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In a world with countless markets, it is impossible to avoid or prevent divergence from happening. Every country faces unique financial challenges and addresses them in different ways—based on their economic conditions. Adopting different monetary policies, though beneficial to each country, could cause some global conflicts. At the “Markets: Dealing With Divergence” session at the World Economic Forum Annual Meeting 2025, policymakers, governors, and investors gathered to discuss the current situation and explore potential solutions to this challenge.
THE CURRENT SITUATION
The United States, which represents 4% of the world’s population, contributes 20% of global GDP and 68% of world market capitalization. Despite this high level of productivity, the U.S. still faces some financial challenges in some areas, particularly inflation. Similarly, the European Union (EU) faces financial uncertainty—influenced by the U.S. election—to which they plan to react by being gradually cautious. While both the U.S. and the EU face similar challenges, their unique approaches—shaped by cultural and political contexts—require careful consideration.
ADDRESSING DIVERGENCE
When developing strategies, it is important to take other factors into account, especially the cultural aspects. The United States and the EU have some cultural differences. For example, Americans normally focus on opportunities rather than risks, which is opposite from Europeans, who tend to focus on risks more. This cultural difference can lead to two regions adopting different approaches to shared challenges. With this, revising regulations is often used to change some cultures, which might be harmful to the country’s economy. In this case, the EU uses incentives, rewarding people to incentivize them to take more risks. When facing divergence, it is also important for two trading regions to find common ground to tackle the challenges, rather than going into a significant divergence, so that they can move forward together.
Divergence, if left unchecked, can have serious consequences in global markets. In a trading world, economic instability in one region can affect others, potentially causing global conflicts. Thus, all sectors should focus on tackling this challenge through collective efforts, mutual understanding, and coordinating regulations. By dealing with divergence, we can then build stronger and more resilient economies.
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