Chief Economists’ Briefing: What to Expect in 2025? / DAVOS 2025

Summary

This discussion focused on the global economic outlook for 2025, featuring insights from economists Fernando Honorato Barbosa, Karen Harris, and Gilles Moëc. The panel explored key economic trends, challenges, and potential impacts of geopolitical events.

The economists highlighted a weak global economic outlook for 2025, with expectations of conditions worsening over the next year. They noted significant regional divergences, with strong growth predicted for the United States and South Asia, while Europe and China face weaker prospects. The discussion emphasized the increasing fragmentation of the global economy, driven by geopolitical rivalries and local policy choices.

A major focus was the potential impact of U.S. policies, particularly in light of a possible Trump re-election. The panel discussed the likelihood of increased tariffs and their effects on global trade and inflation. They also explored the concept of “post-globalization,” characterized by a shift towards bilateral agreements and a more Westphalian world order.

The economists debated the sustainability of U.S. fiscal policies, including the Inflation Reduction Act, and the potential for a looming debt crisis. They also discussed the resilience of global supply chains and the growing importance of services trade compared to goods trade.

The panel emphasized the need for policymakers to address domestic economic challenges while navigating international pressures. They concluded by stressing the importance of understanding the complexities of U.S. policies and their potential impacts on global markets and trade relationships.

Keypoints

Major discussion points:

– Weak global economic outlook for 2025, with divergence between regions (strong US growth, weak Europe/China)

– Impact of US policy and potential Trump re-election on global trade and economy

– Ongoing economic fragmentation and “clubification” of world trade

– Inflation concerns and fiscal policy challenges in the US and globally

– Need for productivity growth and regulatory reform, especially in Europe

Overall purpose:

The goal was to discuss the global economic outlook for 2025 based on a recent survey of chief economists, examining key risks, trends, and policy implications for leaders and policymakers.

Tone:

The tone was generally serious and analytical, with economists offering measured but somewhat pessimistic views on global economic prospects. There were moments of levity and candid observations, particularly when discussing political realities and policy contradictions. The tone became more urgent near the end when discussing advice for policymakers.

Speakers

– Sebastian Matthes: Moderator

– Fernando Honorato Barbosa: Chief Economist of Banco Bradesco, Brazil

– Karen Harris: Managing Director of the Macrotrends Group, Bain & Company

– Gilles Moëc: Chief Economist of AXA Investment, UK

– Audience: Mentioned but no specific individuals identified

Additional speakers:

– None identified

Global Economic Outlook 2025: A Fragmented Future

The discussion on the global economic outlook for 2025, moderated by Sebastian Matthes, brought together economists Fernando Honorato Barbosa, Karen Harris, and Gilles Moëc to explore key economic trends, challenges, and potential impacts of geopolitical events. Based on a survey of around 50 economists, the panel painted a picture of a weak global economy characterised by increasing fragmentation and divergence between regions.

Economic Landscape and Regional Disparities

The economists unanimously agreed on a pessimistic global economic outlook for 2025, with expectations of conditions worsening over the next year. Sebastian Matthes highlighted the stark regional divergences, noting strong growth projections for the United States and South Asia, while Europe and China face weaker prospects. Specifically, 56% of economists expect weak growth in Europe. Gilles Moëc emphasised that this divergence between the US and other regions is a continuation of long-term trends, challenging the traditional view of the US as the primary driver of global economic growth.

Fernando Honorato Barbosa pointed out that increasing uncertainty and fragmentation are driving the overall pessimism. Karen Harris elaborated on the concept of “post-globalisation,” describing it as a shift towards more bilateral agreements and a Westphalian world order, distinct from deglobalization. Gilles Moëc offered a nuanced perspective, preferring the term “clubification” of the world economy rather than complete fragmentation, suggesting the formation of economic “clubs” or groups of countries that continue to trade and do business together.

US Policy and Its Global Impact

A significant focus of the discussion was the potential impact of US policies, particularly in light of a possible Trump re-election. Gilles Moëc outlined two potential scenarios of “Trumpnomics 2.0”: a positive version focusing on deregulation and tax cuts, potentially boosting productivity, and a negative version emphasizing protectionism, which could lead to higher inflation and lower productivity. The panel explored how tariffs might be implemented as a key policy tool, with Karen Harris framing them as “a tax on access to the US consumer.”

The economists debated the implications of “post-globalisation” for global trade and supply chains. Karen Harris noted a trend towards more resilient but expensive supply chains, while Fernando Honorato Barbosa pointed out that growth in services trade is outpacing goods trade. Despite these shifts, the panel noted that record global trade is expected in 2024.

Productivity and Economic Lessons

Gilles Moëc drew attention to the strong productivity growth in the US compared to Europe, emphasising the need for a better regulatory environment in Europe rather than replicating US policies like the Inflation Reduction Act (IRA). He stressed the importance of business investment in R&D and software for driving productivity gains. Fernando Honorato Barbosa highlighted the potential positive aspects of cutting red tape in both the US and Europe to boost economic growth.

