As 2025 lurches toward 2026, the global economy faces a mess of interlocking threats that would make anyone nervous. Trade policy changes have doubled as a concern since June, with 60% of respondents now citing them as the top disruption to global growth. That's not a small shift. It's a seismic one.
Trade policy worries have doubled since June—60% now call it the top threat to global growth.
Trade policy isn't alone in keeping executives up at night. Geopolitical instability ties with trade changes as the biggest risk to the world economy and has held that position for three straight years. It's now the primary threat to company performance, overtaking weak demand. Every region sees it as a top domestic risk. The hits just keep coming.
Inflation, which seemed to be fading into memory, has clawed its way back into the top five risks for the first time since March 2025. Services inflation accelerated in November. Japan hit 3% in October and edged higher. The Fed, meanwhile, risks its credibility by focusing too narrowly on labor markets while inflation lurks. North American respondents are particularly worried, and they should be.
Domestic political conflicts round out the top three concerns, especially in developing markets, Europe, and North America. Political leadership shifts have dropped off the list, replaced by anxieties over economic volatility. The ECB thinks rates are fine where they are, but futures markets give a 30% probability of a rate cut by June 2026. Someone's wrong.
Growth forecasts paint a grim picture. Global GDP growth decelerates from 3.4% in 2025 to 3.2% in 2026. UNCTAD is even more pessimistic at 2.6% for both years. The World Bank sees just 2.3% in 2025 with a tepid recovery afterward. Not exactly inspiring.
Central banks are scrambling. The Fed held steady on January 28, 2026. The BOJ hiked in December. Banxico cut amid weak growth. Meanwhile, government debt piles up at higher long-term rates, with Japan and the UK facing auction pressure. Supply chain disruptions hit their highest level since December 2022. There's a 35% probability of recession in 2026. Emerging markets are particularly vulnerable to these pressures, as currency volatility threatens to compound existing economic fragilities. African currency pairs face especially acute volatility from commodity price swings and external capital flows that magnify exchange rate instability. Forex traders navigating this environment must stay vigilant about compliance requirements as regulatory scrutiny intensifies across jurisdictions. Happy New Year.
