Article Summary
- AI investments are partially offsetting the impact of tariffs on global trade.
- The benefits are unevenly distributed, favoring a few countries specializing in AI supply chains.
- The impact of tariffs is delayed, with a larger effect expected in 2026.
- Government policies may mitigate the tariff impact.
Introduction
When former US President Donald Trump announced his 'Liberation Day' tariff policies, economists predicted a global shock. Now, some of those economists are revising their global growth forecasts upward.
AI Spending: A Lifeline for the Global Economy
One key reason: what the US government took away through tariffs, the American tech sector replenished through its massive spending in AI. For example, in October, the WTO projected global merchandise trade volume would grow 2.4% this year, up from its August forecast of 0.9%. Similarly, the IMF revised its 2025 world growth forecast to 3.2%, up from 2.8%.
Uneven Distribution of Benefits
But these figures don't tell the whole story. While AI is supporting global trade and growth, that support is uneven. Outside of the US and China, AI investment is primarily benefiting a handful of regions already entrenched within specialized AI supply chains, such as South Korea and the Netherlands. Oriano Lizza, a trader at CMC Markets, said Asia accounted for nearly two-thirds of global AI-related trade growth in the first half of 2025. "The vast majority of these benefits are concentrated in advanced manufacturing economies," he said.
The Tariff Cliff: A Delayed Impact
Furthermore, the pain from tariffs hasn't been canceled; it's just been delayed. Companies watching Trump's campaign rhetoric received ample warning before the April tariff announcement. Importers and exporters rushed to act before tariffs took effect, shipping goods to the US ahead of a series of deadlines. This inflated trade volumes this year.
Grim Outlook for 2026
Once tariffs take effect, and stockpiled inventories dwindle, economists expect companies to pass tariff costs onto consumers and reduce exports to the US. The WTO's outlook reflects this: while revising its 2025 forecast upward, it lowered its 2026 world merchandise trade volume growth forecast to 0.5%, down from 1.8%.
Governments Step In
This fate may not be sealed. Policies from the world's largest governments are constructing a safety net. Economists expect Trump's touted 'Big and Beautiful' bill to boost the US economy in the short term by extending tax cuts, while simultaneously increasing the federal deficit. In addition to that, Mansoor Mohi-uddin, chief economist at Bank of Singapore, said Germany is making a historic shift from fiscal austerity to increased spending. And Japan approved a $135 billion stimulus package to spur economic growth.
Conclusion
That policy support, combined with a weaker dollar and expectations for Federal Reserve rate cuts, means that as long as the AI frenzy doesn't break, the global economy may still be able to stand on its feet in 2026. "Investors are actually still quite well positioned," Mohi-uddin said.
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