Fiscal and Monetary Policy Challenges

The economists debated the sustainability of US fiscal policies and the potential for a looming debt crisis. Karen Harris expressed concerns about US debt and the need for entitlement reform, noting that the US cannot afford the IRA. Fernando Honorato Barbosa introduced the concept of a “fiscal policy trilemma” facing many countries as they balance the needs of ageing populations, economic growth, and other priorities. The panel agreed that markets might eventually force a debt discussion in the US.

Implications of AI and Automation

Fernando Honorato Barbosa highlighted the potential impact of AI and automation on job markets, particularly in the context of increasing protectionism. He suggested that AI could lead to significant efficiency gains but also raised concerns about its effects on employment in various sectors.

Public Sentiment and Economic Indicators

Karen Harris emphasized the importance of discussing price levels rather than just inflation rates, noting how this relates to public sentiment and quality of life issues. The panel agreed on the need to consider these factors alongside traditional economic indicators when assessing policy impacts.

Conclusion

The discussion painted a complex picture of the global economy in 2025, characterised by fragmentation, regional divergences, and significant policy challenges. While the outlook remains generally pessimistic, the economists highlighted opportunities for targeted reforms and the need for a nuanced understanding of evolving global economic relationships. As the world moves towards a more fragmented or “clubified” economic order, policymakers and business leaders will need to navigate carefully to ensure resilience and growth in an increasingly uncertain global landscape, while also addressing challenges posed by technological advancements and changing public expectations.

Sebastian Matthes: Good morning, everyone, and welcome to the briefing on the Chief Economist’s Outlook 2025 and our discussion on where the global economy is headed this year and what leaders and policymakers can expect from the next 12 months. The Chief Economist’s Outlook has been published a couple of days ago here in Davos, and it’s the result of a survey of around 50 economists, both from public and private institutions, and three of them are sitting here with me on stage today. We have Fernando Honorato Barbosa, Chief Economist of the Banco Bradesco from Brazil. We have Karen Harris. She is Managing Director of the Macrotrends Group from Bain & Company. Welcome. And we have Gilles Moek, Chief Economist of AXA Investment from the UK. Welcome. So before we start our discussion here on stage, a very quick remark to our online audience. If you want to share ideas we discuss here on stage or numbers from the report, please do that, but use the handle and the hashtag WEF25. Now to get the discussion going, let’s briefly look at the most important findings from the report. The outlook for the global economy in 2025 remains weak, with many downside risks. I think that’s not a big surprise. Fifty-six percent of the chief economists expect conditions to even weaken over the next year. Only 17 percent foresee an improvement, so very little space for optimism. And the main reason for this outlook is the increasing uncertainty all over the world. The IMF has delivered the numbers. A couple of days ago, the global economy will expand by 3.2 percent this year. That’s basically unchanged from 2024. And that will slow to 3.1 percent over the next five years. But we also see very significant divergence, regional divergence. This is what we are going to discuss here in a minute. A very good outlook for the United States. Forty-four percent of the economists predict strong growth for 2025, compared to only 15 percent in the last survey. So that’s a big jump. South Asia is also expected to maintain strong growth. And here are all eyes on India. For many other regions, the economists are less optimistic. And this is what you can hear in Davos in many discussions already. Europe ranks as one of the weakest regions. Seventy percent, 74 percent even, of the economists expect weak or very weak growth for Europe. And this would be the third slow year in a row. In Germany, we would say Europe has the rote Laterne, which is carrying the red lantern. Also weak, the outlook for China and growth is projected to even slow down in China for the next couple of years. Quick look to inflation. Global inflation is easing. IMF projects an annual average of 4.3 percent in 2025, down from 5.8 percent in 2024. However, services inflation remains higher than good inflation, especially a topic we are going to talk about in a second. So these are the main facts. Now let’s turn to our esteemed panel here today. So what are your expectations? Maybe let’s start with you, Fernando.

Fernando Honorato Barbosa: Okay, no, fantastic. So thank you very much. Thank you for the audience. Let’s say I think the key driver of this type of, not say pessimism or to some extent realism, is about fragmentation. We’ll have a chance to talk a lot about that in a minute, Sebastian, I know. But the thing is, we are talking of a world with higher import tariffs, we’re talking of a world of high fragmentation, we’re talking of a world of low efficiency. I always joke, globalization was not because of globalism, it was because of efficiency. So if you are going back a step in which we’ll have less globalization, we’ll have trade barriers, this means that companies will face higher costs and consumers will face higher prices. And as a result, it’s very hard to see growth buoyant these years.

Sebastian Matthes: Karen, your outlook?

