In 2025, the global economy was marked by trade conflicts, shaky growth, persistent inflation and rising government debts in many regions. None of these problems disappeared with the advent of the New Year.
The global economy has nevertheless proven resilient, but remains vulnerable, according to the opinion of the Organization for Economic Cooperation and Development (OECD). Global growth is expected to fall from 3.2 percent in 2025 to 2.9 in 2026.
The repercussions of Trump's tariff policy
In April, the US government under Donald Trump created uncertainty on a global scale with sweeping new tariffs. The goal was to rebalance trade flows and reduce the US budget deficit. Markets reacted with turbulence and adjustments in supply chains.
Meanwhile, Washington reached agreements with many of its trading partners. As a result, the average US tariff rate, which had risen from 2.5 percent when Trump took office in January, has risen to 17.8 percent. According to calculations by experts from Yale University, this is the highest figure since 1934.
The US Supreme Court is due to rule later this year on whether Trump's trade policy is legal. The president invoked an alleged national emergency to be able to impose the tariffs by decree without the approval of Congress.
Many observers expect the Supreme Court to uphold the decisions of the lower courts and declare the tariffs illegal. However, the government could reimpose some measures in other ways. Accordingly, US tariffs will remain a central topic in 2026.
Continued tensions between the US and China
Against this backdrop, the conflict with China will remain at the center. Trump and Chinese President Xi Jinping met in October and reached a 12-month deal, but key economic and strategic sticking points in the trade conflict remain unresolved.
“This looks more like a truce than a lasting peace agreement to end the US-China trade war,” says Rajiv Biswas, an economic risk analyst.
”The US and China continue to find themselves in a geostrategic competition that only fuels hostility in key areas such as defense technology and advanced industries such as artificial intelligence, quantum computing and robotics,” Biswas told DW.
Regarding the dominance in the technology sector, the analyst continues to expect “increased application of tariffs, sanctions and other economic measures” in the mentioned key areas.
China's structural weaknesses
Despite tensions with the US, experts expect the Chinese economy to grow by five percent next year, in line with the government's latest targets.
The country will not soon be free from structural challenges - such as an aging population, declining capital productivity and overcapacity in many industries, Biswas believes.
China's growth model "continues to prioritize demand, leading to chronic overcapacity and persistently weak consumer spending," economist Neil Shering told DW.
The government has announced that it wants to strengthen domestic consumption and stabilize the tense real estate market. However, imbalances will continue to characterize 2026, Schering believes.
Economist Alicia Garcia Herrero of the French investment bank Natixis expects Trump's tariffs to hit the Asian economy even harder in 2026 - mainly because of rising geopolitical tensions and fragmented trade structures in the region.
Inflation and high debt
In addition, inflation in large parts of the world, including the United States and Europe, remains high due to tariffs. New trade barriers and disruptions in supply chains could further increase price pressures.
Central banks may face a dilemma: higher interest rates can reduce inflation, but at the same time weaken growth and make it harder to repay debts - especially for heavily indebted and financially weak countries. A number of eurozone economies are struggling with budget problems - such as France, where unpopular austerity measures are being discussed to stabilize deficits and debt servicing.
What if the AI boom fizzles?
Hope will continue to be pinned on artificial intelligence (AI). Large American technology companies want to invest hundreds of billions of dollars in the construction of data centers and other infrastructure facilities. Accordingly, the industry will continue to be a growth stimulator.
However, market nervousness is growing. Many investors doubt that the investments will pay off in the long term. Some experts are already warning of a possible soap bubble, the bursting of which could lead to a market crisis.
Economist Garcia predicts a structural and lasting revolution caused by artificial intelligence, but at the same time warns of possible serious risks: in the event of a sudden collapse of high-tech stocks, investments in artificial intelligence could also collapse - with possible serious consequences for the American economy and global growth.
Author: Srinavas Mazumdaru