Senior Vice President, Head of International, U.S. Chamber of Commerce
January 17, 2024
As the new year begins, executives surveying the global economy can discern intense crosscurrents. New and old risks loom, from Russia’s ongoing invasion of Ukraine and the Israel-Hamas war to continuing U.S.-China tensions relating to trade, technology, and Taiwan. At the same time, the U.S. appears to have avoided recession while bringing inflation to heel, and easier monetary policies promise a more benign global financial environment in 2024.
The U.S. business community understands the need to think globally. As U.S. Chamber of Commerce President and CEO Suzanne P. Clark has said: “Our nation’s future depends on our engagement in the world—it’s how we protect our national security, promote our values, unlock economic growth for American businesses, and lower prices for American families.”
Understanding the global environment is a precondition for the American leadership required to shape that environment. For that reason, the U.S. Chamber’s International team tracks the biggest global trends, including these on our dashboard in 2024:
A global vote-a-rama looms, but not all elections are created equal.
According to The Economist, an unprecedented 76 countries representing more than half the world’s population will go to the polls in 2024 in electoral processes ranging from free and fair to much less so. That total includes eight of the world’s ten most populous countries. Polls generally appear to favor incumbents or ruling parties in India, Indonesia, and Mexico in elections scheduled over the first half of the year. June elections for the European Parliament will gauge the appeal of populist extremes across the 27 EU member states; the outcome also will shape the next five-year European Commission, which will kick off in early December. South Africans will vote under a new electoral system at mid-year as the long-governing ANC’s popularity has ebbed. Russians will cast ballots in a March election that is expected to be neither fairly administered nor genuinely contested. In Canada and the U.K., unpopular incumbents must schedule votes by 2025 at the latest, but snap elections may be called sooner should the governing parties see a favorable window. Worldwide, divergent domestic circumstances are driving voters in different directions, but democracy’s appeal persists on every continent.
The biomedical revolution has arrived—if we don’t blow it.
Just as the 20th century revolutionized physics and chemistry, the 21st century dawned with promise for medicine as scientists plumbed the mysteries of the human genome. And now the medical breakthroughs are arriving: COVID-19 vaccines, developed in mere months, saved an estimated 20 million lives worldwide in the first year of the pandemic alone. Vaccines for RSV, malaria, and even some cancers are being introduced. The new year should see the final eradication of polio, which will join smallpox and rinderpest as just the third virus to be eliminated by human ingenuity. The FDA just approved a gene-editing therapy for the treatment of sickle cell disease, promising a new era of bespoke gene treatments. Alas, the billions spent by private industry on medical research are placed at risk by politicians who threaten to seize property using “march-in” rights or discarding intellectual property protections, endangering the system of incentives that undergirds these astonishing innovations.
Geopolitical risk is fueling a rise in defense spending.
Russia’s ongoing invasion of Ukraine, the Israel-Hamas war, and tensions in other hotspots have swelled the order books of defense companies to near-record highs (though such risks are arguably in line with historical norms). Investors believe higher defense spending is here to stay, reports the Financial Times: “Total global military expenditure increased by 3.7 percent in real terms in 2022 to a new high of $2,240bn, according to the Stockholm International Peace Research Institute. Military expenditure in Europe had its steepest year-on-year increase in at least 30 years.” Russia’s poor performance in the war has sent its military exports plummeting, while the U.S., Nordic, and Korean defense manufacturers seem positioned for export success in the years ahead.
China’s economy faces mounting problems.