Karen Harris: I think if we start with what Fernando is right about, that we have this globalization, one underlying structural element of that that’s really important is that it has created a dependency on the U.S. as the buyer. If you look at net goods importers, the U.S. dominates that. Net goods exporters, China and Germany are the two. And this is what the Trump administration talks about when it talks about the trade imbalance. And that has deleterious effects on the workforces in the United States and the manufacture of goods. And that wrenching attempt at rebalancing is a lot of what we’re seeing proposed by the Trump administration. Some policies may or may not work, but that is one of the critical objectives. So that, I think, is creating a lot of uncertainty about how that will unwind. I think the second piece, the more near-term piece where we—I hate to be the grumpy economist, but where we’re less optimistic about the U.S. outlook is that it depends on the affluent consumer, that 20 percent of the U.S. affluent are about a little over half of U.S. consumption, and their number one driver of consumption is equities and the performance of equities. They own—they’re very markets-driven in their outlook. And the U.S. stock market is larger than—in equities is larger than the next 10 combined. And so we’re talking about global growth and U.S. growth that is very reliant on U.S. affluent consumers. And that—because of that market link and because of where valuations are, that creates

Sebastian Matthes: a fragility that I think is concerning. Gilles.

Gilles Moëc: Good morning, everyone. Thanks a lot for having me. Well, we’re in line with the findings of the survey. We’re above consensus for the U.S. in 2025, with some deterioration in 2026. I agree with you that things will get a bit more complicated and below consensus for China and Europe. But I would like to reflect precisely on the fact that the survey is an average between those two very polar situations, and we should reflect on this because most of us were trained in the idea that it’s the U.S. which sets the tone of the global cycle. And in a way, what the survey tells us is that we no longer believe it’s true. We believe that the U.S. is going to do very, very well, but this is not having any significant traction effect on the other regions. So the big current account deficit country is no longer supporting the rest of the economy. And before we get to the T word and what Mr. Trump may have to do with this, a point which for me is absolutely central is that we should not forget that this divergence, this gap between the U.S. and the other regions, is to some extent an extrapolation of what we’ve been seeing for many, many years now. The new U.S. administration has no bearing in the fact that productivity in Europe has been stagnating for years. This is our own doing. The U.S. administration has nothing to do with the fact that China is in the middle of a real estate correction. It has nothing to do with what was coming from D.C. So we have these forces which have been shaping the world economy for a number of years, and in 2025, obviously, we are tempted to ascribe a lot of what’s going to happen in the month ahead to what’s going on in D.C., but we should also look at ourselves and our own sensibilities

Sebastian Matthes: in the gap between the U.S. and the rest of the world. So let’s come to the T word. Donald Trump and the U.S. policy are playing a major role here in Davos on almost every panel, so it has to be discussed here as well. The chief economists expect U.S. policy to have a significant impact on the global economy. I think, no surprise, 61% believe this will be a long-term shift. I find that striking. What is your expectation, Karen? What will this long-term shift look like? I think the election of Donald, or the re-election of Donald Trump is, it puts us decisively on the road to what we call post-globalization.

Karen Harris: This is, it’s not deglobalization, because actually there’s no necessary diminishment in global trade, but the direction is changing. And the best way I can describe it is that we are moving into a more Westphalian world, with the nation-state taking preeminence over multinational and multilateral orders. So we see more bilateral agreements. We see trade, again, restructuring in different directions. We’ve been on a path, the world, by we, I don’t mean the United States, I mean we, all of us, have been on a post-global path, I would say really since 2015, in a decisive way. It’s not just Donald Trump, but Xi Jinping’s change of policy that have changed that. But this is really, I think, the point at which that reality has set in. And I guess the only flag I would say is that we hear a lot of descriptions that this is a U.S.-China rivalry. And I’m much less convinced about that. But I do think it’s a multipolar world. And we were discussing collectively Van der Leyen’s speech yesterday. Europe has the opportunity to create a common capital market and reinvest and be a pole. But my goodness, like, let’s get a move on that, right?

Sebastian Matthes: To be that. So, Jean, 90% of the economists believe the actual tariffs will be smaller in the end than discussed in the election campaigns. How do you see that? Possibly, depends on the day.

Gilles Moëc: The issue I have with the tariffs is that it appears as a sort of Swiss knife for the new U.S. administration. It’s not just about rolling back. on China or extracting more defense spending from Europe. It’s about anything. It’s about fentanyl crossing the U.S. border. It’s about trying to extract from Europe more purchases of LNG from the U.S. So it is so pervasive to the entirety of the economic platform of the new U.S. administration that my baseline is that some of it is going to happen. It is there in so many aspects of the entire economic strategy developed by Mr. Trump that, honestly, some of it will come up. The question for me is, as a European, I’m obviously very, very selfish with that, is how much of this is going to be tailored? How much of this is going to be a sort of generic, uniform tariff on everyone? Because if it’s a uniform tariff on everyone, it’s kind of okay because it would mean that the relative competitiveness of, say, European exporters relative to third parties, exporters onto the U.S. market, would not change. We would simply compete differently with U.S. producers. But very often, there is no U.S. producer for what we do.

Karen Harris: I would just add that I think of tariffs as a tax on access to the U.S. consumer. Effective or ineffective, that is the purpose of them.

