The Trump effect (and other events that shaped 2025)

It’s been a year of unprecedented change and uncertainty for businesses across the globe. Largely fuelled by the actions of the 47th President of the United States, following his inauguration on January 20, 2025.

To try and sum up the impact of Trump’s policies – as well as other key events affecting businesses over the past 12 months – we spoke to some of our faculty experts for their reflections on a rollercoaster year.

Yoyoing tariffs brought volatility to international trade

Professor Davide Castellani, Professor of International Business

“The Trump administration introduced a sweeping wave of tariffs in 2025, targeting a wide range of products and trade partners under the banner of making global trade ‘reciprocal’ again. These measures were presented as corrective following years of persistent U.S. trade deficits, and as a tool to bring industrial production back to U.S. soil. Yet, despite the political narrative, the economic logic behind this strategy remains flawed, and the effects have proved far more disruptive than transformative.

“One of the most significant misunderstandings has been the assumption that tariffs could meaningfully reduce the overall U.S. trade deficit. In reality, the U.S. trade deficit is not simply the result of ‘unfair trade’, but of a deeper imbalance inside the American economy.

“Internationally, the volatility of U.S. policy has undermined confidence in America as a reliable trade partner. Long-standing allies have accelerated efforts to diversify away from U.S. markets, and some economies have been drawn closer to China – now clearly the other pole of the evolving geopolitical landscape. Europe could benefit from this realignment, but fragmented political leadership risks squandering the opportunity.”

DEI became a weapon

Dr Melissa Carr, Director of EDI, World of Work Institute

“The past year has brought diversity, equity and inclusion (DEI) from the margins of ‘culture wars’ to the centre of regulatory and business decision-making. After his inauguration, President Trump signed orders framed as ‘restoring merit-based opportunity’, revoking federal DEI and affirmative action frameworks and directing agencies to abolish DEI offices and programmes. Thousands of federal workers in DEI-related roles have since been removed and parts of the private sector followed by scaling back or rebranding activity under political and legal pressure.

“What was new in 2025 was not only policy but tone. DEI has been weaponised as a symbol of everything that is supposedly wrong with ‘wokeness’. In rallies and media appearances, the administration portrayed migrants as ‘aliens’ and ‘invaders’ and cast human rights advocates as soft on crime or even complicit with ‘monsters’. That framing spilt into corporate life, where DEI is sometimes portrayed as protecting the ‘undeserving’ or lowering standards, and the people leading this work are pulled into broader battles over who belongs and who does not.

“So how should boards and senior leaders respond to a DEI backlash? A first step is to be clear on which pressures are legal, which are political, and which are just noise and threats. Second, organisations need to rebalance the ‘business case’ and ‘moral case’ for DEI. Corporate DEI narratives have sold diversity primarily as a route to higher profits, innovation and market share. The more robust approach treats equity and dignity at work as ethical commitments and as part of risk and governance: preventing discrimination, complying with law, upholding human rights, and creating conditions for sustainable performance.”

RTO mandates challenged the ‘new normal’

Dr Rita Fontinha, Director of Flexible Work, World of Work Institute

“Over the past year, large employers have been tightening return-to-office (RTO) mandates and narrowing the menu of flexible-work options, even as hybrid work remains entrenched. Recent surveys show a clear shift: one CBRE study found that 37% of companies are enforcing office attendance in 2025, more than double the 17% doing so in 2024, while only about 7% of firms still allow fully remote work in 2025, down from 21% a year earlier.

“In a strict ‘labour market as a market’ view, this reflects changing bargaining power: with slower hiring, the normalisation of post-pandemic life, and the rapid diffusion of AI tools that let firms automate tasks or source talent globally, employers’ outside options have improved. That makes it easier for companies to insist on in-person presence, while offering fewer unconditional remote roles.

“Yet the persistence of substantial work-from-home time shows that flexibility has not disappeared. It has become more conditional and employer-designed, rather than an open-ended right employees can easily demand.”

The explosion of AI left leaders lagging

Professor Keiichi Nakata, Director of AI, World of Work Institute

“2025 was a year of AI action plans, with global economies signalling their commitment to developing and engaging with AI. In January, the UK AI Opportunities Action Plan was published, followed by the EU AI Continent Action Plan in April, America’s AI Action Plan in July, followed immediately by China’s Global AI Governance Action Plan in the same month.

“Despite differences in approach, each economy is striving for competitiveness and global influence in AI. Donald Trump’s influence can be seen in the language used in America’s AI Action Plan, subtitled ‘Winning the Race’, in which his forward states: “It is a national security imperative for the United States to achieve and maintain unquestioned and unchallenged global technological dominance. To secure our future, we must harness the full power of American innovation.” Trump will not let China win the race.

“The backdrop to these action plans is the continuing developments in generative AI (GenAI). While some successful use cases in GenAI are emerging, many still remain at the exploration stage. Our own survey of 4,000 UK workers commissioned earlier this year showed that they are optimistic about AI but also overwhelmed, seeking more guidance and training by their employers to embrace the potential opportunities AI brings.

“Some organisations are understandably cautious in the wake of reports findings that 95% of GenAI pilots at companies are failing to deliver measurable business impact and concerns about the use of AI impacting the generation of meaningful contents, characterised as ‘workslop’ by Harvard Business Review.”

Cyberattacks hit seemingly untouchable businesses hard

Professor Adrian Palmer, Professor of Marketing

“2025 was a standout year for high profile cyberattacks on global brands, from Cartier and The North Face to Jaguar Land Rover, Marks & Spencer, Co-op, Harrods and adidas, to name just a few. While the threat of cyberattacks is nothing new, the scale of impact on household names sent shock waves across the industry. If their defences aren’t up to the job and customer relationships affected, then what hope is there for businesses with less resources and smaller budgets?

“Complete security is a rare state, and trade-offs must be made to balance the costs and benefits of increased cybersecurity. Even a full closedown of IT systems may be worth accepting if the chances of a cyberattack happening are very low and the costs of mitigation are high. But the problem remains that it can be difficult to predict the future frequency and severity of cyberattacks.

“Whilst media headlines tended to highlight the big companies that were targeted, we shouldn't forget that every business is a potential target. For smaller or poorly funded businesses, which put the majority of their sales into just one platform, the consequences can be proportionately more devastating than for a multinational company. Resilience needs to be built into planning for businesses of all sizes and sectors.”

If you’d like to speak to any of our faculty experts contact pr@henley.ac.uk.