– Ira Kalish, chief global economist at Deloitte, December 2025
In 2025, the global economy was disrupted in part by significant changes in US trade.1 Countries outside the United States responded by seeking trade liberalization with other countries and implementing fiscal and monetary stimulus meant to boost domestic demand. Additionally, investment in AI accelerated globally, especially in the United States and China.
Heading into 2026, there is great uncertainty, which could negatively influence business investment.2 Some companies have already postponed supply chain investments.3 The disruption of economic relations between countries also means uncertainty about the direction of currency values and borrowing costs. Overall, a modest slowdown in global economic growth is likely in 2026.
United States
The US economy faces headwinds from trade and immigration policy. Tariffs will likely boost inflation in 2026, thereby reducing consumer purchasing power.4 Immigration policy could mean slower employment growth and labor shortages in key industries. Yet massive investment in AI infrastructure could sustain economic growth. The sharp rise in technology-related equities has boosted wealth and spurred strong spending growth by upper-income households.5 Meanwhile, low- and middle-income households face increasing financial stress.6 If the pace of AI-related investment continues, economic growth will likely be moderate. Yet if there is a reversal in AI investments, the US economy could weaken substantially.
China
China’s economy continues to face significant headwinds owing to the collapse of the residential property market.7 This has caused a sharp decline in property investment and resulted in a loss of household wealth, leading consumers to save more and spend less.8 China’s government is utilizing fiscal and monetary stimulus to boost domestic demand. Meanwhile, the country faces a decline in exports to the United States due to tariffs and potential trade restrictions from other countries.9 On the other hand, China has become a leading global player in high technology and renewable energy, which could help fuel its economy and, in turn, drive consumer spending.10
Europe
Governments in Europe are starting to boost investment in defense and infrastructure, funded by debt, in response to geopolitical shifts.11 This is effectively a fiscal stimulus which, combined with lower policy interest rates, should have a modest positive impact on economic growth.12 On the other hand, Europe continues to face challenges, not the least of which are troubled trade relations with the United States and increased competition from China.13 The outlook is for moderate growth with low inflation.
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