Sebastian Matthes: And so then it depends on who you want to tax and for what. So that would be my question. So how does that all fit together? So the U.S. is seeing strong growth. We will see lower taxes, but we will see higher tariffs. So what will happen with inflation?

Fernando Honorato Barbosa: We were talking about that right before, right, Sebastian? So let me talk about two possible inconsistencies of the outlook. So one is exactly what you just touched it up on. So we see higher tariffs, we see less efficiency, we see more fragmented world, maybe post-globalization. How can that feed into easier monitoring fiscal policies? Maybe fiscal policies will be eased and that will prompt demand. And as a result, probably inflation will pick up. And how can monetary policy be so eased? I’m not talking maybe about Europe, but that’s the case of U.S. and Latin American countries. So this is one possible inconsistency that I see. The second one is about AI. I know this is not a panel about AI, but if companies, they realize we are living in a world of more fragmentation, a lot of less efficiency, they will invest more in AI. This will, to some extent, try to circumvent these restrictions and maybe cause some issues, frictions to the job market. And well, and maybe this goes against the promises of the politicians that they will create more jobs with these tariffs. So I see some sort of inconsistencies in this typical outlook. Again, populism has its easy promises, but the economy has its own restrictions. So by the end of the day, I think we’ll see, we’ll talk a lot about the risks of inconsistencies of these policies we are talking here in Davos.

Sebastian Matthes: But what do you see, Karen, for inflation? What is your prediction? Well, first, I think one of the more important conversations we should be having is around price level, not inflation.

Karen Harris: That is what the election in the U.S. and the elections in Europe are talking about. Nobody cares that things are only 2.4 or 3% more expensive than they were. They care that for the first time, if we look at groceries, for example, volumes have gone down. People are buying less food. So we can talk about that we’ve conquered inflation, and that’s important. But I do think we need to, that this, and I think the word populism is important. The elite, we, Davos, has been disintermediated in this election, right? We have failed to convince people. We have failed to implement rules in a way that resonate with the majority of voters in a way that feels relevant. And I think, and we can talk about all of these economic indicators, but I think it’s really important that we reground in what the population is saying, which is their quality of life, their sense of future, their optimism had collapsed, and they want a disruptive alternative. So there’s lots of inconsistencies in this. Tariffs are inflationary, depending on who you deport. Immigration is either, if you deport consumers, it’s deflationary, producers, it’s inflationary, and they’re built in inherent contradictions. But I think to focus on those details is to miss that big shift.

Sebastian Matthes: Zhu, what is your take on that?

Gilles Moëc: I believe in, unfortunately, resident inflation in the US, quite simply because, again, before using the T word, the US economy is doing well. Donald Trump won because the majority of American people believe that the US economy is not doing well. Objectively, it is. So we are already in a situation where growth is probably above potential, in a situation where even if the December inflation print was a bit better, inflation remains actually quite resilient and the risk is that you add to this underlying situation, which is already, I would say, propitious to some resident inflation, you’re going to probably add inflationary policies. So you can have sort of a positive version of Trumpnomics 2.0. The positive version is you do deregulation and you offer very, very cheap energy and you get lots of investment. For instance, in AI, we got the announcement yesterday. Investment goes up and the US continues to widen its productivity gap with the rest of the world. Great, but how quickly is it going to trickle down to what is actually at the bedrock of Mr. Trump’s electoral support? So the risk is that he still needs to provide some of the stuff on which he has been campaigning, inflationary tariffs, and probably an inflationary fiscal policy in total.

Sebastian Matthes: Can we quickly stay with this point for a minute because you, Fernando, also brought it up. Productivity growth is really strong in the United States. Gilles, what can Europe learn from the United States right now? I think the risk, I think, in Europe is to try to replicate stuff

Gilles Moëc: which may not have been that instrumental in the recent acceleration in productivity in the US. We have IRA envy in Europe right now. We look at the IRA and just, no, we need to do that. It’s just that we don’t really have the money right now. But if you look at what is probably the source of the re-acceleration of productivity in the US in the last 10 years, it’s actual decentralized decisions by businesses 10 years ago to shift their investment towards R&D and towards software investment. This is what they did 10 years ago. It’s probably benefiting now. So one of the things we should remember is that there is something to say about the regulatory burden. And this is something Mrs. van der Leyen talked about in a speech on Tuesday morning. We don’t have a lot of money right now. So replicating IRA, I don’t think is within our means or even within our political means, but it’s stuff which is relatively free is to go harder at offering a better regulatory environment for businesses in Europe.

