2025 was dominated by Trump and his tariffs. And, 2026.. well that will be the year that China will DOMINATE the global economy, more and more governments will hit a debt limit, the A.I. bubble will NOT pop and China will blockade Taiwan.
Hey, I’m Joeri, I have a PhD in economics, and every year, at the end of the year I predict the 5 key megatrends that will dominate the global economy in the next year. Last year, my predictions did surprisingly well, predicting that
“””demographic decline will start to bite in Europe and Japan“””
“””Trump’s trade war will start slow“””
“””Trump’s most aggressive Tariff suggestions should be seen as more of a negotiating tactic than a real policy.“””
And that Elon Musk’s DOGE would probably NOT succeed because it would be
“””unlikely that he will figure out American politics in just a year.“””
My next big predictions were that
“””The global economy will struggle“””
that
“””governments will face tough choices to reign in debt“””
and finally that
“””the green energy revolution will continue to amaze “””
Looking back, all of these predictions actually materialized. The global economy again had a disappointing year, Europe and Japan grew especially slowly, Governments from France, to Brazil to the UK, which I had mentioned as especially risky, faced debt crises. And, as you can see here, while the Trump trade war chaos came quickly, most of it was part of his negotiation strategy as actual tariffs only followed slowly. Finally, on the bright side, the green energy revolution powered ahead, as 2025 EV, solar and wind turbine adoption are again on track for another record year.
So, actually, the only prediction that I got REALLY wrong was that
“””most of my predictions will NOT come true. “””
Which honestly got me thinking. Why did my main predictions do so well last year, given that economists have such a bad reputation making predictions, and that I myself said last year that
“””A non-human complex system, like, for example the weather can only be reliably predicted for just a few days ahead. The outcome of a really small human complex system, like a sports game, is notoriously hard to predict by both experts and scientists. So, to think that anyone can reliably predict the global economy for a full year ahead, is, frankly, madness.“””
So, yeah, it turns out it wasn’t madness after all. But, why?
Well actually, if we look at stuff like financial markets or big geopolitical events, a lot of research says these are indeed fundamentally unpredictable. However, when it comes to big macro trends, such as globalization or, deglobalization, as you can see here actually these trends are pretty predictable.
And, that’s what I mostly predicted last years, big macro trends that reshape the world today will continue to do so next year. So, to switch things up a bit this year, I’ll take some more risks such as with my bubble and Taiwan blockade predictions. But first, let’s get into a prediction I’m very confident about
Prediction 1: China will dominate more and more industries
The core of this prediction is that, after muscling their way into the smartphone industry, shipbuilding industry, battery industry, drone industry and car industry.
China will challenge previously untouchable Western giants like Elon Musk’s Space-X in 2026. Yes, Elon. Sorry, it’s happening again. When Tesla entered the Chinese market in 2018, it was most advanced EV company by far. But, now, it’s playing catch-up with 100s of Chinese car brands, like Yang Wang, Xiaomi, Zeekr, MG and many more.
Yes, in 2026, China is challenging Space-X in the space sector. But, that’s not all. It’s going after Nvidia in the advanced chip sector, Pfizer and Novo Nordisk in the bio-pharmacy sector, Germany’s BASF in the chemical sector, and the German Mittelstand in general when it comes to making advanced machines.
China’s increased dominance is one of these relatively predictable macro-trends. So, I’m pretty confident in this prediction, giving it an 80% probability.
But, importantly, I don’t know WHICH of these sectors the Chinese will dominate next year. A lot of China’s incredible industrial success is just the result of the country getting richer. When Europe got rich, when Japan got rich, when Korea got rich, they all naturally started to compete globally in advanced industries.
What differentiates China though, is that it’s government is making these 5 year plans, in which they FIRST boost specific sectors with subsidies in such a way that it creates intense competition, then SECOND they let the intense competition process play-out and stop subsidizing, then a lot of companies fail. But, the toughest ones who have survived this process of intense competition, these emerge as world class companies.
This process has yielded China some incredible results. In 2006, the Chinese government started heavily supporting the shipbuilding industry. Today, China dominates the shipbuilding industry. In 2015, China explicitly started targeting the battery, solar and electric vehicles industries. Today, China dominates all of these industries.
But, importantly, China’s process doesn’t always work for each sector. For example, China has previously also targeted airplane manufacturing of the type currently done by Boeing and Airbus. So far, their efforts have largely failed. So, I’m not saying China will dominate ALL of these sectors in 2026. But, I am saying with 80% confidence that China will dominate more and more industries in 2026.
