The Briefing Table

December 2025

Welcome to the second issue of our economic and business roundup. Each month we focus on the top 3–5 forces shaping markets, geopolitics, and corporate decision-making. This month, the common thread is policy divergence and structural uncertainty, creating a more volatile and less predictable operating environment.

1) The U.S. Economy: Soft Landing, Tight Supply, and Policy Volatility

The U.S. economic growth is increasingly uneven (i.e., “K-shaped”) with higher‑income groups advancing while lower‑income workers fall further behind. Consumer sentiment remains below prior levels as households grapple with high prices and labor‑market uncertainty. Nevertheless, overall consumer spending and services are holding up for now while inflation seems to be easing toward the Fed’s 2% target. Interest rates remain elevated, but further rate cuts are a near-certainty after Powell departs next year.

Key structural pressures:

• Labor constraints: Economic growth slowed by talent shortages across sectors (e.g., logistics, construction, healthcare), compounded by a net outflow of immigrants and the retirement of baby boomers

• Capital costs: Borrowing remains expensive, limiting investment

• Fiscal trajectory: High deficits introduce uncertainty for interest rates, bond markets, and public-sector contracts

• Policy volatility: Upcoming elections and regulatory shifts could affect taxes, industrial policies, immigration, and environmental compliance

Bottom Line: While the economy appears relatively stable on the surface, C-Suite executives should anticipate intermittent shocks, a tightening labor supply, and persistent volatility in fiscal and regulatory policy, alongside the looming risk of asset bubbles deflating across stocks, crypto, AI, and housing.

2) The Supreme Court Tariff Case: Potential Realignment of U.S. Trade Authority

The Supreme Court is set to rule on Presidential tariff authority. This decision will shape whether the White House retains unilateral control or whether Congress reclaims a significant role.

Potential outcomes and second-order effects:

• Limited authority: More predictable tariffs, slower deployment, fewer surprises

• Expanded authority: Accelerated tariffs, retaliatory measures, inflation pass-through, and supply chain disruptions

Retroactive implications: If SCOTUS rules against the Administration and tariff payments already made must be refunded, companies could face a temporary windfall, but also substantial operational uncertainty as customs authorities determine how refunds are processed. Large retailers and importers may need to manage complex accounting adjustments, potentially impacting cash flow and quarterly results. At the same time, the ruling could trigger pressure to reinstate tariffs under a new framework, creating further decision-making complexity.

Bottom Line: Tariffs will remain a major source of policy uncertainty. Companies should scenario-plan for sudden shifts in sourcing, pricing, and logistics now to avoid scrambling for operational or financial adjustments later.

3) Climate Policy Divergence: Fragmentation, Governance, and Capital Allocation

Global climate policy is diverging rather than converging, with the U.S., EU, and China moving on different trajectories that create regulatory and operational complexity: The U.S. is implementing a (temporary?) policy reversal, the EU is facing implementation delays, and China is pressing ahead at full speed.

Key dynamics:

• U.S.: Litigation and political pressure complicate SEC climate disclosure and emissions standards; California continues to enforce stricter rules

• EU: Aggressive emissions targets, carbon border adjustments, and CSRD reporting requirements continue but with increasing resistance

• China: Focused on competitiveness and standards-setting in EVs, batteries, and solar

Business implications:

• Boards face increasing fiduciary responsibilities around climate disclosure

• Capital investment and insurance costs are rising due to extreme weather, infrastructure constraints, and retreating coverage

• Multi-jurisdictional compliance is costly and will persist for the next decade

Bottom Line: Climate is no longer a long-term horizon issue but a medium-term operational and strategic constraint.

4) Japan–China Tensions: Economic Rivalry, Strategic Risk, and Supply Chain Exposure

Tensions in East Asia are intensifying not only due to Japan’s military modernization and China’s assertive regional posture, but also because of the role of Japan’s new Prime Minister Sanae Takaichi, whose hardline stance on Taiwan and accelerated defense agenda have further sharpened regional frictions.

Key points:

• Red lines remain fragile: Taiwan independence continues to be China’s ultimate non-negotiable red line

• Alliance dynamics: U.S. guarantees shape Japanese actions and influence regional signaling

• Operational exposure: Semiconductors, battery materials, precision machinery, and shipping lanes are vulnerable to disruption

Bottom Line: Geopolitical risk is unlikely to escalate to conflict in the short term, but supply chain and trade disruptions are increasingly probable. Scenario analysis remains essential.

5) Autonomous Vehicles: The Shift from Hype to Practical Deployment?

The AV landscape appears to be moving from hype to selective, practical deployment. Funding and deployment are now concentrated among a smaller set of players such as Waymo, Tesla, and key Chinese operators.

Key dynamics:

• Safety outcomes: Recent high-quality studies suggest significant safety benefits for Waymo AVs compared with human drivers in deployed areas

• Economics: Robotaxi unit economics remain challenging; middle-mile and freight applications show clearer ROI

• Regulatory fragmentation: Different U.S. states impose varying safety, testing, and liability requirements

• AI oversight: 2025 executive orders increase scrutiny on safety-critical AI systems

Caution: The automotive industry has a long-standing tendency to go “all-in” on emerging trends (e.g., EVs, AVs, fuel cells, telematics, M&A) only to encounter setbacks when reality invariably catches up with the hype. AVs are especially sensitive, subject to intense scrutiny and widespread media attention, where even a single high‑profile incident can derail public acceptance and regulatory progress, impacting not just individual companies but the entire sector (e.g., Cruise, Tesla, Uber).

Strategic implication: A more thoughtful, scenario-based approach is essential. Companies should consider a range of plausible outcomes rather than relying on most-likely or best-guess forecasts, especially for AVs where technological, regulatory, and public perception risks remain high.

Bottom Line: AV adoption is real but incremental. Executives should invest selectively, partner strategically, and avoid overcommitting capital until the sector demonstrates sustained, scalable performance.

Key Take-Aways

• Expect divergence, not convergence. Macro, trade, climate, and geopolitical policies are moving in different directions across regions

• Scenario analysis is critical. Model multiple economic, policy, and supply chain scenarios to maintain optionality

• Build operational resilience. Labor, energy, insurance, and capital constraints require flexible contracts and adaptive sourcing

• Strategic capital allocation: Prioritize investments with optionality, resilience, or early-mover advantages, while avoiding overcommitment to high-risk, unproven technologies

• Geopolitical vigilance: East Asia, trade enforcement, and climate regulations remain the highest-consequence risk zones