Tariffs, wars, AI: WEF chief breaks down what's next for global economy
Even as the global economy proves more resilient than expected, deep structural risks and profound technological shifts are reshaping the world order—from the threat of new wars and rising debt to AI-driven transformations and a trade system in flux, warns Borge Brende, President and CEO of the World Economic Forum.Speaking to India Today's Rajdeep Sardesai and Business Today's Siddharth Zarabi, Brende flagged four major forces driving global uncertainty and opportunity: geopolitical conflicts, trade fragmentation, historic levels of sovereign debt, and the rise of artificial intelligence.advertisementGLOBAL GROWTH RESILIENT DESPITE CHALLENGES'The global growth is more sluggish than it was in the last decades, but with the geopolitical backdrop we are faced with—the most complicated one maybe since the Second World War—the global economy is more resilient than I expected,' Brende said.
He spoke about the risk of another major war, potentially involving Iran or another Asian flashpoint, and warned that trade wars are already denting global output. 'We are far below trend growth,' he noted. 'We had trend growth the last decades close to 4%. Now, the global trend growth is maybe even less than 3%... and trade is now growing slower than global growth.'The WEF's latest global outlook highlights another red flag: global debt levels haven't been this high since World War II. 'Many countries are struggling with this,' Brende said.advertisementBrende pointed to a structural shift in the nature of global trade, away from manufacturing and toward services and digital flows. 'Trade in services and digital trade are growing three times faster than trade in manufacturing,' he said, adding that this change is partly why India is performing well amid global turbulence.FLAGS TARIFF UNCERTAINTYBut policy unpredictability, especially from the United States, is compounding volatility. With the Trump administration threatening up to 50% steel tariffs on key trade partners by July, Brende said 'it is a full-time job to follow' the evolving stance. 'There's a lot to unpack it's not only about tariffs. The Chinese are not exporting rare earths like before, the Americans are restricting exports of aircraft engines. We're seeing tit-for-tat policies.'The globalisation model of the last four decades is breaking down. In its place, Brende sees the rise of 'friend-shoring,' 'home-shoring,' and 'just-in-case' production, as countries rewire supply chains for security rather than efficiency.'Just in time is not good enough anymore. You also have to have just in case,' Brende said. 'You want to have production in your country and not necessarily import. That can lead to higher prices, and inflation is also a problem.'He added that the current US tariff regime, which uses executive provisions to bypass Congress, may soon face legal challenges, potentially up to the Supreme Court. 'There are many unknowns still,' he said. 'The summer will show us more.'IN THE ERA OF AIadvertisementTurning to the pressing question of jobs and growth in the AI era, Brende acknowledged the global challenge of meeting employment demands, especially for countries like India with a large and growing workforce.'It is, but it's also a great opportunity,' he said. 'With every paradigm shift in technology, it can reduce or kill some jobs, but it can also create new, higher-value jobs. Artificial intelligence is a huge impact factor on productivity. Our economists estimate that proactive AI adoption could boost productivity by 10% — a gain we haven't seen for decades. And productivity means prosperity.'Brende believes India is uniquely positioned to benefit thanks to its young, tech-savvy population, strong services sector, and digital infrastructure like digital IDs. 'Of course, it's hard to know exactly where future jobs will come from. Look at Switzerland: 100 years ago, 95% of their population worked in agriculture. Now, it's just 2%, yet they produce more food and have some of the highest incomes in the world because they embraced change and innovation.'advertisementBrende said the jury is still out on AI's potential impact on inequality. 'The platform economy showed a 'winner takes all' trend with big tech dominating. AI hardware requires massive investment, but as software applications proliferate, there are opportunities for smaller players. We saw a Chinese company launch a language model at a fraction of the cost of the big ones, showing disruption can come from unexpected places.'He added, 'Some of the world's most valuable companies didn't even exist 30 years ago. The next global giants could be emerging today in Bangalore or other innovation hubs. Whether AI leads to concentration or broader opportunity is uncertain — it's a key challenge of our time.''AVOID WARS'Asked about his biggest worry and greatest hope for the global economy beyond 2025, Brende said, 'I'm concerned about future wars. If we see new wars, that will kill growth.'Yet, he remains optimistic: 'The world economy has been so resilient. Trade was the driver of growth for decades. Maybe new technologies like AI are already driving growth, increasing productivity, and leading to investment. I don't think we will see a repeat of the sluggish 1970s.'
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