Sebastian Matthes: We’ll open up for a Q&A in a minute. So get ready. We will have a microphone so you can add comments or ask questions. We have to talk about fragmentation. We came to that topic already. Many chief economists see a trade war dynamic and an ongoing fragmentation of the economic landscape. 94% of them foresee further fragmentation of goods trade over the next three years. Only a smaller majority, 59% expect the same for service trade. So how will continued fragmentation impact global supply chains, Karen? And what new models of supply chains will we see? I think we’re already seeing, the term is resilient supply chains,

Karen Harris: which just means more expensive supply chains and more of them that companies are investing in. I did wanna make one comment. What trends do you see there? Sorry, I just did wanna say that the US can’t afford the IRA either, right? Like the fiscal incontinence has been a big driver of growth, but putting that to the side, we’re willing to postpone that debt rather than have debt breaks and rules around it. But again, we’re seeing a redirection of trade, but cross-border trade has been flat. It hasn’t gone down. And we’ve seen trans shipments rise who have been the big beneficiaries of the first set of tariffs. It’s been the Vietnams, the Mexicos of the world where access to markets has been pushed out. Do we expect to see that continue? Well, that depends on how effective the Trump administration is in the policy objective of balanced trade, because in a world of balanced trade, Vietnam is number three on the list of largest offenders in terms of a current account deficit. And the degree to which that policy gets pushed might change the security of investing in other regions in order to access the US market. So I think that is unclear. The least risky proposition is to get closer to North America, but that is too expensive, right? There just isn’t the labor force and the cost base. So that’s the tension that companies are wrestling with. So Fernando, what trends do you see

Sebastian Matthes: when it comes to resilience in supply chains?

Fernando Honorato Barbosa: Yeah, so again, it’s the second change we’re seeing since the pandemic. The pandemic was the big one. Learned a lot about that, about resilience as Karen was mentioning. Now we have the second one about how to trade, how to deal with these new partners, how to trade under these new tariffs, and how to reorganize our companies. And again, I insist, we will probably see a lot of AI playing a role in defining these things. But there’s one interesting aspect of the report that says that services trade are growing much faster than goods trade. So, again, we are not doing fine, but services are doing much greater. And, again, services prove to us that defining the boundaries is not that simple, because where are you buying cloud? Where are you buying all those data for your AI inputs? So, again, we might be living in a world where politicians believe that putting these trade barriers, they mean a lot, and they are really a fact for goods and for labor. We do not have the chance to talk a lot about labor, but preventing labor is a very important thing, and I think that is what we need to do. So, again, we are not doing fine, but services are doing much greater, and they are really a fact for goods and for labor. We do not have the chance to talk a lot about labor, but preventing labor is a very, very, very damaging to the global economy. But, anyway, we are living in those old days where politicians

Sebastian Matthes: believe in these boundaries, physical boundaries, while

Karen Harris: services trade is here to tell, yeah, it’s a little bit different this time. So, I think there are interesting things in the next few years about services trade. And, again, I think that community of communities is really to the highest level of exponential growth, and I don’t know how to describe it. Thank you very much for all that you said. And especially with regards to the

Sebastian Matthes: restitution of capitalism operators, I think that’s a good thing, and I think that’s a good thing for the global economy. And I think that’s a good thing for the global economy.

Fernando Honorato Barbosa: Maybe there’s one quick here, Sebastian, about red tape, we were having a discussion. It’s parallel to this tariff barrier. Maybe one positive, just to keep one, is that by cutting red tape in the U.S., I saw a speech again saying we need to cut that in Europe, and Jill was saying that right before. There were some Taiwanese sell the same Asarina national power plant in Europe in 1971, then

Sebastian Matthes: they will submit all the air times in Europe. So maybe that’s not a good thing for all of us, right? So I think it’s the right thing to do to cut red tap. So maybe I have a very interesting number, 2024 survey of U.S. economy, what do you think about that?

Gilles Moëc: And what do you think about the fragmentation of the world economy? For me, the biggest trend on this is more wait and see, unfortunately. Because rather than the word fragmentation, I prefer the word clubification of the world economy. We have a number of small clubs of countries which get along pretty well and can continue to do business and trade together. The problem is that the clubs which are the most important, the most important in the world, they are not the most important. So the idea that you can circumvent the U.S. protectionism by investing heavily in Mexico and Canada, well, maybe, maybe not. Latin America in general, you could cut it in two. You have a part of it which is increasingly driven towards China, a part of it which continues to be driven by North America and Europe, et cetera, et cetera, et cetera. So I think that’s a good point, and I think it’s a good point to make. I think that’s a good point, and I think it’s a good point to make, actually, for 2025, is that a lot of companies stay a little bit on their hands, because you don’t know where you

Fernando Honorato Barbosa: want to put your assets. It’s an excellent point. Fernando, will we see a growing global divide? I think so, unfortunately, again. I understand when Karen, she says about, she talks about these post-globalization, but it’s hard for me not to think in terms of a global divide, because I’m not sure that we can see a global divide in Europe, so I think this is one real risk that we might face. And, again, one thing that calls a lot of attention in the report is that why is this happening? Because of geopolitical rivalries, that’s true, it’s shown on the report, but also because of local choices. And, again, this should be respected. These are all democratic countries that are making these choices for populism, but I’m not sure they understand the importance of this. So, again, I think that’s a good point. We have a lot of countries that are not putting here, they were concerned about 20% increase in prices, not because inflation is 2%. So, this will not go back to the old days of the pre-pandemic. But I love the globalization story, but I just mentioned two ones on the report. First, about fiscal policy trilemma. So, countries will have to focus on aging, they’ll have to focus on the economy, they’ll have to focus on the economy, they’ll have to focus on the economy, and then, of course, the other thing that’s

Sebastian Matthes: important is a combination of inflation and unemployment. There might be another one, maybe that includes immigration. So, these things will be huge discussions moving forward. » I find that very interesting, you saying the U.S. can’t afford the IIA.

