Trump and AI will not reshape 2025’s global economic prospects

The world’s poised for significant economic transformations influenced by political shifts, tech advancements, and ongoing geopolitical tensions.There are six broad themes that should shape the global economic outlook for the year.

Political shifts and economic policies

President Donald Trump's return to the White House, after a fiery election campaign and numerous legal battles, has significant implications for the global economy in terms of focus on tax cuts, deregulation, and trade policies. A resurgence in protectionist policies will lead to trade tensions with Canada, China and the EU. The US GDP is projected to grow by 2.7% this year.

Justin Trudeau's resignation as Prime Minister of Canada has created political uncertainty, impacting trade relations and economic policies.

Researchers at Oxford Economics believe that there could be a 2.5% drop in Canada's GDP by early 2026, leading to a surge in inflation and unemployment rates and potentially pushing Canada into a recession in 2025. 

Changes to the Middle East’s status quo, particularly the fall of Bashar al-Assad's regime, underscore the region's geopolitical volatility. Fluctuations in oil prices and supply chain disruptions could arise from regional instability. If these are resolved, oil prices could stabilize around $70 per barrel and the impact on global trade could be significant.

The ceasefire between Israel and Hamas brings hope for stability in the Middle East. This could lead to increased regional stability, boosting trade and economic activities. The estimated economic gain from the ceasefire is projected at $30 billion.

The protracted conflict between Russia and Ukraine remains a critical concern. The promised Trump-ceasefire could lead to a $100 billion boost in global trade.

The advances in AI and quantum computing are revolutionizing industries from finance to healthcare. Enhanced efficiency, predictive analytics, and transformative solutions will redefine traditional business models. The global AI and quantum computing market is expected to grow to $124.4 billion by 2025.

While Bitcoin's value continues its volatility, Increased adoption of cryptocurrencies and blockchain technology will lead to a more decentralized financial system. The total market cap of cryptocurrencies is projected to reach $3.21 trillion by the end of 2025.

Even without the US putting it low on its agenda, the global push for renewable energy and climate change mitigation will reshape economic policies and corporate strategies.

Investments in green technologies and sustainability initiatives will continue to accelerate. The renewable energy sector is expected to attract investments worth $1.5 trillion by 2025. 

China introduced fresh stimulus measures to boost its economy. These actions include cuts to policy rates, increased fiscal spending, and support for the real estate sector.

The stimulus is expected to support commodity markets and stabilize prices, with the impact estimated at $409 billion.

As a provider of the world’s cheapest credit, Japan's monetary policies play a crucial role in global finance. The Bank of Japan's (BoJ) interest rate decisions have far-reaching implications.

In March 2024, the BoJ ended years of negative interest rates and raised its short-term policy rate to 0.25%. On January 24, 2025, the BoJ raised its short-term policy rate by 50 basis points to 0.50%, marking its highest level since 2008.  The potential impact could amount to a $1 trillion decrease in global liquidity, slowing down economic recovery.

The last one, if the lessons learnt during Covid are not considered, the estimated economic impact of HPMV (human metapneumovirus) is projected at $50 billion.