Tariffs, wars, AI: WEF chief breaks down what’s next for global economy

The global economy stands at a crossroads, marked by resilience in some areas while grappling with deep structural challenges. Borge Brende, President and CEO of the World Economic Forum (WEF), sheds light on the complex interplay of various forces shaping our economic landscape. His insights, shared in a conversation with Indian journalists, outline key factors influencing today’s global economic environment, including tariffs, geopolitical tensions, and the rise of artificial intelligence (AI).

Brende emphasizes that while global growth rates are lower than the trend seen in previous decades, the economy’s resilience is noteworthy. “The global economy is more resilient than I expected,” he states, attributing this robustness to its ability to withstand a backdrop of geopolitical tensions, which he characterizes as the most complicated since World War II. Brende highlights a critical concern—global growth has decelerated from a historical average nearing 4% to potentially under 3% currently. Moreover, the repercussions of ongoing trade wars are conspicuously slowing down global output, with trade growth lagging behind overall economic growth.

Among the critical issues Brende addresses is the challenge posed by rising global debt levels, which are reminiscent of post-World War II periods. This issue weighs heavily on numerous countries as they navigate policy uncertainties and financial strains. The economic landscape is further complicated by structural shifts in global trade dynamics, moving from traditional manufacturing toward a burgeoning emphasis on services and digital flows. According to Brende, “Trade in services and digital trade are growing three times faster than trade in manufacturing,” which partly accounts for India’s relative success amid global economic turbulence.

Turning to tariffs, Brende expressed concerns about the unpredictability of U.S. trade policies, particularly those enacted under the previous administration. With threats of tariffs on key partners, including steel tariffs potentially reaching up to 50%, the trade landscape is fraught with uncertainty. The new economic model is marked by a shift from globalization to practices like “friend-shoring” and “home-shoring,” wherein countries prioritize security over efficiency in their supply chains. This evolution signifies a fundamental change in the way nations approach trade, with implications for inflation and production costs.

Brende reflects an air of caution with the current U.S. tariff regime, which allows for significant executive power in bypassing Congressional approval. He notes the potential for legal challenges to this approach, adding another layer of complexity to global trade dynamics as the summer unfolds, and stresses that there are many unknowns on the horizon.

In contemplating the future of employment amidst the rise of artificial intelligence, Brende acknowledges the dual nature of this technological shift. While AI presents the risk of job displacement, it also signifies an opportunity to create higher-value jobs. The potential productivity boosts from proactive AI adoption could reach 10%, marking a substantial gain in an age where productivity improvements have been hard to come by. Countries like India, with their youthful populations and growing tech sectors, are uniquely positioned to leverage these transformations.

Brende draws parallels to historical shifts in the workplace, using Switzerland’s past as an example. A century ago, the majority of its population worked in agriculture, yet today only a small fraction does, illustrating the profound changes that can arise through innovation and adaptation. As AI technologies continue to evolve, questions around inequality and opportunities for smaller enterprises emerge. Brende underscores the unpredictable nature of technological disruption, citing examples like a Chinese company that launched a competitive language model at a fraction of the big players’ costs.

The conversation shifts to Brende’s worries and hopes for the future of the global economy. His fear centers on the potential for new wars, which he believes could stifle growth and exacerbate existing challenges. Yet, underlying these concerns is a sense of optimism—he believes that the world economy has demonstrated remarkable resilience. “Trade has been the driver of growth for decades,” he states, positing that emerging technologies such as AI could catalyze new avenues for investment and productivity.

In conclusion, the global economy is navigating a complex array of challenges and opportunities that will shape its future trajectory. From the specter of geopolitical tensions and rising debt to transformative advancements in artificial intelligence, understanding these dynamics is essential. As nations adapt to a shifting landscape of trade and technological change, the path forward remains uncertain yet filled with potential for innovation and growth. Whether these opportunities lead to widespread prosperity or exacerbate existing inequalities will depend on how effectively governments, businesses, and societies rise to the imminent challenges ahead.

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