Karen Harris: Will the debt debate start now, or when do you see that happening? » I think at the end of this year,via ca, at some point, it may happen after they get into power, and it’s very justified. The upside is that DOJ finds actually, finds savings in government, but really if you want to hear a serious discussion. so Europe, the serious discussion is a common market, in the U.S., it’s entitlement spend. And that’s why I think it’s so important that we have a conversation about this. I think it’s important to have a conversation about this. And I haven’t heard that, maybe I haven’t been listening hard enough. » The markets might start the discussion at some point. » They might. The term premium went up. Is that the bond vigilantes? I don’t know. The markets may start that discussion, but how much of that is just an expectation of longer growth? » I think it’s very important. I think it’s very important to have a discussion about this. And until that, again, until that some politician is willing to say elect me or don’t reelect me, we have got to tackle what

Fernando Honorato Barbosa: we’re spending on Social Security and Medicare, then we’re not having a serious discussion. » I think maybe there are early signs on the yield curve. So again, we don’t know if it’s growth, if it’s risk premium, where we have more products left, that they’re more 상 després. I keep hearing about K-raph, talk about Citibank and their monetary fury talking about you can issue that unbounded, wow, we’re not living in this world any more. Maybe the heydays of oftimes deafness have come to an end, and it holds to talk seriously about not a budgetfit, themselves, but develop dynamics and entitlements includes issues about insurance actually attacks and the relationship with the Gugar understandable. I mean, that’s one by one.

Sebastian Matthes: One last point, a very interesting number and you mentioned that already. In 2024, we’re seeing a new record in trade, global trade. This will be the highest number in a long time?

Karen Harris: What do you think about that? What do you think about that? What do you think about that? China certainly hopes not, right? I mean, their economy is dependent right now on external demand because of their domestic situation, so some of that will depend on the global south cannot replace the U.S. as a consumer, but certainly, that

Sebastian Matthes: would be a bad outcome for China to see that number shrink.

Gilles Moëc: There’s no contradiction between fragmentation and a continuation of the global economy. So, I think, as far as our economies continue to diversify and continue to grow on trend, I would still expect a growth in trade, just not along the same lines.

Sebastian Matthes: Let’s come to our very quick final round. What would be the most important single piece of advice for policymakers and

Fernando Honorato Barbosa: executives to get ready for 2025 when it comes to global economical risks? Fernando? I think, first of all, I think, I think, first of all, we have to be very careful about what we say. We can do that just by simply not supporting that much protectionism, by not supporting those huge increase in tariffs, but truth to be told, my most important concern is about fiscal policy these days. It’s not a pending concern.

Gilles Moëc: It’s not something for the very short term, but I think we’ll talk a lot about that in the next few years or so. I think, first of all, we have to be very careful about what we say. We’re going to be consumed by the bilateral negotiations with the U.S. and, obviously, everyone will need to engage with Washington, D.C., but don’t forget to put your own house into order. If there’s one message for me, it’s really that. China, Europe, there’s a lot we

Karen Harris: need to do domestically, and we can do it, even if we get pressure coming from Washington, D.C. Karen? When you’re thinking about the U.S. and the U.S. and the U.S. and the U.S., be careful not to engage in the parable of the elephant, that you assume there’s one, that there’s a single policy that’s dominating. I think when we look at the Trump administration, we see, yes, balanced and fair trade, also national security, and re-diversification of the U.S. manufacturing base. Can all of these things happen in 2025? No. None of them will happen in 2025. So, the more you think about the U.S. and the U.S. and the U.S., all three of those, the more you need to be thoughtful about how you access that U.S. market.

Sebastian Matthes: Fernando, Karen, Jill, thank you very much for the discussion, and thank you all for coming, and have a great day. Thank you.

Agreement Points

Weak global economic outlook for 2025

speakers

– Sebastian Matthes
– Fernando Honorato Barbosa
– Karen Harris
– Gilles Moëc

arguments

Weak global economic conditions expected to continue

Increasing uncertainty and fragmentation driving pessimism

summary

All speakers agreed that the global economic outlook for 2025 remains weak, with increasing uncertainty and fragmentation contributing to the pessimistic view.

Shift towards post-globalization and fragmentation

speakers

– Fernando Honorato Barbosa
– Karen Harris
– Gilles Moëc

arguments

Increasing uncertainty and fragmentation driving pessimism

Shift towards “post-globalization” and more bilateral agreements

Formation of economic “clubs” rather than true global fragmentation

summary

The speakers agreed that the world is moving towards a post-globalization era characterized by increased fragmentation and the formation of economic ‘clubs’ or bilateral agreements.

