Global Risks Weekly Roundup #18/2025: US tariff shortages, military policing, Gaza famine.
Executive summary
Shortages of some goods expected in the US starting later this month, because of tariffs.
The power outage on the Iberian Peninsula was the worst in Europe since 2003, and Europe may have been close to a more widespread blackout.
Trump wants to involve the military in policing within the US.
Negotiations between the US and Iran over its nuclear weapons program have stalled.
Microsoft will host xAI’s Grok model in its cloud service, in a move to reduce Microsoft’s dependency on OpenAI.
Gaza is running out of food, and the UN warns of famine.
India-Pakistan tensions remain high.
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Geopolitics
United States
US economy
A recommendation for those in the US: Because imports are slowing, especially from China, shortages of some imported goods are expected to become noticeable in the coming weeks and to become substantial around August. If tariffs continue, some of these shortages may become pronounced; prices will increase dramatically for other goods. We recommend that those in the US consider buying imported goods before shortages and large price increases arrive.
Forecasters also discussed the possibility of shortages caused merely by self-fulfilling prophecy. For instance, the majority of toilet paper for US consumption is produced domestically, and so, one might naïvely think that as shelves start to empty of other products, toilet paper inventories will not be affected. However, shelves might empty of some products simply because people expect them to, even of products that are not substantially affected by tariffs.
Ocean shipping volumes arriving in the US are expected to start falling off this week. Volumes arriving at the Port of Los Angeles from Asia are expected to be 35% lower this week, and total volumes arriving at New York ports are expected to be 40% lower. Subsequent weeks are expected to see 60% lower volumes than normal, as companies have halted or reduced imports. These reductions in arriving port volumes will be felt in stores over the coming weeks and months.
We also wonder whether tariffs might affect the US food supply to a limited extent. The US imports about 15% of its food, by value, and a lot of these exports aren’t luxuries. Food prices fell by 0.1% in March, compared to February, but we expect to see food prices increase over the coming months.
Tariffs and business uncertainty have dampened US economic growth. The US economy shrank by 0.3% in the first quarter of 2025, and as of May 1, the Atlanta Fed projects 1.1% growth in GDP for the second quarter. US consumer confidence plunged in April to nearly a Covid-level low. In a sign of the times, McDonald’s store traffic fell by 3.6% in the first quarter of this year, the biggest decline since 2020. The US government spent $200B more (about 10% more) in Trump’s first 100 days than in the corresponding period in 2024, driven primarily by fundamentals (Social Security, Medicaid/Medicare, spending on military personnel and veterans, and interest payments).
Apollo Global Management predicts that the impact of tariffs on consumers and businesses will lead to a recession in the US this summer. Apollo predicts that the trucking industry will be particularly hard hit; Craig Fuller of Freightwaves expects “a large number” of trucking companies to go bankrupt.
However, the stock market ended last week extremely well, with the S&P 500 recovering losses since tariffs were announced on April 2 on news that the US had robust job growth in April and that China might be open to trade talks. The stock market is also doing as well as it is at least in part because individual retail investors have bought into the market, even as institutional investors have sold off a lot of their holdings. However, while the stock market recovered, the dollar fell 9.5% in the first 100 days of Trump’s presidency against a basket of foreign currencies. The dollar’s fall may reflect the beginning of a global shift away from the dollar as the world’s reserve currency.
The Trump administration imposed tariffs to help US manufacturing, but any such help is not being felt in the short term, as tariffs affect the prices of imported parts, intermediate goods and equipment paid by US manufacturers, and uncertainty dampens business investments in manufactured goods. New manufacturing orders, production and employment remained depressed in April; General Motors forecasts $4–5B lower profits in 2025 because of tariffs.
Farmers are also being hurt by the trade war, as export orders are being canceled. The executive director of an export trade group for farmers reports that the situation is “a full-blown crisis”.
US politics
Trump signed an executive order that requested recommendations within 90 days about how to involve the military in policing within the US. Historically, the Posse Comitatus Act has prevented military personnel from being deployed within the US except in certain unusual circumstances. The US military also created a second special military zone along the border with Mexico where the military can detain immigrants.
In an interview, Trump discussed the possibility of deporting 20–21 million immigrants without due process. And the US is considering sending immigrants with criminal records to Libya and Rwanda, in addition to El Salvador.
Trump’s national security advisor, Mike Waltz, was reassigned to the more ceremonial position of ambassador to the UN for several reasons, including his perceived inefficiency, but also his hawkish stance on Iran, potentially, coordination with Israel and Netanyahu, and to a lesser extent, his role in Signal chats containing national security information. Marco Rubio will serve as the acting national security advisor.
Rubio is now wearing four hats: Secretary of State, interim national security adviser, acting administrator for USAID and acting archivist of the United States. It is possible that his holding multiple roles will decrease his and the US’ ability to handle crises; fortunately, Rubio has extensive experience. The major issues Rubio must address include tensions between India and Pakistan, attacks on Red Sea shipping and Israel by the Houthis in Yemen, negotiations with Iran over its nuclear weapons program, the situation in Gaza, and attacks on the Druze religious minority in Syria.
