As 2024 slowly unfolds, the US presidential election is slowly floating to the top of the minds of American voters and global leaders alike. And at this moment, the election is shaping up to be a rematch between sitting President Joe Biden and former President Donald Trump. Eurasia Group Founder and President Ian Bremmer joins Yahoo Finance's Julie Hyman and Brian Sozzi from the World Economic Forum in Davos, Switzerland to discuss the economic risk underlying this election cycle, as well as potential geopolitical fallout stemming from a second Trump presidency.

Any positive market gains "would be counterbalanced by so much of the concerns of American credibility, even creditworthiness, around a US that is so dysfunctional, so polarized, and where a new McCarthyism could emerge that could really chill Red vs. Blue, including the investibility of Red vs. Blue states under a Trump-led political administration," Bremmer explains.

It's all part of Yahoo Finance's exclusive coverage from the World Economic Forum in Davos, Switzerland, where our team will speak to top decision-makers as well as preeminent leaders in business, finance, and politics about the world’s most pressing issues and priorities for the coming year.

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

- Former President Donald Trump as expected winning in the Iowa caucus followed by Ron DeSantis and Nikki Haley, and we have Ian Bremmer of the Eurasia Group, the president there here with us, very good person to talk to about this topic and many other topics. So not a surprise that Trump won. Were you surprised at all by DeSantis percentage that he got, and does it matter?

I don't think it matters. I think that, look, the media is talking about Nikki Haley, but DeSantis has still been far better known nationally. He still is polling in second place, and this is going to hurt Nikki. She was really trying to make the argument that it's a two-person race. It is not a two person race. It's a one person race. Everybody else is essentially jockeying for cabinet positions and vice president under Trump if he wins, and that is where the country is going right now.

- What is the economic risk that you see if we do have a rematch of Trump and Biden?

IAN BREMMER: I don't think there's a-- well, there's a near-term risk in the sense that once Trump gets the nomination, which is virtually certain, that he will be so much more powerful in the Republican Party.

I mean, overnight he'll have the loyalty of pretty much everybody-- the endorsements, the money, the media attention, and that means that his policy pronouncements, to the extent that he makes them, will suddenly have a lot more impact, for example, in pushing not to provide any support for the Ukrainians or in giving the Iranians a much tougher run in responding to their support for proxy wars in the region.

Do I think that's going to have a big economic impact? Not near-term. If Trump wins, of course, last time around there was a positive market impact to Trump winning. Why? Massive near-term deficit spending markets like that, regulatory rollback, markets like that, and also lower taxation.

This time around, that would also be true, but it would be counterbalanced by so much of the concerns of American credibility, even credit worthiness around a US that is so dysfunctional, so polarized, and where a new McCarthyism could emerge. That would really chill red versus blue, including investability of red versus blue states under a Trump-led political administration. That wasn't a risk in 2016. That would be a risk in 2025.

- But is that a risk that would dissuade President Trump from doing any of that stuff?

IAN BREMMER: No, of course, not.

- So it could happen anyway.

IAN BREMMER: Of course.

- OK. I am curious, here in Davos, how many people are talking about the likelihood of a Trump presidency, and sort of trying to prepare for that already?

IAN BREMMER: Everyone's talking about it. I mean, there's a lot of ice out there right under the ice. Just under the ice is sheer panic. On the part of certainly every European leader, you may have seen Christine Lagarde, the head of the ECB, who came out publicly saying that she thought that Trump was a serious risk for Europe, for trade relations, for America's role in the world. She's the only one that said that publicly.

Every European leader I'm speaking to privately is concerned. I just had a meeting with a very senior Japanese delegation this morning. That was issue number one, two, and three, and they say back in Tokyo right now, every CEO, that is what they're worried about. It's not yet dominating the media, but compared to the last two months ago when I was in Tokyo, it's become much more.

I think people were hoping that it can't really be real. I mean, given 91 indictments and given all of the legal exposure and the fact that in Washington DC Trump could very easily be convicted before an election, something's going to happen to stop him. No, it's not. No, it's not.

The only thing standing in the way of Trump winning is 81-year-old Joe Biden, who has a record to run on, but also has a lot of people that feel like he's not actually up to the job. And that is a serious concern for a former president who refused to accept the free and fair transfer of power. I mean, that's existential. That's foundational to any democracy.