Similar Viewpoints

Both speakers emphasized the importance of looking beyond traditional economic indicators like inflation and considering the broader impact on consumers and quality of life.

speakers

– Fernando Honorato Barbosa
– Karen Harris

arguments

Potential inconsistencies between tariffs, fiscal policy, and inflation

Focus on price levels and quality of life issues rather than just inflation

Both speakers highlighted the ongoing changes in global trade patterns, with a focus on more resilient but potentially more expensive supply chains and the formation of economic ‘clubs’.

speakers

– Karen Harris
– Gilles Moëc

arguments

Trend towards more resilient but expensive supply chains

Formation of economic “clubs” rather than true global fragmentation

Unexpected Consensus

US economic strength not benefiting other regions

speakers

– Sebastian Matthes
– Gilles Moëc

arguments

Strong growth projected for US, weak outlook for Europe and China

Divergence between US and other regions a continuation of long-term trends

explanation

There was an unexpected consensus that the strong US economic performance is not having a significant positive impact on other regions, challenging the traditional view of the US as the driver of global economic growth.

Overall Assessment

Summary

The main areas of agreement included the weak global economic outlook for 2025, the shift towards post-globalization and fragmentation, and the divergence between US economic performance and other regions.

Consensus level

There was a moderate level of consensus among the speakers on the overall economic outlook and major trends. This consensus implies a shared understanding of the challenges facing the global economy in 2025, particularly regarding fragmentation, trade dynamics, and regional disparities. However, there were some differences in the specific focus areas and potential solutions proposed by each speaker.

Different Viewpoints

US Economic Outlook

speakers

– Sebastian Matthes
– Karen Harris

arguments

Strong growth projected for US, weak outlook for Europe and China

Trend towards more resilient but expensive supply chains

summary

While Sebastian Matthes presented a positive outlook for the US economy based on economist predictions, Karen Harris expressed less optimism, citing concerns about the reliance on affluent consumers and market performance.

Nature of Global Economic Fragmentation

speakers

– Fernando Honorato Barbosa
– Gilles Moëc

arguments

Increasing uncertainty and fragmentation driving pessimism

Formation of economic “clubs” rather than true global fragmentation

summary

Fernando Honorato Barbosa views fragmentation as a driver of economic pessimism, while Gilles Moëc sees it more as a ‘clubification’ of the world economy rather than complete fragmentation.

Unexpected Differences

Services Trade Growth

speakers

– Fernando Honorato Barbosa
– Karen Harris

arguments

Growth in services trade outpacing goods trade

Trend towards more resilient but expensive supply chains

explanation

While discussing trade fragmentation, Fernando Honorato Barbosa unexpectedly highlighted the growth in services trade, which contrasts with the focus on physical supply chains emphasized by Karen Harris. This difference highlights the complexity of modern trade dynamics.

Overall Assessment

summary

The main areas of disagreement revolved around the US economic outlook, the nature and impact of global economic fragmentation, and the interpretation of trade and tariff policies.

difference_level

The level of disagreement among the speakers was moderate. While there were differing perspectives on specific issues, there was a general consensus on the challenges facing the global economy. These differences in viewpoint provide a nuanced understanding of the complex economic landscape for 2025, highlighting the need for flexible and adaptive policies to address various potential scenarios.

Partial Agreements

All speakers agreed on the potential impact of tariffs and trade policies on the global economy, but they differed in their focus and interpretation of the consequences. Fernando highlighted inconsistencies in policies, Karen emphasized the importance of price levels and quality of life, while Gilles focused on the strategic use of tariffs by the US administration.

speakers

– Fernando Honorato Barbosa
– Karen Harris
– Gilles Moëc

arguments

Potential inconsistencies between tariffs, fiscal policy, and inflation

Focus on price levels and quality of life issues rather than just inflation

Tariffs likely to be implemented as key policy tool

Similar Viewpoints

Both speakers emphasized the importance of looking beyond traditional economic indicators like inflation and considering the broader impact on consumers and quality of life.

speakers

– Fernando Honorato Barbosa
– Karen Harris

arguments

Potential inconsistencies between tariffs, fiscal policy, and inflation

Focus on price levels and quality of life issues rather than just inflation

Both speakers highlighted the ongoing changes in global trade patterns, with a focus on more resilient but potentially more expensive supply chains and the formation of economic ‘clubs’.

speakers

– Karen Harris
– Gilles Moëc

arguments

Trend towards more resilient but expensive supply chains

Formation of economic “clubs” rather than true global fragmentation

Key Takeaways

The global economic outlook for 2025 remains weak, with increasing uncertainty and fragmentation

The US economy is expected to show strong growth, while Europe and China face weaker prospects

US policy under a potential Trump administration is likely to accelerate ‘post-globalization’ trends

