The Global Economy

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Europe’s economy needs help Even before the French and German governments collapsed, Europe’s economy had enough difficulties: Tepid growth and lagging competitiveness versus the U.S. and China, an auto industry that’s struggling, and now Donald Trump threatening tariffs. Solutions will be harder to find while the two countries that make up almost half of the eurozone economy remain stuck in political paralysis well into 2025. Read more.

Why this matters: Where once there was the so-called French-German axis to push Europe ahead, now there’s a vacuum. French Prime Minister Michel Barnier resigned last week after losing a vote of confidence, and while President Emmanuel Macron will appoint a successor, the new head of government will lack a majority. Elections are not constitutionally permitted until at least June. Germany’s coalition led by Social Democratic Chancellor Olaf Scholz with the Greens and pro-business Free Democrats fractured in November, triggering an early election on Feb. 23. Talks to form a new government could last into April.   The most urgent matter may be how to respond to U.S. President-elect Donald Trump. European officials are trying to defuse a potential trade conflict involving new U.S. tariffs or import taxes on European goods that would seriously ding the continent’s export-focused economy. Europe could decide not to retaliate to any U.S. tariffs, thus avoiding a mutually destructive tit-for-tat cycle.

RELATED COVERAGE ➤ Trump says he can’t guarantee tariffs won’t raise US prices and won’t rule out revenge prosecutions   Germany’s far-right AfD party nominates a candidate for chancellor in the upcoming election   China’s ban on key high-tech materials could have broad impact on industries, economy

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European Central bank cuts benchmark rate by a quarter percentage point to boost stagnant economy

FRANKFURT, Germany (AP) — The European Central Bank cut its key interest rate on Thursday to boost an economy that’s struggling to grow as consumers burned by inflation warily eye price tags and businesses try to navigate political turmoil in leading economies France and Germany.

https://apnews.com/article/europe-economy-zero-growth-germany-eurozone-a7df09cc5334f37c48e901ff0d3584b7?

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? Global economy turns away from U.S.

Illustration: Sarah Grillo/Axios

The world economic order is shifting beneath our feet as allies look to America-proof their economies, Axios Macro co-author Courtenay Brown writes. "Our old relationship of steadily deepening integration with the United States is over," Canadian Prime Minister Mark Carney said today. "The 80-year period when the United States embraced global economic leadership ... is over." ?️ State of play: In the near term, allies are preparing trade countermeasures, hoping to force Trump into dealmaking mode and de-escalate the trade war. But in the long run, once-close allies are exploring how they can delink their economies from the U.S. ? The intrigue: The value of the U.S. dollar fell sharply post-tariff announcement. Analysts attribute the move to a sense that the U.S. may no longer serve its unique role in the global economy. "Investors will be shocked how much things are going to move away from the U.S. in standards, networks and infrastructure — as well as services — in coming years," said Adam Posen, the president of the Peterson Institute for International Economics and a former Bank of England official. Go deeper.

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European Central Bank cuts interest rates as tariffs threaten the economy

The European Central Bank cut its main interest rate by a quarter of a percentage point Thursday, citing growing trade tensions after US President Donald Trump’s tariffs sparked a global trade war.

https://www.cnn.com/2025/04/17/economy/ecb-cuts-interest-rates-tariffs-intl/index.html?

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? Globalists echo Trump

Illustration: Allie Carl/Axios

Pro-globalist, free trade institutions have an awkward admission: President Trump is right, Axios' Courtenay Brown writes. Why it matters: The era of America as the world's biggest customer looks like it might be over. Zoom in: Leaders of major international groups — think the International Monetary Fund and the World Trade Organization, no friends of Trump — now warn that the rest of the world has relied too much on the U.S. for economic growth. They're echoing White House calls for the rest of the globe to pick up the slack. "The U.S. has a point when it says too many countries are dependent on its market or the production of some critical inputs are too concentrated," WTO chief Ngozi Okonjo-Iweala said this week. ? Between the lines: That's a nod to countries that export considerably more goods and services to other nations than they purchase, such as China. In the current protectionist era, that creates a huge new risk. Never before has the U.S. — the world's biggest consumer — threatened a sudden withdrawal from the global stage. Keep reading ...

