A year of economic earthquakes

The long-term effects of the tectonic shifts visible in 2025 are hard to parse

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Major shifts in economic policy or in an economy's dominant technology have long-lasting and sometimes unpredictable effects on internal political dynamics, wealth distribution, and inequality.

The age of easy money, for example, led to asset prices ballooning and entrenched wealth disparities, creating a politics of populism and political divides between generations and educational strata. Freer trade led to geographical disparities developing in industrial nations and to the reduction of the social and political power enjoyed by traditional landowning castes and classes in countries like India - again, with major consequences for political trends decades after the economic shift in question began.

The year 2025 has been tectonic in multiple ways. Two major shifts in policy have taken place globally, alongside one major development in the technological substrate. The world's trading architecture is being remade; politics has turned against the migration of people; and investment in artificial intelligence has become the driver of global growth. Each of these will have important - but sometimes clashing - consequences.

The reelection of Donald Trump to the White House has brought us to a more transactional, less connected moment in our global economic architecture. The rise of China had already led to some constraints on trade flows - in India, the European Union, and elsewhere - to protect crucial infrastructure like telecom and power, or to retain strategically important manufacturing sectors like automobiles. But Mr Trump has ensured that trade skirmishes stop being bilateral and local, and instead become a global conflict. It is now a world war, with unexpected adversaries arising every month. Last December, it would have been hard to predict that within a year Mexico would be imposing 50 per cent tariffs on Indian cars.