Year-Ahead Predictions 2019 Companies must prepare for significant global events that will occur and trends that will gain momentum in the coming year.About Year-Ahead Predictions As part of its mandate, the A.T. Kearney Global Business Policy Council continually scans the horizon for developments along the key dimensions of demography, economy, environment, geopolitics, governance, resources, and technology. In assessing this wide range of dimensions, the Council keeps its finger on the pulse of events and trends that are likely to affect the external operating environment. We use the insights gleaned to help business leaders and strategic planners be mindful of likely near-term developments that could affect their industries broadly and their companies specifically. Year-Ahead Predictions 2019 makes 10 significant predictions, including forecasts of events that we believe will occur and trends that we expect will gain momentum in the coming year. For each prediction, we first explain the current state of play and then lay out our expectations for how it will unfold over the next 12 months. Each of these developments will have an important near-term impact on the global business environment in its own right. When considered together, these predictions signify potentially profound shifts. This is the third consecutive year in which the Council has made such predictions. As in the past, we hold ourselves to account by assessing the validity of the predictions we made the previous year at the end of the publication.Executive Summary The Global Business Policy Council makes 10 key predictions for 2019, all of which we believe will have important implications for the global business environment:1. The US瑿hina trade war will intensify. 2. Bitcoin will lead the consolidation and maturation of the cryptocurrency market. 3. The global trash crisis will spur innovations in waste management. 4. The global shipping industry will crash into new sulfur regulations. 5. The Xi璓utin relationship will be the world's most consequential bromance. 6. The global anxiety epidemic will lead to a proliferation of new products. 7. A sand shortage will grind the gears of the global construction industry. 8. The looming emerging markets credit crisis will grow in both scale and scope. 9. Africa will be more connected than ever. 10. Real-life Iron Man will materialize in the form of exoskeletons.View online: bit.ly/YAP2019Year-Ahead Predictions 20191In 2019, trade tensions and geopolitical realignment will intensify. At the same time, underreported resource challenges will rise in urgency.Prediction #1The US瑿hina trade war will intensify. US瑿hina relations worsened significantly in 2018 as US President Donald Trump took a hardline approach to reducing the bilateral trade deficit with China. Over vocal opposition from the business community, the Trump administration imposed tariffs on $250 billion of Chinese imports after negotiations failed. Beijing retaliated with tariffs on $110 billion of US imports and took steps to create a more restrictive business environment for US companies in China (see figure 1). More than half of US companies reported slower approvals or enhanced inspections by Chinese authorities following the imposition of tariffs. Beijing has also refused to address long-standing US complaints related to China's industrial policies, weak intellectual property protections, and forced technology transfers. Negotiations were in a standstill until early December, when Presidents Trump and Xi agreed to resume talks for 90 days.Figure US China tensions show no signs of subsiding Key dates in the US China Trade War Event Prediction July 6, 2018 The United States imposes tari s on $34 billion of Chinese imports. China retaliates with tari s on $34 billion of US imports.The US Trade Representative (USTR) begins an investigation into unfair Chinese trade practices pursuant to Section 301 of the Trade Act of 1974.August 18, 2017September 24, 2018The United States imposes tari s on an additional $200 billion of Chinese imports. China retaliates with tari s on $60 billion of US imports.Summer 2019The United States imposes tari s on $267 billion of Chinese imports. China retaliates by increasing the tari s on US imports.March 22, 2018 The USTR releases its Section 301 Report, an investigation into unfair Chinese trade practices, and recommends tari s.August 23, 2018The United States imposes tari s on $16 billion of Chinese imports. China retaliates with tari s on $16 billion of US imports.Spring 2019The US tari s on the $200 billion list of Chinese imports increase from 10% to 25%.Sources: Bloomberg; A.T. Kearney analysisThis short ceasefire is unlikely to last, however, so the US瑿hina trade war will intensify in 2019. Insufficient progress on key issues will likely lead President Trump to raise tariff levels on Chinese imports. The administration may even impose tariffs on an additional $267 billion of Chinese goods--encompassing essentially the entire value of Chinese imports in 2017. And while Democrats will have a majority in the US House of Representatives, the bipartisan disapproval of China's trade practices will sustain President Trump's trade agenda. China's retaliation will likely include increased tariffs on some US imports and efforts to offset potential losses for domestic companies. Beijing will also look to secure alliances, dispel growing opposition to its trade practices, and fortify its domestic economy. China will therefore focus on diversifying its trade and reducing its dependence on the United States, including pressing ahead with free trade agreements. Southeast Asian economies will likely benefit from the trade war as US importers shift production and supply chains to avoid tariffs on Chinese goods. This move will begin the long process of restructuring supply chains (subscription required) for many companies. The International Monetary Fund (IMF) estimates that the trade war will translate to a small but significant 0.2 to 0.4 percentage point reduction in global economic output in the long term. View online: bit.ly/YAP2019 Year-Ahead Predictions 2019 3Prediction #2Bitcoin will lead the consolidation and maturation of the cryptocurrency market. Bitcoin celebrated its tenth birthday in October 2018 under clouds of doubt regarding the long-term future of cryptocurrencies. All cryptocurrencies saw a rapid price spike in 2017--and Bitcoin alone soared 1,375 percent that year. But Bitcoin dropped from more than 90 percent of the total cryptocurrency market capitalization in January 2016 to just a 33 percent share in February 2018 as a result of the rapid proliferation of altcoins (see figure 2). And the cryptocurrency market overall collapsed spectacularly in 2018; the 10 largest cryptocurrencies lost more than 80 percent of their collective value between January and September. This decline was fueled by security breaches and hacks, spiking fees, and the popping of a highly speculative bubble. In September, the New York Attorney General's Office released a report saying that crypto exchanges were at risk of market manipulation while failing to provide basic consumer protections.Figure Bitcoin is slowly regaining its dominance in cryptocurrency markets Total cryptocurrency market capitalization Bitcoin Ethereum OtherSources: CoinMarketCap; A.T. Kearney analysisDespite these obstacles, the cryptocurrency market will begin its second decade in a state of post-crash consolidation and maturation. By the end of 2019, Bitcoin will reclaim nearly two-thirds of the crypto market capitalization as altcoins lose their luster because of growing risk aversion among cryptocurrency investors. More broadly, financial regulators will soften their stance toward the sector. The UK Parliament's Treasury Committee, which wants to end the wild west of crypto markets, will pursue regulations intended to stifle criminal activity and reduce price