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U.S. weighs on the world economy

Illustration: Maura Losch/Axios

An economic slowdown induced by the U.S. tariffs will drag down most of the world's major economies, the International Monetary Fund predicts. The big picture: The U.S. propelled global economic growth for years. Now it's acting as a disruptor to the world economy, Axios Macro co-authors Neil Irwin and Courtenay Brown write. ? What they're saying: The U.S. economy is on track to grow 1.8% in 2025, slowing by a full percentage point from last year, the IMF's quarterly outlook says. That's a sharp downgrade from what the IMF expected at the start of the year: ? The latest: The White House today signaled trade tensions with China could soon cool. "The president and the administration are setting the stage for a deal with China," Press Secretary Karoline Leavitt said. "Everyone involved wants to see a trade deal happen and the ball is moving in the right direction." Go deeper. ps:Not only is he ruining our economy but also the world economy!!

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Economy

The International Monetary Fund issued a stark warning about President Trump’s unpredictable tariff policy and countermeasures by American trading partners: If the situation persists, US prosperity will suffer — and so will the global economy. In its latest World Economic Outlook report, the IMF forecast that global economic growth will slow to 2.8% in 2025, down from 3.3% last year and significantly below the historical average. The US economy is only expected to grow 1.8% this year, compared with 2.8% in 2024. The IMF isn’t the only one sounding alarm bells. US financial markets are also revealing how the escalating trade war is making America an unsafe place to invest. The Dow Jones Industrial Average dropped 9.1% in the first three weeks of April, the index’s worst performance for any April since 1932.

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? Stat du jour

Illustration: Axios Visuals

California is the 4th largest economy in the world, Gov. Gavin Newsom's office reports from new global and national data. The Golden State used to sit at No. 5, but has recently surpassed Japan with a nominal GDP of $4.1 trillion, ahead of Japan's $4 trillion. Now only the U.S. ($29 trillion), China ($19 trillion) and Germany ($4.7 trillion) are ahead of California. ?? Reality check: 4th place might slip away. India (current No. 6) is projected to pass California by 2026.

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? Global economy's trade paralysis

Illustration: Sarah Grillo/Axios

At any moment, a Truth Social post — and now a court ruling — can upend the global trade system, Axios' Courtenay Brown writes. Why it matters: The world economy has never seen anything like this. The tariff legal fight injects new uncertainty into what was already a historically unpredictable situation. After an appeals court ruled that Trump's sweeping tariffs could remain for now, a port official told Axios yesterday: "One day it makes sense to ship and the next day it doesn't." ? The intrigue: Europe's trade delegation was in Washington this week, just as it became clear courts could kill many of the tariffs that brought them to the negotiating table. "It makes no sense to negotiate about that," Bernd Lange, a key European Parliament lawmaker leading the trade delegation, told Axios, referring to the "Liberation Day" tariffs that might ultimately be illegal. "I guess now we have a better position for negotiation," Lange said just minutes before the appeals court issued its stay — a sign of how quickly dynamics can change. ⏰ Lange admitted that he has started waking up a half-hour earlier since Trump was inaugurated "to follow the news coming from the United States." He is on Truth Social.

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Dicey outlook

Global economic growth is on track for its weakest decade since the 1960s, according to a new analysis. The World Bank cited US President Donald Trump’s trade war as a major factor weighing on economies worldwide.

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World Bank warns that 39 fragile states are falling further behind as conflicts grow, get deadlier The world’s most desperate countries are falling further and further behind, their plight worsened by conflicts that are growing deadlier and more frequent.That is the sobering conclusion of the World Bank’s first comprehensive study of how 39 countries contending with “fragile and conflict-affected situations’’ have fared since the COVID-19 pandemic struck in 2020. Read more.

