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Manmohan Singh's demise: RTI, RTE, NREGA, Nuclear deal landmarks in his legacyMarin year in review: Top stories of 2024LAUNCESTON, Australia, Dec 30 (Reuters) - It may pay to be a contrarian in 2025, as the upcoming year has the potential to be one of the most volatile in recent memory, particularly in commodities. There is the return of U.S. President-elect Donald Trump, who is threatening to disrupt global trade flows with a wall of tariffs on imports into the United States. With an incoming Republican-led Congress, he will have little to restrain him this time around. There is also still considerable uncertainty over the economic trajectory of China, the world's second-biggest economy and largest buyer of commodities. And the future of the global energy transition has become much hazier because of Trump's climate change scepticism, the increasing influence of right-wing political parties in Europe, and increasing public wariness of the costs they may be forced to shoulder as the world shifts away from carbon-based energy. All of the above could create an environment in which contrarian ideas turn into realities. Below I outline five such scenarios. To be clear, these are not my base case expectations for 2025. Rather they are possibilities worth keeping an eye on. 1. Trump is way better than expected In this scenario, virtually everything goes right for the incoming Trump administration. The threat of tariffs is enough to force concessions from major trading partners, resulting in the implementation of only a few small trade barriers. The United States remains the global economic standout, and the rest of the world essentially rides on its coattails. Inflation eases, monetary policy is relaxed, and China leads an Asian economic recovery as Beijing's stimulus efforts finally bear fruit. In turn, commodity prices are pushed upward, apart from crude oil, which would probably struggle from too much supply, especially if U.S. producers increase output significantly as Trump is demanding. There may also be a peace dividend if Trump helps to broker ceasefires in Ukraine and the Middle East, even if the former requires giving into some of Russian President Vladimir Putin's demands. This would be bullish for commodities exposed to global growth, such as copper, but potentially bearish for crude and natural gas if Russian supplies return to the market. 2. Trump is way worse than feared The new Trump administration follows through on his most extreme threats, erecting massive trade barriers and withdrawing from, or undermining, international pacts and treaties, including the Paris climate deal and the North Atlantic Treaty Organisation. If this happens, expect the global economy to suffer as countries battle to re-order trade flows and supply chains. Inflation would probably rise globally, and monetary policy may be tightened in many major economies as a result. Commodities exposed to global growth, such as copper and iron ore, would weaken, as would crude oil and LNG as demand softens. A preview of this is copper's reaction to Trump's election victory, with London contracts dropping 7.7% in the following week. It is also likely that bond vigilantes would punish Treasuries in response to Trump's policies, especially if he combines huge tariffs with deficit-boosting tax cuts. And U.S. equities may ultimately turn bearish if Wall Street realises that the sugar high from tax cuts will not outweigh the economic damage from tariffs. 3. China comes roaring back Many Western analysts now hold the view that China is the sick man of Asia, meaning a rebound in its economy would come as a big surprise. But it is possible that 2024 will be remembered not as a moment of decline but as the year Beijing cleaned up the troubled parts of its economy, such as the poor financial state of housing developers and local governments. These efforts could start to bear fruit in 2025, allowing Beijing to focus more on boosting consumer sentiment and spending. If China is also able to successfully navigate the new Trump administration's policies, it could change tack to engage more constructively with Europe and build better partnerships with the global south, finding new markets to exploit its leadership in energy transition technologies and products. A revitalised China would be a boon for commodities such as copper, iron ore, liquefied natural gas and coal, but perhaps not as much for crude oil, given its ongoing and rapid switch to electric vehicles. 4. OPEC+ starts to fracture The remarkable cohesion of OPEC and its allies, the group known as OPEC+, has been a defining feature of crude oil markets in recent years. This collective export body has used output cuts to anchor crude prices in a range around $75 a barrel for the past two years. That may not be as strong as some members would like, but is still considerably higher than would likely have been the case without the production discipline. However, the ongoing demand softness and the new Trump administration's aims to further boost U.S. output may place more pressure on the bloc's unity. Some members, such as the United Arab Emirates, may take the view that it is best to monetise reserves sooner rather than later, especially if they start to believe that the China-led switch to electric vehicles (EVs) has become a juggernaut that could upend global energy markets. 5. The energy transition accelerates, but the United States is left behind One way China can counteract any U.S. trade barriers is to boost its engagement with the rest of the world, and one of the best ways of doing this is by expanding trade in manufactured goods such as EVs, solar panels, batteries and wind turbines. The energy transition could accelerate on the back of cost-competitive Chinese goods, coupled with a willingness among buyers outside the United States to move away from expensive fossil fuels. In this scenario, the United States gets further left behind as Trump's "America First" policy effectively becomes America alone. If the energy transition does accelerate, it will be positive for copper, lithium and a host of minor metals. Silver may also benefit, given its use in making solar panels. Overall, the first part of 2025 is likely to be defined by a period of uncertainty, followed by markets adapting to whatever new realities unfold. Past experience suggests that initial price and volume volatility does not last and commodity markets are remarkably adept at adjusting. The views expressed here are those of the author, a columnist for Reuters. Sign up here. Editing by Anna Syzmanski and Clarence Fernandez Our Standards: The Thomson Reuters Trust Principles. , opens new tab Thomson Reuters Clyde Russell is an Asia Commodities and Energy Columnist at Reuters. He has been a journalist and editor for four decades, covering everything from wars in Africa to the resources boom. Born in Glasgow, he has lived in Johannesburg, Sydney, Singapore and now splits his time between Tasmania and Asia. He writes about trends in commodity and energy markets, with a particular focus on China. Before becoming a financial journalist in 1996, Clyde covered civil wars in Angola, Mozambique and other African hotspots for Agence-France Presse.
