Atlantic Council• Jan 8, 2026• 46:10Interview

AI, supply chains, and trade resets: The global economy in 2026

From Atlantic Council

Jan Hatzis•Chief Economist at Goldman Sachs, Head of Global Investment Research

Executive Summary

Goldman Sachs projects an above-consensus US GDP growth of 2.6% for 2026, driven by fiscal stimulus and easing financial conditions, not AI investment, which had a negligible impact in 2025.
The firm forecasts a below-consensus US inflation rate of ~2.1% by year-end 2026, as the inflationary effects of 2025's tariffs fade, potentially allowing for two more Fed rate cuts.
China's economy is expected to grow by 4.8%, fueled by a resilient export sector that is creating a historic global trade imbalance, despite a severely weak domestic property market.
The primary "black swan" risk for 2026 is a larger-than-expected increase in the US unemployment rate, potentially driven by AI-related efficiencies, which could trigger a negative economic feedback loop.

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Concerns Raised

Sustained US fiscal deficit (~6-8% of GDP) will exert upward pressure on long-term interest rates.
China's massive export-driven imbalance is creating global trade friction and pressuring other economies.
A potential sharp rise in US unemployment, possibly linked to AI efficiencies, could trigger a negative economic feedback loop.
The ongoing downturn in China's property market continues to be a major drag on its domestic economy.

Opportunities Identified

US growth is poised to outperform expectations due to fiscal stimulus and the fading negative impact of tariffs.
US core inflation is forecast to return to the Fed's 2% target, allowing for further monetary policy easing.
The global economy proved more resilient to 2025's tariff shocks than anticipated, suggesting underlying strength.
Easing financial conditions, driven by Fed rate cuts, will provide a tailwind for US growth in early 2026.

Key Themes

US Economic Exceptionalism vs. Consensus

Goldman Sachs presents a contrarian view on the US economy, forecasting stronger growth (2.6%) and lower inflation (~2.1%) than Wall Street consensus. This optimism is rooted in fading tariff impacts, significant fiscal stimulus, and easing financial conditions, suggesting a soft landing that allows for further Fed rate cuts.

This divergent forecast challenges prevailing market expectations, suggesting potential opportunities in US equities and bonds if Goldman's more optimistic scenario for growth and disinflation materializes.

The Mismeasured Impact of AI

The speaker argues that the direct contribution of AI investment to US GDP growth in 2025 was "basically zero." This is because most AI hardware is imported, creating a negative entry in net exports that offsets the positive investment figure in GDP accounting, a crucial nuance often missed in popular narratives.

This insight forces a recalibration of near-term growth drivers, separating market hype from measurable economic reality and highlighting that AI's significant economic impact is more likely to be a future productivity story than a current investment boom.

China's Unbalanced Export-Driven Strategy

China is offsetting its severe domestic economic weakness, particularly in the property sector, by doubling down on an export-led growth model. This has resulted in remarkable export resilience despite tariffs and is projected to create a current account surplus reaching an unprecedented 1% of global GDP.

This strategy creates significant deflationary and competitive pressure on manufacturing sectors globally, especially in Europe, fueling geopolitical and trade tensions as the world grapples with this massive imbalance.

Persistent US Fiscal Imbalance

Despite a massive increase in tariff revenue, the underlying US fiscal deficit remains structurally high at 6-8% of GDP. This imbalance is expected to continue increasing the debt-to-GDP ratio, necessitating greater absorption of US debt by global investors.

This structural issue is likely to exert sustained upward pressure on long-term interest rates, even as the Fed cuts short-term rates, creating risks for long-duration assets and the potential for renewed market volatility focused on US fiscal sustainability.

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Topics

US GDP Forecast Global GDP Inflation Forecast Federal Reserve Interest Rates Monetary Policy Fiscal Policy US Deficit Tariffs Trade Policy Artificial Intelligence (AI)Productivity Growth China Economy Euro Area Economy Geoeconomics Central Bank Independence Labor Market Unemployment Risk

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