Test Of Resilience

ADVANCED ECONOMIES ARE GRAPPLING WITH RISING DEBT BURDENS, AGING POPULATIONS, AND POLITICAL GRIDLOCK, WHILE EMERGING-MARKET ECONOMIES, DESPITE BEING HELPED SOMEWHAT BY A WEAKER DOLLAR, ARE SHOWING SIGNS OF STRAIN

- Eswar Prasad & Caroline Smiltneks

Although the global economy has proven surprisingly resilient in the face of US President Donald Trump's tariff war and other severe challenges, cracks in the foundation are beginning to appear.

The October 2025 update of the Brookings-FT TIGER (Tracking Indexes for the Global Economic Recovery) reveals an economic landscape that seems benign in some ways, but unsettled in others, with household and business confidence weighed down by uncertainty about trade policy, political upheavals in many countries, and geopolitical volatility.

Advanced economies are grappling with rising debt burdens, aging populations, and political gridlock, while emerging-market economies, despite being helped somewhat by a weaker dollar (which alleviates financing pressures), are showing signs of strain.

Trump’s tariffs, and the protectionist tendencies they have triggered, are rippling through labour markets and dampening consumer demand around the world, compounding structural weaknesses in trade-dependent economies. Meanwhile, financial markets, which were initially spooked by America’s erratic trade policies, are forging ahead, with equity indexes across the world reaching new highs even as growth prospects weaken. In the United States, stock prices have been bolstered by exuberance about the potential benefits of AI.