Economic nationalism and trade tariff volatility is fuelling uncertainty and stalling long-term decision-making, noted the latest Chief Economists Outlook by the World Economic Forum, released on Wednesday. 

The report reveals that an overwhelming majority of surveyed economists (79%) view the current geoeconomics developments as signs of a significant structural shift for the global economy rather than a temporary disruption. 

“Policymakers and business leaders must respond to heightened uncertainty and trade tensions with greater coordination, strategic agility and investment in the growth potential of transformative technologies like artificial intelligence,” said Saadia Zahidi, Managing Director, World Economic Forum, in a statement. “These steps are essential for navigating today’s economic headwinds and securing long-term resilience and growth.” 

According to the report, a majority of surveyed economists see current U.S. economic policy as having a lasting global impact, with 87% expecting it to delay strategic business decisions and heighten recession risks. The growth outlook is divided, with weak prospects in North America.

The thorn of the tariffs

Trade policy has been at the centre of spiralling economic uncertainty, with the announcement in early April of unprecedented increases in bilateral tariffs between the U.S. and many other countries by President Donald Trump, which has rocked confidence in the durability of key pillars of the post-World War II international economic order.

Most have since been paused for 90 days, which has led to a significant easing of short-term concerns, particularly in financial markets. However, underlying uncertainty about the U.S. economic policy persists, and it remains to be seen what will happen when the pauses elapse.

The chief economists were largely aligned in their assessment that higher tariffs and persistent trade tensions would fuel inflation and suppress trade volumes, and persistent uncertainty would inflict significant economic damage to the global economy, including through paralysed decision-making and heightened risks of policy miscoordination.

In the face of escalating geopolitical and economic uncertainty, businesses tend to adapt to mitigate risks and capitalise on any emerging opportunities. The most likely response, highlighted by 100% of the chief economists surveyed, involves reorganising, sourcing and logistics to reduce exposure to tariffs or export controls over the next three years.

Geopolitical uncertainty fuels uptake in defence spending

The intensifying geopolitical and geoeconomic tensions have further macroeconomic impacts through their effects on government spending—shifts in the global security architecture have caused the steepest year-on-year rise in global military spending since at least the end of the Cold War. 

According to the report, the uptake in military spending is the most palpable in Germany, which recently overhauled its fiscal framework largely in order to facilitate increased defence spending. The U.S. for the first time announced a defence budget that surpasses $1 trillion.

Most chief economists surveyed expect public borrowing to increase (86%) while more than half (56%) expect that other public investment will decline, and nearly half (47%) expect that spending on public services will decline. Tax increases (25% of respondents) were seen to be the least likely means of financing increasing public defence budgets.

Emerging economies lead the rebound

Although the global economy may be recovering from a period of sluggish growth, the report suggests a fragile and uneven recovery, with marked regional divergences and growing financial vulnerabilities threatening long-term stability.

Based on insights from a panel of leading chief economists across public and private sectors, the WEF report finds that 97% of respondents expect at least moderate global growth in 2025—a sharp improvement from 82% just four months ago. 

While this marks a decisive shift in sentiment, only 13% anticipate strong growth, pointing to lingering caution amid geopolitical instability, supply chain realignments, and financial fragilities.

The optimism is far stronger for emerging economies, particularly in Asia. A significant 86% of economists expect at least moderate growth in South Asia this year, while 73% are optimistic about East Asia and the Pacific. 

In contrast, just 56% expect the same for the United States, 59% for China, and only 13% see any positive momentum in Europe. Sub-Saharan Africa and Latin America received mixed forecasts, with 57% and 52% of economists, respectively, predicting moderate growth.

India, although not named explicitly, is implicitly central to South Asia’s bright outlook. With robust domestic demand, investment inflows, and digital innovation, the region’s economies appear better shielded from global headwinds than their developed counterparts.

Debt, divides, and digital transition

Yet, the economic recovery is anything but uniform. A full 97% of chief economists agree that global financial markets are increasingly vulnerable to systemic risks, with sovereign debt levels and fiscal deficits posing major concerns. Over 60% of respondents expect both public and private sector debt to rise further this year, even as interest rates remain elevated.

The report highlights intensifying geo-economic fragmentation as another key threat. Nearly 80% of economists say businesses are actively adjusting their supply chains in response to geopolitical shifts, with many firms “reshoring” or “friend-shoring” critical sectors. 

This could entrench divides between high-income and low-income economies, as access to capital, markets, and technology becomes increasingly asymmetric.

When asked about inclusive growth prospects, only 28% of the economists expressed confidence in short-term progress. For lower-income economies, that number drops to a mere 13%, suggesting that inequality—both within and between countries—could worsen without coordinated intervention.

AI and sobering labour market realities

The report also explores the complex implications of artificial intelligence on global labour markets. While 64% of respondents believe AI will boost overall productivity in the long term, more than 70% also caution that AI could widen labour market disparities between high- and low-skilled workers. These shifts, combined with demographic pressures and uneven education access, could exacerbate employment insecurity across several economies.

Climate and structural transformation lagging

In what may be a wake-up call for global policy circles, the survey finds that optimism around structural transformation—particularly climate action and energy transition—has waned. Only 22% of chief economists expect meaningful acceleration in climate-related investments over the next year, down from 28% in January 2024. 

The authors warn that if sustainable infrastructure and climate finance do not scale rapidly, the world risks locking into outdated systems at the very moment transformation is needed most.

Conclusion: optimism tempered by uncertainty

While the headline figures suggest a rebound in global confidence, the deeper narrative of the WEF’s Chief Economists Outlook is one of cautious optimism, tempered by structural vulnerabilities. 

Economic fragmentation, persistent inequality, rising debt, and climate inertia continue to challenge the global system. The report calls for urgent multilateral coordination, especially around debt sustainability, AI governance, and inclusive finance.