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US Secretary of Defense Pete Hegseth arrives for his first official day at the Pentagon in Arlington, on Jan. 27, 2025.
HARD NUMBERS: Trump looks to lasers, US economy grows, Americans cool on Canadian annexation idea, Canadian researchers feel the freeze
60: The US is going back to the future with Donald Trump’s call this week to develop a system of space lasers to protect the country from nuclear attack. Under the “Iron Dome for America” plan, Trump has given Defense Secretary Pete Hegseth 60 days to develop a plan, which is to include the use of defensive space lasers – a revival of former US President Ronald Reagan’s vision of Star Wars.
2.3: The US economy showed strong growth at the end of 2024, expanding by 2.3% in the last quarter of the year. For the full year, the world’s largest economy grew 2.5%, exceeding most expert’s expectations. China, the world’s second-largest economy, grew at an official rate of 5%, though experts dispute those statistics. US President Donald Trump has promised a “golden age” for the US, but the economic impact of his proposed tariffs and massive federal budget/staffing cuts remains unclear.
16: Good news for Canada – only 16% of Americans support Donald Trump’s suggestion of annexing Canada, according to an exclusive poll by Echelon Polling, commissioned by GZERO Media. Meanwhile, 23% of respondents supported retaking control of the Panama Canal and acquiring Greenland.
40 million: The whiplashing moves of theTrump administration regarding federal funding for healthcare research (apparently frozen for review until at least Feb. 1) alongside a broader freeze on all federal grants, which was then rescinded, have rippled far and wide. Canadian researchers, who received more than US$40 million in support from the US, are now mired in uncertainty about the future of their work.
US Federal Reserve Chair Jerome Powell speaks to the media during a press conference at the Federal Reserve, in Washington, DC, on Wednesday, Jan. 29, 2025.
A tale of two central banks
North of the border, though, the Bank of Canada went ahead with its sixth cut in a row, this one a modest 25 basis points, bringing its interest rate down to 3%. The bank noted an inflation rate of about 2%, a soft labor market, and an unemployment rate of 6.7% in December – and looked ahead to a potentially rocky 2025 for the country economically, even as it expects GDP growth to pick up this year. Maybe.
Immigration rates are slowing in Canada, and the threat of Trump tariffs could drive the country into a recession and send inflation soaring. The Canadian Chamber of Commerce warns that a 25% duty alongside retaliatory tariffs would cost Canada 2.6% of GDP per year – roughly CA$78 billion, while the US economy would take a 1.6% percent hit, coming in at US$467 billion.
Should that happen, the two central banks may quickly align themselves on the need for more, perhaps steeper, rate cuts.
Container ships in front of the port of Bremerhaven.
How scared should the world be of Trump’s economic threats?
On Wednesday, President Donald Trump used his social media platform to threatenVladimir Putin with “high levels of Taxes, Tariffs, and Sanctions on anything being sold by Russia to the United States” unless he struck a bargain over Ukraine.
There’s just one problem: Russia has very little trade with the US. Americans imported just $2.8 billion in goods from Russia from Jan. to Nov. 2024, less than a tenth of the pre-war figure and less than 1% of all US imports over the same time period. The extensive sanctions already in place have hardly brought Moscow to its knees, and arguably benefited US rivals like China, Iran, and North Korea. It’s tough talk, but it’s not likely to push Putin to the table.
China is a different story. Trade with the US added up to an average of $54 billion per month in 2024, and the 60% tariffs Trump threatened to put on China on the campaign trail would cause severe damage to both economies. That may be why Trump is backing off the high sticker number and said Tuesday he is considering imposing at 10% tariffs on Chinese goods as soon as Feb. 1.
Now, 10% is a number that Beijing feels is much more manageable. China is experiencing price deflation — a really damaging phenomenon with one silver lining in that it could mean US consumers wind up paying about the same prices even if Trump hikes tariffs. The central government is also promising funds to stabilize the stock market in the face of potential tariffs and prevent investors from seeking safer shelter for their cash.
The fears are more real in Europe, where Trump threatened to impose tariffs without specifying a rate on Tuesday. Growth in the region’s most important economies is already stagnating, and even small barriers to trade with their most important partner will have serious consequences. Further economic troubles could empower far-right movements across the continent, which may suit Trump just fine. We have our eye on Germany, which will hold elections in precisely one month.
