Global Economy Resilient in 2025 Despite Trump's Policies Slowing U.S. Growth

The global economy outperformed expectations in 2025, according to economists at Berenberg.

U.S. economic growth slowed to an estimated 2.1% in 2025, down from 2.8% in 2024. Tariffs, immigration restrictions, and policy uncertainty contributed to the drag. However, AI investment and fiscal handouts are expected to push growth above the 1.5% trend rate in 2026.

The eurozone grew by 1.4%, with Japan and China also outperforming forecasts at 1.2% and 4.9%, respectively. Berenberg economists believe Trump may adjust his policies in 2026, including potential tariff cuts to avoid a lame-duck scenario.

Why the Move Happened

Trump's aggressive trade policies, including high tariffs and a near-total halt to immigration, have weighed on the U.S. economy. These policies were expected to slow growth significantly, but the impact has been somewhat mitigated by continued AI investment and fiscal stimulus according to economic analysis.

The U.S. economy initially contracted in early 2025 amid the implementation of these policies. However, growth rebounded in the second and third quarters as businesses and households adjusted to the new environment as reported by Business Times.

How Markets Responded

The U.S. labor market showed signs of strain in late 2025, with the unemployment rate rising to 4.6%. October saw significant job losses across key sectors, although November brought a partial recovery as noted in labor market reports.

The Federal Reserve cut interest rates in the final months of 2025, signaling a shift toward a more accommodative monetary policy. These cuts are expected to provide further support to the economy in 2026 according to financial analysis.

What Analysts Are Watching

Berenberg economists expect Trump to pursue less aggressive tariff policies in 2026, which could offer relief for both the U.S. and global economies. They noted that Trump's "divide and rule" strategy may ultimately strengthen the European Union's cohesion according to economic forecasts.

Analysts are also closely monitoring the U.S. labor market, with concerns over inflation and a divided Federal Reserve influencing the economic outlook. A weaker labor market could limit the impact of Trump's tax cuts on consumer spending as reported by Business Times.

Despite these uncertainties, the global economy has demonstrated resilience. The combination of AI investment, fiscal and monetary stimulus, and potential policy adjustments in 2026 could help maintain this momentum according to economic analysis.

Investors should remain vigilant, as risks such as a weakening labor market and persistent inflation could impact economic forecasts. Continued policy clarity and adjustments in trade and immigration policies will be crucial in shaping the trajectory of global growth in the coming years as reported by financial analysis.