Trade Wars, Shooting Wars and the AI Investment Boom
Key Takeaways
- •The Trump administration's latest tariff measures have not yet dented global trade, which has shown unexpected resilience despite escalating trade tensions.
- •Oil prices have returned to roughly $100 per barrel amid heightened Middle East geopolitical tensions, potentially complicating the inflation and monetary policy outlook for major economies.
- •Artificial intelligence investment has become the primary driver of economic growth in both the United States and China, extending its influence beyond the technology sector.
- •Shearing cautioned that a potential downturn in AI-related capital spending could significantly affect broader growth prospects given its impact on equipment, infrastructure, and services demand.
- •All three themes share the capacity to simultaneously influence prices, policy decisions, and business planning across the global economy.
Group Chief Economist Neil Shearing unpacks another turbulent week for the global economy in the latest Capital Economics Weekly Briefing podcast. In conversation with David Wilder, Shearing examines three major themes shaping the current macroeconomic landscape: the latest escalation in the US trade war, the economic fallout from rising geopolitical tensions with Iran and higher oil prices, and the way the artificial intelligence investment boom continues to reshape growth dynamics in both the United States and China.
The topics are linked by their potential to affect prices, policy decisions and business planning at the same time. Tariffs can alter trade flows and supply-chain costs, oil shocks can feed into headline inflation, and large-scale AI investment can change the composition of economic growth.
Trade War
Shearing addresses what lies behind the Trump administration's latest tariff announcements and explores why global trade has remained surprisingly resilient despite escalating trade tensions. The discussion touches on the broader implications for international commerce and supply chains, including the extent to which firms and trading partners can adapt when tariffs become a recurring policy tool.
Shooting War
With oil prices returning to around $100 a barrel, the podcast examines the potential implications for inflation and central bank policy if tensions in the Middle East continue to escalate. The segment considers how sustained higher energy costs could complicate the monetary policy outlook for major economies, particularly where policymakers are already balancing inflation risks against softer growth conditions.
AI Investment Boom
The conversation turns to how AI investment has become the major driver of economic growth in both the US and China. Shearing discusses the scale and significance of this investment surge and raises the question of what could happen to growth prospects if the boom were to turn to bust. That makes AI-related capital spending an important macroeconomic indicator, not just a technology-sector story, because it can influence demand for equipment, infrastructure and related services across the wider economy.
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