From a post-COVID rebound that never quite arrived to a punishing property crunch and an aging population, China’s economic trajectory is more troubled than it has been in decades. Government intervention in capital markets is directing investment to Made in China 2025 manufacturing sectors like electric vehicles, robotics, and medtech, adding to industrial overcapacity and fueling trade tensions. Together with Beijing’s growing bias toward security at the expense of economic openness, these policies are proving an accelerant for capital flight, with foreign investors leading the way. Chinese trade with the U.S. and, to some degree, Europe may be stagnating, but its trade and investment ties across the developing world are partly making up for the losses: Southeast Asia, for instance, trades much more with China than with the West. In Washington, bipartisan support has risen for new moves to respond to Beijing’s civil-military fusion and harmful industrial policies, including further action on export controls and investment restrictions (both inbound and outbound). Even so, the Biden administration is likely to continue its recent steps to limit further deterioration in bilateral ties, and business continues to support mutually beneficial commerce in the many areas where national security considerations are absent.
World trade is expanding even as firms rejigger supply chains.
Defying the obituaries, global trade and investment continue to expand, with U.S. trade approaching $7 trillion in 2023. Gone are the port backups of 2021-2022, but supply chain managers face new challenges: Attacks on Red Sea shipping, shutdowns on the U.S.-Mexico border, and drought-induced capacity reduction in the Panama Canal all mean delayed shipments and higher costs (though not nearly as high as during the pandemic). International companies are moving to deconcentrate and diversify supply chains away from China in a much more concerted manner than even a year ago, but the outlook varies dramatically from sector to sector: EVs and batteries, generic pharmaceuticals, and semiconductors face very different realities. The biggest winners in attracting new investment so far are Mexico and Southeast Asia.
Tech plants seeds of growth; will policymakers trample the seedlings?
2023 was the year AI went mainstream, adding momentum to the already impressive growth companies of all sectors and sizes are deriving from the digital economy. Unfortunately, 2024 may see a proliferation of digital trade barriers, driven in part by the Biden administration’s abdication of its longstanding support for digital commerce. U.S. companies’ leadership in all things digital may only add impetus to other governments’ drive for “tech sovereignty,” a term heard often but not only in Europe, that often singles out U.S. firms for discriminatory treatment. Should this trend be fully realized, the costs for U.S. businesses and workers will be high, but the slower growth, reduced investment, and suppressed dynamism for the economies where these rules are imposed will cause them to fall further and further behind in the global competition for innovation and growth.
The forecast for global finance is… partly sunny?
Market expectations are high for the Fed to cut rates this year, though such moves are dependent on further declines in inflation. If these forecasts pan out, these cuts will likely be emulated elsewhere and should contribute to a more benign global financial environment. Rate cuts usually usher in a weaker dollar; regardless, the greenback’s role as the global reserve currency remains unchallenged. Analysts generally expect a torrid 2023 for equities to give way to more moderate gains for stock markets, and declining Treasury yields are expected to benefit bond bulls. Such a moderate international interest rate environment typically portends good news for emerging economies—which would be a welcome counter to geopolitical tensions.
The year ahead will test U.S. leadership.
The U.S. response to Russia’s invasion of Ukraine has been swift and sure, but the inability of Congress to approve additional support for Ukraine (and Israel)—despite favorable majorities in both the House and Senate—threatens American credibility on the world stage. Revisionist powers are probing for weakness: Russia in the Balkans, Iran in Yemen, and China in the South China Sea. Against this backdrop, the U.S. is lagging on economic statecraft: U.S. international economic policy is rife with initiatives that are long on rhetoric but under-resourced as Washington has left market-opening, growth-inducing, job-supporting trade deals by the wayside. The U.S. hasn’t added to the list of 20 countries with which it has a trade agreement in place in a decade; in that same span, other countries have inked more than 100. Add to this unfilled ambassadorships and long delays for skilled workers seeking U.S. visas, and America’s commercial diplomacy at times looks threadbare.
America’s prosperity at home depends on our prudent and principled leadership on the world stage. To influence world affairs in ways that uphold our standard of living and our standing in the world, Washington must focus on good economic stewardship at home—and keep our commitments under the global rules-based order and mutual defense alongside our allies and partners.
About the authors
John G. Murphy
John Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy and regularly represents the Chamber before Congress, the administration, foreign governments, and the World Trade Organization.