And don’t forget Canada and Mexico, which are staring down the barrel of 25% tariffs that Trump threatened on Tuesday as well. It’s creating a decidedly tense atmosphere in North America, with Canadian Prime Minister (for now) Justin Trudeau promising retaliation, which Mexican President Claudia Sheinbaum has hinted at as well.
The bottom line? You’re probably in for rising prices in the near future … unless everyone can come up with a reason for Trump to let them slide. We’re watching what Trump says when he speaks at the World Economic Forum in Davos on Thursday.
FILE PHOTO: A view of a logo during the 54th annual meeting of the World Economic Forum, in Davos, Switzerland, January 19, 2024.
Davos Dispatch: 3 takeaways & 3 things to watch
GZERO’s very own Tony Maciulis is in the Alps all week to report from the 55th World Economic Forum in Davos, Switzerland.
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Grüetzi! That means “hello” in Swiss German, and it’s the only word I know in that language. But there are people from 130 countries gathered in this little Alpine village right now, so a smile and a nod will generally get you through anything but the security line.
As we head into the third day of the World Economic Forum, conventional wisdom is that newly inaugurated President Donald Trump is dominating all the conversations here. That isn’t wrong. But it’s kind of a “Yes, and ...” as they teach you in improv.
A few notes from yesterday:
- China’s Vice Premier Ding Xuexiang made headlines with his address at the forum, though it read like a speech meant to counter an executive order on tariff hikes that hasn’t yet been issued. Instead, it felt like a preemptive strike as he warned, “Protectionism leads to nowhere, and there are no winners in a trade war.” He made a case for multilateralism on the most multilateral of stages, perhaps setting the stage for moves China will make to fill a leadership void if the US backs out of major global efforts like the World Health Organization.
- If China’s on offense, Europe is building defense. In two big speeches Tuesday, both Ukrainian President Volodymyr Zelensky and European Commission President Ursula von der Leyen laid out arguments for a stronger, more self-reliant Europe. Zelensky called for increased defense spending that could give the Continent a shot at going it alone if US support diminishes. “Europe has too often outsourced its security, but those days are gone,” Von der Leyen declared.
- And I overheard more than a few grumblings on the Promenade about the déjà vu of another US withdrawal from the Paris Climate Agreement. Trump puts America in the company of only three other countries — Yemen, Libya, and Iran. But who’s counting?
What to watch for today:
- Speaking of Iran, that nation’s Vice President for Strategic Affairs Javad Zarif is set to speak on Wednesday, as is Syria’s new Foreign Minister Asaad Hassan al-Shibani. These are two prominent moments in an agenda that has several programs focused on the Middle East.
- UN Secretary-General António Guterres will be here just days afterhe warned the world has opened “a Pandora’s box of ills” with regard to growing inequalities and protracted conflicts. (Close the box, please.)
- And our Global Stage series is set to premiere a new conversation from Davos! “The AI Economy: An Engine for Local Growth,” streams at 11 a.m. ET today. The program features Ian Bremmer, Microsoft’s Vice Chair and President Brad Smith, WTO Director General Ngozi Okonjo-Iweala, European Investment Bank President Nadia Calviño, and G42’s CEO Peng Xiao. Watchhere.
Navigating global trade during uncertain times
In a rapidly shifting geopolitical landscape, businesses are focusing on adapting to global trade uncertainties. Dr. Nikolaus Lang, global leader of the BCG Henderson Institute, shared his insights with GZERO’s Tony Maciulis during the World Economic Forum in Davos. Dr. Lang discussed the Trump administration’s cautious approach to tariffs, emphasizing the likelihood of increases in the near future. "Our point of view is that there will be tariff hikes in one way or the others. Whether this will be the magnitude that was kind of mentioned in the campaign remains open."
While the delay may provide corporations some time to prepare, he stressed the urgency for businesses to strengthen their "geopolitical muscle" by diversifying supply chains, planning for inflationary volatility, and integrating geopolitical awareness into decision-making. Despite the complexities, Dr. Lang remains optimistic about global trade growth, forecasting a 3% annual increase over the next decade. Emerging markets, particularly Southeast Asia and India, are poised to benefit significantly, offering substantial expansion opportunities. His insights underscore the need for businesses to remain agile and proactive, finding opportunities even amid disruption.