The Trump administration has asked the Supreme Court to grant DOGE access to Social Security computer systems. Two DOGE employees were given access to a classified network that protects nuclear weapons information; however, their access was not activated.
Nearly all remaining employees at the National Institute for Occupational Safety and Health (NIOSH) have been laid off.
Trump appointees in the Department of Justice (DoJ) reassigned all senior voting-rights investigators and directed attorneys to dismiss all active voting-rights cases.
ABC News highlights how the Trump administration has pursued a strategy of making fast changes and publishing many executive orders, fast enough that opposition and the courts can’t react effectively.
An NPR/PBS News/Marist poll found that 45% of the US gives Trump a failing “F” grade for the first 100 days of his presidency. A poll conducted between Feb 28 and Mar 20 found that 52% of US adults agreed with the statement that, “President Trump is a dangerous dictator whose power should be limited before he destroys American democracy.”
Europe
Germany’s domestic intelligence service has classified the AfD party as “extremist,” paving the way for more surveillance of the party. US Secretary of State Marco Rubio expressed his concern about this on Twitter and also called the German political establishment’s immigration policies extremist; the German Foreign Office Twitter account snapped back at him in reply.
Classification of the AfD as extremist could potentially be a precursor to it eventually being banned. Our forecasters estimated the probability that the AfD would be banned within the next 6 months to be 4.9% (range: 2% to 9%).
Zelensky says that in his meeting in the Vatican with Trump, they agreed that a 30-day ceasefire was the first step towards peace and also discussed air defence and sanctions. After the meeting, Trump said that he fears Putin “doesn’t want to stop the war”.
Ukraine and the United States finally signed a minerals deal, after the US agreed to Ukraine’s request that any benefits the US gets will be in exchange for future military aid, not past aid. A joint fund will be set up, financed by the exploitation of critical minerals and oil and gas resources.
Following the signing of the deal, the US prepared to make its first sale of military equipment to Ukraine since Trump took office, and a licence for $50 million or more in exports was certified by the State Department. One Ukrainian official said that because Ukraine will now exclusively be buying US weapons, it will need to be more selective about what it requests.
Russia announced the beginning of “direct talks” with Ukraine; Kyiv hasn’t commented yet.
Russia is expanding bases and planning to mass large numbers of troops along its borders with Finland and the Baltic states, in an indication that it may be preparing for war in the Baltics. A Russian invasion of one or more Baltic states would challenge NATO and would be a test of whether Article 5 still has teeth.
The power outage on the Iberian Peninsula caused businesses to close, cars to operate without traffic lights, and consumers to resort to paying for goods with cash. It was the worst outage in Europe since 2003. Some details are still unclear, but it seems that a sudden outage resulted in the frequency across the electrical grid dropping, and emergency response systems weren’t able to respond in time. This may have resulted in a cascading failure, with further outages causing further frequency problems. It took hours to reboot systems and to use battery storage and hydroelectric and gas plants to restore power.
The frequency fluctuations may have been close to triggering a much more widespread blackout in Europe. Grid improvements that facilitate handling a mix of renewable energy sources and managing load requirements without triggering similar failures may be needed in the future.
France is accusing Russia of cyberattacks on defence, finance, and media sectors.
In Romania, George Simion, a Romanian nationalist and Eurosceptic, won the first round of presidential elections on Sunday, with 40% of the vote. Simion opposes giving military aid to Ukraine and supports NATO, US leadership of NATO, and Trump’s Make America Great Again movement. Nicuşor Dan came in second place; Dan will run against Simion in the second round, to be held on May 18th. Dan is the Mayor of Bucharest and is an independent politician running on an anti-corruption platform. He was formerly a mathematics professor; decades ago, he won two gold medals in the International Mathematics Olympiad, achieved both times with perfect scores. Despite his considerable intellect, he is not a natural communicator or politician. Dan received half the votes that Simion did, but he is likely to pick up most of the votes from the third-place candidate, Crin Antonescu. A tight second-round race is expected, with Dan being the slight favorite.
A first round of the Romanian presidential elections was already held last November, but after a little-known, far-right, pro-Russian candidate, Călin Georgescu, won that round, the election result was annulled by the constitutional court over concerns about Russian interference. The court ordered the election to be redone, and Georgescu was barred from running again. He was not on the ballot in Sunday’s elections.
Armenia is reportedly joining NATO drills in Georgia. Armenia is still technically a member of the Russian-led Collective Security Treaty Organization (CSTO), a mutual defence pact among Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan, but Armenia froze its membership in the CSTO in February 2024 after Russia supported Azerbaijan in border clashes with Armenia, and Armenia has stopped paying its CSTO dues.
Middle East
The UN warns of famine in northern Gaza.
