After the global economy unexpectedly weathered 2025, 2026 may carry forward last year's risks or even greater ones, making this year likely another period of turbulence and heightened risk for the world economy.
Reviewing last year, from Trump's return to the White House in January, the global economy trembled under Trump's threats and shadow. Upon taking office, he imposed "fentanyl tariffs" on China, Canada, Mexico and other nations, then in early April declared what amounted to "war" on all countries by announcing his "reciprocal tariffs" - ranging from a minimum 10% baseline tariff to over 50%, sparing no nation. China, retaliating against the U.S., escalated tariffs to over 100% after several rounds of trade combat.
At the time, all experts and market analysts held extremely pessimistic views on economic prospects, believing high tariffs would impede and destroy international trade, suppress economic growth, and reduce resource efficiency. The U.S., as the instigator, was expected to suffer slower growth and higher inflation from launching the tariff war.
However, the final results proved unexpectedly positive. America's economic performance was remarkably strong, with annual growth estimated at around 3%, exceeding 4% in some quarters. Treasury Secretary Bessent, speaking to media in December, noted with evident satisfaction: "Economic performance has been better than we expected... we will still end this year with 3% real GDP growth." While unemployment rose to 4.6%, inflation cooled to 2.7%, demonstrating the American economy's surprising resilience.
China's economy directly faced the strongest impact of Trump's reciprocal tariffs, with exports to the U.S. plummeting by 20-30%. Internal consumption weakness and continued real estate doldrums remained unresolved, creating a situation of both domestic troubles and external pressures. Nevertheless, China's annual economic growth rate maintained above 5%. More surprisingly, despite the sharp decline in U.S. exports due to the tariff war, China effectively and rapidly diversified markets to other regions. In the first 11 months of last year, China's trade surplus exceeded $1 trillion. Additionally, China achieved considerable success in both technology and traditional industries like automotive, demonstrating remarkable economic and industrial resilience.
With the two largest economies displaying resilience through the tariff war, despite the EU and Japan's weak economic performance hovering around 1%, the global economy still managed above 3% growth. The IMF revised its October forecast upward to 3.2%. Though stumbling along, the global economy safely navigated 2025.
More surprisingly, under the intense tariff war's influence, global trade still achieved substantial growth in 2025. According to the UN Conference on Trade and Development's year-end "Global Trade Update" report released in December, driven by East Asia, Africa, and South-South trade, global trade volume will grow approximately 7% in 2025, reaching a record $35 trillion.
However, after weathering last year's "Trump shock," this year may face even greater risks than before. International institutions' forecasts for this year's global economic growth rate are generally lower than last year's. For example, the OECD estimates global economic growth will slow from 3.2% in 2025 to 2.9% in 2026.
One important driver of 2025's economic performance was the AI boom, directly fueling industrial, employment, economic, and financial market enthusiasm. But after last year's "passion," concerns about whether AI has formed a bubble, and when that bubble might burst, have increasingly emerged.
Given that various bubbles - whether common stock market and real estate bubbles, or rarer historical railway, tulip, and internet bubbles - can only be definitively identified as bubbles during post-mortem analysis after they burst, despite concerns about an AI bubble surfacing throughout last year, predicting whether an AI bubble will burst this year remains impossible. This represents this year's greatest risk.
Moreover, while last year's tariff war raged intensely, the final results showed the two major economies of China and the U.S. demonstrated resilience and safely weathered the tariff war, serving as a stabilizing anchor for the global economy.
Regarding this year's trajectory of China-U.S. relations, after the Trump-Xi summit in late October last year, both countries ceased their trade and tariff wars. Subsequently, Trump's visit to China in April and Xi Jinping's possible reciprocal visit to the U.S. by year-end suggest improving bilateral relations. However, this view may be overly optimistic, as from short, medium, and long-term perspectives, China-U.S. relations lack any foundation for stability or optimism.
Regarding today's seemingly moderate and stable tariff war ceasefire agreement between China and the U.S., the Trump-Xi summit's agreements and consensus clearly stated a one-year ceasefire with both sides withdrawing previously announced or implemented sanctions: for China, most importantly the rare earth card; for the U.S., more severe entity controls, chip blockades, and port fees. Since both sides would suffer severe injuries from continued confrontation, the one-year ceasefire agreement clearly indicates this is not a "long-term peace agreement" - China and the U.S. will ultimately clash again, possibly as early as October this year.
From a longer-term perspective, China-U.S. competition and rivalry has become a structural reality. This structure will not change due to signing a few agreements or a more moderate politician taking office - at most, only the intensity and methods will differ. Under this structure, China and the U.S. can and will clash again over various pretexts at any time. Naturally, the shorter-term variable remains the unpredictable Trump factor.
The economic situation in 2025 began with the Trump shock but gradually digested variables, stabilized, and improved - the worst-case scenarios predicted for the first half never materialized. 2026 continues the previous period's relatively stable situation, but actually harbors underlying risks and variables, with risks potentially greater than last year. This year should remain another period of global economic turbulence and heightened risk.