Trade fragmentation is expected to continue, especially for goods, with a shift towards more resilient but costly supply chains

Productivity growth remains strong in the US compared to Europe, highlighting the need for regulatory reforms in Europe

Fiscal policy challenges, particularly US debt and entitlement spending, are growing concerns

Resolutions and Action Items

Europe needs to create a common capital market and reinvest to become a stronger economic pole

European policymakers should focus on improving the regulatory environment for businesses rather than trying to replicate US policies like the IRA

Unresolved Issues

How to address the inconsistencies between protectionist policies, fiscal expansion, and inflation risks

The long-term sustainability of US debt and when/how the debt debate will begin in earnest

How to balance the desire for economic nationalism with the benefits of global trade and efficiency

The impact of AI and automation on job markets in the context of increasing protectionism

Suggested Compromises

Focusing on ‘clubification’ of the world economy rather than complete fragmentation, allowing for trade within aligned groups of countries

Balancing protectionist measures with efforts to cut red tape and improve domestic business environments

Considering both inflation metrics and absolute price levels when assessing economic policies and their impacts on consumers

I always joke, globalization was not because of globalism, it was because of efficiency. So if you are going back a step in which we’ll have less globalization, we’ll have trade barriers, this means that companies will face higher costs and consumers will face higher prices. And as a result, it’s very hard to see growth buoyant these years.

speaker

Fernando Honorato Barbosa

reason

This comment insightfully frames globalization as primarily driven by economic efficiency rather than ideology, and highlights the potential negative consequences of de-globalization on growth.

impact

It set the tone for discussing the economic impacts of fragmentation and protectionism, leading to further exploration of these themes throughout the conversation.

I think of tariffs as a tax on access to the U.S. consumer. Effective or ineffective, that is the purpose of them.

speaker

Karen Harris

reason

This succinct framing of tariffs provides a clear lens through which to view their purpose and impact, cutting through political rhetoric.

impact

It shifted the discussion towards a more focused analysis of the economic impacts and strategic purposes of tariffs in U.S. trade policy.

We believe that the U.S. is going to do very, very well, but this is not having any significant traction effect on the other regions. So the big current account deficit country is no longer supporting the rest of the economy.

speaker

Gilles Moëc

reason

This observation challenges the traditional view of the U.S. as the engine of global growth, highlighting a significant shift in global economic dynamics.

impact

It prompted further discussion on the divergence between U.S. economic performance and that of other regions, as well as the changing nature of global economic interdependence.

I think it’s really important that we reground in what the population is saying, which is their quality of life, their sense of future, their optimism had collapsed, and they want a disruptive alternative.

speaker

Karen Harris

reason

This comment brings attention to the disconnect between economic indicators and public sentiment, highlighting the importance of considering popular perceptions in economic analysis.

impact

It broadened the discussion to include considerations of public sentiment and political realities alongside pure economic analysis.

Rather than the word fragmentation, I prefer the word clubification of the world economy. We have a number of small clubs of countries which get along pretty well and can continue to do business and trade together.

speaker

Gilles Moëc

reason

This reframing of global economic trends offers a nuanced perspective on how trade relationships are evolving, moving beyond simple fragmentation.

impact

It introduced a more complex view of global economic relationships, leading to discussion of regional trade dynamics and strategic economic alliances.

Overall Assessment

These key comments shaped the discussion by moving it beyond surface-level analysis of economic indicators to explore deeper structural changes in the global economy. They highlighted the tensions between efficiency and protectionism, the changing role of the U.S. in the global economy, the importance of public sentiment in economic outcomes, and the evolving nature of international economic relationships. This resulted in a multifaceted conversation that touched on economic, political, and social factors influencing global economic trends.

How will the shift towards a more Westphalian world with bilateral agreements impact global trade patterns?

speaker

Karen Harris

explanation

This is important to understand the long-term implications of moving away from multilateral trade systems towards more nation-state focused agreements.

What specific regulatory changes could Europe implement to improve its business environment and productivity?

speaker

Gilles Moëc

explanation

This is crucial for understanding how Europe might close its productivity gap with the United States without replicating expensive programs like the IRA.

How will increased investment in AI to circumvent trade restrictions impact job markets and political promises of job creation?

speaker

Fernando Honorato Barbosa

explanation

This highlights potential contradictions between protectionist policies and technological advancements, which could have significant economic and political implications.

How will the ‘clubification’ of the world economy affect global trade and investment patterns?

speaker

Gilles Moëc

explanation

Understanding this trend is important for businesses and policymakers to navigate the changing landscape of international economic relations.

When and how will the debt debate start in the United States, particularly regarding entitlement spending?

speaker

Karen Harris

explanation

This is critical for understanding the long-term fiscal sustainability of the United States and its potential impact on global markets.

How will the fiscal policy trilemma (focusing on aging populations, economic growth, and other priorities) play out in different countries?

speaker

Fernando Honorato Barbosa

explanation

This highlights the complex policy challenges facing many countries and their potential impact on global economic dynamics.