Follow GZERO coverage of Davos here: https://www.gzeromedia.com/global-stage
Will Trumponomics cause a slowdown for the US economy?
Donald Trump’s economic agenda blends deregulation, anti-immigration policies, higher tariffs, and loose fiscal policy—an approach that "cuts in multiple different directions," says Jon Lieber during a GZERO livestream to discuss the 2025 Top Risks report. Lieber says deregulation could boost productivity, while measures like deportations and trade barriers risk straining industries reliant on foreign labor and open markets. With markets pricing in optimism but key sectors facing uncertainty, the impact of Trumponomics will hinge on how far the administration goes in implementing its campaign promises in 2025 and beyond.
Take a deep dive with the panel in our full discussion, livestreamed on Jan. 6 here.
Argentina's President Javier Milei gestures during the Atreju political meeting organized by the young militants of Italian right-wing party Brothers of Italy (Fratelli d'Italia) at Circo Massimo in Rome.
Big milestone for Argentina’s radical president: Economy escapes recession
A year ago, Argentina’s eccentric, wolverine-haired, “anarcho-libertarian” president Javier MIlei took office with a chainsaw and a plan: to tackle the country’s triple-digit inflation and chronic debt problems, he would hack government spending to pieces — and it seems to be working.
Latin America’s third largest economy has emerged from recession for the first time since the third quarter of 2023, with GDP growing nearly 4% since then. Month-on-month inflation has plunged from 25% last December to just 2.4% a month ago.
How’d he do it? Since coming to office, Milei has scrapped more than half of the government ministries, slashed spending on public salaries, devalued the currency, and put pension growth in a chokehold.
The subsequent return to growth is a vindication for Milei, whose state-chopping has won him plaudits from financial markets and the International Monetary Fund. It’s also earned glowing admiration from Donald Trump who envisions a similar gutting of the US Federal government (though his protectionist impulses contrast with Milei’s purer market fundamentalism).
Milei’s approach has been painful for many. The percentage of Argentines living in poverty has surged by 13 percentage points to 53% since he took office. Milei’s bet is that this is merely short term pain. He could yet be right: experts see the economy expanding by 5% next year after contracting 3% in 2024. With mid-term elections approaching in 2025, we’ll soon learn how most ordinary Argentines feel about Milei’s methodical massacres.A man rides a scooter past a giant screen showing news footage of Chinese President Xi Jinping attending a Chinese Communist Party politburo meeting, in Beijing, China December 9, 2024.
China’s vows to pump up its economy — with one eye on Trump’s tariffs
China’s Politburo — the top leadership cabinet — said Monday it would take “more proactive” fiscal measures and loosen up its monetary policy in 2025 as it aims to boost domestic consumption. The body met ahead of the annual Central Economic Work Conference, reportedly scheduled for Wednesday and Thursday, at which the country’s economic policy priorities for the coming year are laid out — and one of those priorities is gearing up for Donald Trump.
The background: China has experienced over three years of economic turmoil that originated in the all-important property market, where most Chinese households keep their long-term savings. Defaults and halted constructions from major developers dovetailed with a local government debt crunch to place tremendous headwinds against economic growth, leading to stock market turbulence and high youth unemployment.
Beijing has attempted to goose growth with monetary easing (aka lowering central bank interest rates) since September and unveiled a $1.4 trillion debt package aimed at stabilizing growth in November. But kickstarting the economic engine is proving difficult.
Watch out for Trump: The incoming US president is promising to hike tariffs on Chinese goods, having mentioned figures as high as 60% on the campaign trail. While tariffs are a laborious way to cut off one’s nose to spite one’s face and are likely to hurt the US economy, Beijing’s exports are one of the few sectors doing well right now. Getting to a stable footing before the trade barriers go up must be a high priority.
China isn’t just playing defense though: US chip-making giant NVIDIA saw its stock slide 3% on Monday after news broke that Beijing was opening an antitrust investigation. NVIDIA has been a darling of investors during the AI boom, with shares nearly tripling in value this year — but this shot across the bows is a sign of what could come.