US Secretary of Defense Hegseth tweeted a threat of military action against Iran, and Iran responded by complaining of "contradictory behaviour and provocative statements” by the US. Meanwhile, Marco Rubio said that Iran must walk away from all uranium enrichment and long-range missile development. Iran postponed a fourth round of negotiations that had been planned to take place on May 3; Oman’s foreign minister suggested that the talks were postponed for logistical reasons, but others have pointed out that the pause came as the US State Department announced new sanctions. Our forecasters estimate that there is a 70.5% probability that the talks will either have succeeded or will still be ongoing on June 15th (range: 55% to 75%).
Netanyahu said that Israel would only agree to a nuclear deal with Iran that eliminates the country’s ability to enrich uranium. He said that the only way to prevent Iran from building a nuclear weapon would be to dismantle “all the infrastructure of Iran’s nuclear program,” and that Israel “cannot live with anything short of that”. This and other previous statements increase the risk that if the US does not end Iran’s nuclear program, Israel might.
The epicenter of last week’s explosion at the Iranian Shahid Rajaei port has been tied to a charity controlled by Ayatollah Khamenei, the Bonyad Mostazafan, or the Foundation of the Oppressed. A 2008 US Congressional Research Service report found that the charity likely represented 10% of Iran’s GDP; the US Treasury has reported that the charity has business relationships with Iranian police, the Defense Ministry and the Islamic Revolutionary Guard Corps (IRGC). There has been no serious attempt to blame the explosion on the US or Israel.
In Syria, there have been deadly clashes between Islamist factions, security forces, and fighters from the Druze community near Damascus. In response, Israel launched airstrikes on targets close to Syria’s Presidential palace in Damascus, to deter Syrian any military actions against the Druze minority.
Asia
Tensions between India and Pakistan continue to simmer. A week ago, India’s navy carried out drills, including missile tests, and on Saturday, India announced that it has banned imports from Pakistan. Pakistan shot down an Indian drone that was operating in Kashmir early last week and test-fired a ballistic missile over the weekend.
However, there are also signs that the conflict is not likely to escalate. Last Monday, Pakistan’s defence minister claimed an Indian incursion was “imminent,” while another official claimed last Wednesday that Indian airstrikes would happen within 36 hours. But no airstrike or military clash has occurred.
US Secretary of State Rubio has stepped up efforts to defuse the situation, while Vice President JD Vance urged the two sides not to start a broader regional conflict. Despite these efforts, Pakistan’s defense minister claimed that the chance of a conflict with India is “increasing… not decreasing”. However, forecasters generally agree that the probability of an India-Pakistan conflict resulting in at least 1,000 military fatalities within the next six months is slightly lower than it was last week.
Other geopolitical
The Liberal Party won elections in Canada and will continue as a minority government. Much of the focus of the election campaign was over which candidate could stand up to President Trump.
Australia’s Prime Minister Albanese was re-elected in a landslide election.
Artificial Intelligence
Microsoft will host xAI’s Grok model in its cloud service, in seemingly the latest move by Microsoft to reduce its dependence on OpenAI.
OpenAI deployed an updated version of its 4o model, which users quickly found to be extremely sycophantic, insincerely lauding users and agreeing with them even when they were clearly wrong. OpenAI then rolled back the model to an earlier version. It’s surprising that OpenAI did not catch this in testing.
Google DeepMind’s new Gemini 2.5 Flash model has a greater tendency to generate text that violates its safety guidelines than does Gemini 2.0 Flash. About 300 Google DeepMind staff in London have been seeking to unionize in recent weeks, in order to challenge Google’s decision to sell AI technology to defence groups connected to the Israeli government.
Trump officials are considering changing US AI chip export rules, “including possibly doing away with its splitting the world into tiers that help determine how many advanced semiconductors a country can obtain.”
Meta launched an AI assistant app.
After initially being suspended over data-protection concerns, DeepSeek is again available in South Korea. Baidu says it has a cluster which can train DeepSeek-like models.
Anduril announced its Pulsar-L, a portable version of its AI-enabled Pulsar electronic warfare (EW) system for ground forces, that is capable of disabling drone swarms (see video). It's under 11.3 kg, has an operating range of 5+ km, and operates autonomously; it doesn't require an EW specialist to operate.
Scammers are using AI to create fake identities to gain admission to community colleges in the US, to steal state and federal financial aid.
Other tech
IBM announced that it would invest $150 billion in the US over the next 5 years; a portion of that investment would be used for facilities for quantum computer production.
Sam Altman’s “World” (formerly Worldcoin) biometric ID company is partnering with Tinder and Visa.
Biological risks
Ten US states are now reporting active measles outbreaks.
Climate and Natural Disasters
Heat waves have been toppling temperature records in the Middle East and South Asia, among other places. Temperatures in some locations in India and Pakistan have reached almost 50°C.
Unexpectedly, the Antarctic ice sheet grew between 2021 and 2023, for the first time in decades.
The populations of three quarters of nearly 500 bird species in the US have declined, two thirds of those nearly 500 species substantially, from 2007 to 2021.
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I noticed an issue in this one: the linked source for "there is a full-blown famine in northern Gaza" is from May 2024.