But, of course, this will invoke a response, which leads us to
Prediction 2: the trade war will broaden
You see, just as Trump’s trade war was a response to Chinese subsidies, already in 2025 more and more countries responded to perceived unfair competition from China with tariffs, such as Brazil’s steel tariffs, Mexico’s car and goods tariffs, or with nationalizations, such as the Dutch nationalization of the Chinese owned chipmaker Nexperia.
In 2026, I predict that this trend will continue for two reasons. The first is that China’s incredible manufacturing machine starts with initial government subsidies. Therefore, many advanced manufacturing nations view Chinese competition as unfair and feel they have to respond to protect their industries.
The second reason is that China is breaking the traditional Asian growth model known as the flying Geese economic model. In a nutshell, the flying geese model states that as Asian countries get rich, they move up the value chain. China is doing that, just as Japan, and Korea have done before it. However, according to the flying Geese model, as Asian countries get richer, they naturally will become too expensive for low wage simple manufacturing industries.
Therefore, Japan moved a lot of it’s low cost manufacturing to Korea and Taiwan, giving them a chance to develop. Korea and Taiwan then did the same for China. But now, China is breaking that pattern. It’s national security strategy is about becoming self reliant in ALL manufacturing. Therefore it’s now promoting factory automation which helps keep simple manufacturing like pencil manufacturing in China, despite rising wages in China.
So, through its policy of self-reliance, China is now threatening both industries in advanced and developing nations. This is why I predict the trend of both developing nations like Brazil, Mexico and India as well advanced nations like the Netherlands and Canada hitting China with more and more tariffs or other restrictions will continue.
But, … hold on. That wasn’t my full prediction. I said the trade war will broaden IN GENERAL. So, not just against China. This means that I predict in 2026 nations still start hitting MORE countries with tariffs and other barriers THAN JUST CHINA.
Again this is already happening to an extent, Mexico didn’t just hit China with tariffs, it hit India as well.
This is not surprising. As I talked about in my multi Polar order video, one of the main predictions of the emerging field of Geo-Economics is that as we transition from a world dominated by one superpower to one by multiple great powers, it’s likely that we see more use of economic weapons like tariffs, sanctions and other economic weapons as countries experiment with how far they can go in this new economic order.
Still, I’m only giving this prediction a 60% probability. The reason has to do with the fact that while megatrends like this are quite predictable over the long term. You could very well have multiple years of small reversals.
For example, let’s go back and look at the deglobalization megatrend in the 1920s and 1930s. Actually there were quite a few years where trade recovered before following the deglobalization mega trend again.
2025 was an exceptionally tariff heavy year from the US, coupled with retaliations from China. Both countries have seen that they are actually quite exposed to each other. So, 2026 could be a correction year, making my 2026 prediction wrong.
In that sense, I’m more confident about
Prediction 3: Government debt will increasingly be a limit
Indeed this is basically the same prediction as I made last year. The reason for it is simple. The world continues to age. The world is used to governments using stimulus to get out of crises. Last year, we saw governments like the UK and French governments change spending plans as a consequence of their high debt, and increasing interest rates. But, they didn’t tackle the underlying issue, which is that France and the UK spend way more than other countries on pensioners.
To raise the pension age by a lot, or reduce pension payments, that was politically unacceptable. The more people age, the more difficult it will become for democracies to lower pensions… given that more and more voters receive these pensions, or will do so soon. Global public debt compared to GDP in advanced economies is now higher than it was during the first world war, at levels only seen during the time of Napoleon.
Therefore, I think there’s an 85% chance that, just like last year, several high debt rapidly ageing countries will again have to make tough choices to deal with their debt, or face increased inflation, OR a falling currency.
Luckily this could be offset a little by my fourth prediction, which is
Prediction 4: the A.I. bubble will not burst yet
Yes. people are still investing enormous amounts of money into the A.I. sector. Yes, there are clear parallels to the 2000 internet dotCom bubble, where despite the genuine promise of the technology of the internet, people still got way too excited about a lot of internet companies.
Yes A.I. Just like the internet is really changing how people work. And yes, just like internet adoption in 2001, A.I. adoption today is still in its infancy.
