment and unilateralism sows confusion among both allies and rivals, Eurasia Group says. The world now lacks leadership to steer it through the impending crisis.
"'America First' and the policies that flow from it have eroded the U.S.-led order and its guardrails, while no other country or set of countries stands ready or interested in rebuilding it … significantly increasing global risk."
Here are five of Eurasia Group's top risks in 2018:
China will fill the vacuum left by the United States
In the absence of U.S. leadership, China faces less resistance in setting the international standards in trade and investment, technology development and the value of non-interference on other countries' affairs. This could force businesses to adapt to a new set of rules and may increase tensions with the Asia-Pacific region's more democratic powers.
Miscalculations spark conflict
The world has become more dangerous because there is no global power to underwrite security and many subnational and non-state actors can carry out destablizing actions. Cyberattacks and terrorism are two top risks, but there is also the chance of a miscalcuation leading to conflict as North Korea continues to test ballistic missiles in a region full of U.S. allies and as the United States and Russia back rival factions in Syria.
Technology cold war
The United States and China are racing to dominate areas like artificial intelligence and supercomputing, setting up a battle to supply other countries with civilian infrastructure, consumer goods and security equipment. This could lead to a fragmented tech space in which China and countries in its sphere of influence seek to control the flow of information and the United States guards against foreign investment in American tech companies.
Tough year for Mexico
Mexico and investors in its economy will suffer more than the United States if NAFTA negotiations do not succeed this year. A presidential campaign that begins in March will make it difficult for Mexican candidates to accept tough compromises with an antagonistic Trump administration.
Deteriorating U.S.-Iran relations
The Trump administration announced a more aggressive strategy to clamp down on Iran's nuclear program and involvement in foreign affairs. This raises a number of risks, including that the 2015 Iran nuclear deal dissolves, tensions lead to a deadly conflict in the Persian Gulf or another regional theaters and a more assertive Saudi Arabia takes the U.S. stance as a green light for actions that escalate tensions.