In any well-functioning democracy, if you had this going on, this would be the number one, two, and three issue, and yet in our country, it's not. What's the conclusion you take from that? So our democracy is not well-functioning. It is a democracy in crisis and, yes, that is the top issue being discussed at Davos this year.

- Well, Ian, I'm hearing you talk about business leaders potentially pulling back in their level of concern, world leaders may be not investing in the United States under another Trump presidency to the extent they would. It sounds awful for the US economy.

IAN BREMMER: I didn't say that. I mean, the US dollar is the global reserve currency. The US is utterly dominant in artificial intelligence. It is a massive food producer, exporter, a massive energy producer, exporter, higher production levels than Saudi Arabia right now, only going up under Biden, would only be going up under Trump. All of these are signs of economic strength.

But at the same time the political environment in the US is more dysfunctional by a long margin than any of the other advanced democracies, to the extent this is a huge risk. I mean, yeah, red versus blue concerns about credit worthiness long term.

Yes, that's true, but the bigger concern is for Europe. Of course, it is because if you're the Europeans and you face a Trump who considers President Zelenskyy a personal and political enemy because he refused to go after Biden and Hunter when Trump demanded it, Trump has consistently said he's going to end the war in the first day.

Way he does that is he says here is the outcome that I demand that you accept, which is completely unacceptable to the Ukrainian leadership. It's accepting essentially a partitioned Ukraine for a ceasefire. When that happens, he cuts off aid. Now that will split NATO. That will split the EU.

You've got the poles and the Balts and the Nordic states who will be existentially opposed to US policy, but you'll also have the Hungarians and the Serbs and maybe the Italians who will say, wait a second, we're paying a lot for this. Let's work with Trump. Let's find a way to work with Russia. That's not the US pulling out of NATO, but that's NATO fragmenting. That's the EU fragmenting.

This is the biggest risk that the Europeans have seen since the fall of the Berlin Wall in 1989. It is that big of a deal, and that's coming at a time when the Europeans are also paying far more for energy. They're having a real hard time continuing present levels of industrialization. They're facing significant fiscal challenges, and then you're going to throw Trump on top of that, in the middle of a Russia-Ukraine war, we haven't talked about the Middle East. This is such a problem for the Europeans. Absolutely, this is the top issue they're talking about right now.

- And there's so much more I want to talk to you about, but I do have to ask about something we talked about off camera a little bit, and I said as you were enumerating some of what's going on in the world, I said, things are always sort of chaotic in the world. Unless people get sort of apathetic or complacent, you said, no, it's not. This is worse.

IAN BREMMER: Yeah, this is worse.

- And so I just wanted to put a fine point on that. In your view, what is happening in the globe right now, and why it is worse, and why people need to pay attention?

IAN BREMMER: Because we have three wars going on right now. We have-- and none of them have guardrails. None of them have diplomatic efforts to try to reduce or contain the tensions. Russia versus Ukraine, 83 countries getting together just a couple of days ago in Davos went absolutely nowhere. The Russians not participating, the Chinese not participating. They're not going to accept being partitioned, but that is the reality of where we're heading.

You've got a Middle East war that continues to expand. It is not being contained to Gaza. The Americans are deeply isolated in their position supporting Netanyahu. That's not going to change anytime soon. And then you have the US versus itself. And you have Democrats and Republicans that exist in different information spaces on everything. And that's-- it's not a civil war, but it's a very deep and existential fight in the most powerful country in the world today.

That is, we are used to that in the United States because it's been happening incrementally over decades, and then a little more quickly over the last couple of years, but let us not kid ourselves about the unprecedented nature of what we're seeing in the US political system virtually every day. We cannot normalize that. Our allies will not normalize that. Our adversaries will take advantage of that. That is what we're talking about here.

Now there are plenty of good things happening in the world. There's massive developments in AI, new climate transition energy technologies are becoming affordable at scale, the us-china relationship a little better managed than it has been, India looks great right now. I mean, we could do an entire segment just on the positive stuff, but we've known each other for a while. Geopolitically, this is by far the worst environment in my lifetime.

- Well, we're going to have to leave it there. We'll save the positive stuff for another time.

IAN BREMMER: That's good.

- Ian Bremmer of Eurasia. Thank you so much for your perspective. Appreciate it.