However, that doesn’t mean that the companies that investors are betting big on today, like unproven billion Dollar start-ups, or even giants like open A.I., and Nvidia, will make enough money in the future to justify their incredible high stock prices today. Serious research firms like Bain and JP Morgan have calculated that A.I. companies need to make so much more money in the upcoming years to justify their current valuations, that it seems clear there is a bubble today.
However, the ai industry today is different than the internet industry in 2001 for two reasons. First, some of the most valuable companies today, like Open A.I. have unprecedented numbers of active users. I mean open A.I. already double the number of users than Netflix and it’s valuation is just above that of Netflix.
Of course, open A.I. has NOT proven that it can get many more of its users to pay, yet.
Yet, this brings us to reason number 2. If we compare US stock prices today compared to earning, the picture still looks much less like a bubble now than it did back then. Especially when it comes to the biggest winner now, Nvidia, they are already earning a lot of the revenue today that justifies their high stock price.
Yes, some have pointed out that a lot of these companies finance each other. That could be risky. But, it could also be completely rational, if these companies live up to their promise.
So, in theory, this bubble could grow quite a bit further. It could pop in 2027. Maybe that’s a 27% chance. It could pop in 2028, maybe that’s a 20% chance. Maybe it could pop later or never at all. If that’s a 30% chance, then actually, the chance that it pops next year is pretty low.
So, my argument is this, yes we see signs of a bubble. But, look back at the Chinese real estate bubble. People were calling that bubble already in 2015, 5 years before it popped. So, I’m making the case here, that the bubble will NOT pop in 2026, with a probability of 75%.
Although, my final prediction could ruin that prediction, as it may tank the global economy… Let’s talk about
Prediction 5: China will blockade or quarantine Taiwan
Okay folks, let’s just be honest here. I’m an economist, what do I know about geopolitics… Well, since Russia invading Ukraine ruined all inflation predictions in 2022, economists like me have been forced to adapt. Since then, I intensely follow experts on Geopolitics such as the folks at the center for Strategic and International Studies.
Alarmingly, in a recent report they polled 35 Taiwanese experts and 52 U.S. experts, and most of them thought that while China does not have the capability to invade Taiwan yet, they DO have the capability to isolate it from the outside world through a naval blockade, which could cripple the island.
A blockade means that China would block all entry to Taiwan via the sea and potentially air. Under international law, a blockade against another nation is considered an act of war. However, only a few nations recognize Taiwan as a nation. So, if Taiwan is not a nation, then maybe it’s coastline is simply Chinese waters. So, what if the Chinese coastguard just sails into Taiwanese waters and start demanding to inspect and potentially authorize all incoming and outgoing ships.
As you can see here, the experts overwhelmingly think the Chinese coast guard is probably ready to enforce such a quarantine of Taiwan, tomorrow, if it wants to.
As you can see in this graph from a CSIS war-game, a Chinese blockade would cause Taiwan to run out of gas in just 3 weeks, run out of coal in 8, oil in 15, which would cripple the country in no time.
And, there are worrying signs China has been preparing all year for a blockade. In the summer it did blockade like military exercises. In July they escalated their military moves in the region, and in November they expanded their navy with a new state of the art aircraft carrier.
Combine this with the fact that the Chinese manufacturing economy is riding relatively high right now, the US is distracted in the Middle East and Venezuela, and that China’s population will soon start dropping, it’s not hard to make the argument that the chance of a Chinese quarantine or blockade in 2026 is higher than ever.
And, dang… the consequences on this one could be horrible. Of course, it would be horrible for the people of Taiwan. On top of that, a quarantine has a high likelihood to escalate eventually into a blockade, which in turn could lead to war. This all of course could also lead to way more sanctions, which would be truly devastating for the global economy as the West crucially depends on China for rare earths, many minerals, and a lot of manufacturing.
In fact, the consequence for the West could be so bad that, they could decide that actually, it’s not worth it to fight a Chinese re-unification at all. If the Trump caved over Chinese rare-earth magnet restrictions so, quickly… perhaps he will just let China have quarantine Taiwan as well.
It’s a real possibility. I am including it in my predictions this year, even though I only give it a 25% probability.
So, then why predict it? Well, last year I did what all economists did, make predictions that are relatively safe. That’s why I got them all right. But, the goal of this video is ultimately not to get it right. The goal of this video is to help you the viewer think about the most likely AND impactful events that could shape 2026. To achieve that goal, I felt it was essential to also make some riskier predictions, given how big the consequences could be.
But, yeah let me know if I succeeded in that. Did this video give you a more informed look at 2026?
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