Why this matters: Of the 39 countries, 21 are involved in active conflicts, including Ukraine, Sudan, Ethiopia and Gaza. More than 420 million people in the fragile economies are living on less than $3 a day — the bank’s definition of extreme poverty.   Increasing conflicts have made things worse. In the 2000s, the world saw an annual average of just over 6,000 conflicts — in which organized groups used armed force against other groups or against civilians and cause at least one death. Now the annual average exceeds 20,000.

RELATED COVERAGE ➤ Nations are meeting to drum up trillions to combat poverty — but the US isn’t going   World Bank approves over $1 billion for projects in Lebanon, Syria and Iraq   10 years after Europe’s migration crisis, the fallout reverberates in Greece and beyond

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• ? World Economic Forum founder Klaus Schwab "engaged in a pattern of workplace misconduct over the past decade," The Wall Street Journal reports from an internal probe. Gift link.

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⚡ Stat du jour: Data centers pass oil

Illustration: Allie Carl/Axios

Investment in data centers will reach $580 billion this year, surpassing the roughly $540 billion invested in new oil supply, Axios Future of Energy author Ben Geman writes from the International Energy Agency's new outlook. Electricity consumption by AI-optimized servers is projected to increase fivefold by 2030, the report notes. ? Some perspective: Data centers are just one piece of the power story, and are highly concentrated in advanced economies and China. Data centers account for under 10% of global electricity demand growth between 2024 and 2030, behind industry, appliances and more. Go deeper: More takeaways from the influential report. Hat tip: Bruce Mehlman!

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? Energy milestone

Data: International Energy Agency. Chart: Axios Visuals More people around the world now work in producing and distributing power — making electricity from wind, solar and other sources — than in extracting and supplying fuels, like oil, gas or coal, the International Energy Agency says. Why it matters: It's a sign of what IEA calls the "age of electricity." Solar gigs in particular are rising quickly, Axios' Ben Geman reports.

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The outlook for inflation in 2026

Core inflation in developed markets is expected to fall to levels that are broadly consistent with policy targets in the year to come. U.S. inflation, which was pushed up by tariffs in 2025, should slow sharply in the second half of 2026. Read the 2026 Global Economic Outlook.

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• 🌎 World Economic Forum leader Børge Brende announced his resignation, the latest casualty of the Epstein fallout rocking business, politics and academia. Go deeper.

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Blowback gets real

Data: Financial Modeling Prep; Chart: Axios Visuals In the first week of the U.S.–Israel war with Iran, the economic ripples were looking pretty minimal. But as Week 2 begins, the risks to the global economy are growing much more serious, Axios' Neil Irwin writes. You can't decapitate the leadership of a country of 90 million people, with expansive military and intelligence capabilities, in the heart of some of the world's most economically important supply chains, without a huge cost. Oil skyrocketed 25% overnight, to just under $120 a barrel, fueling worries that higher energy costs will stoke inflation and curb spending by U.S. consumers. Tokyo's Nikkei 225 index plunged more than 5%. That's the highest oil price since about four years ago, when energy prices surged due to Russia's invasion of Ukraine. Patrick De Haan — a widely cited gas price expert and an analyst for GasBuddy — estimates an 80% chance the national average gas price will hit $4 per gallon in the next month. It's currently $3.48. Zoom in: As of 5 a.m. ET, a barrel of the global crude oil benchmark was going for about $107 on futures markets, up 15% from Friday and 47% from 10 days ago, before the Iran attack. Brent crude prices approached $120 overnight before receding on reports of coordinated global action to release oil reserves. The risk of a broader economic slump is rising with the disruption to oil supplies. S&P 500 futures are down 1.3% overnight, setting Wall Street up for its third consecutive day of losses. Japan's Nikkei index was down 5.2% and South Korea's KOSPI down 6%, reflecting those economies' more direct dependence on Middle Eastern oil now at risk of a protracted blockade. 🔮 The odds of a U.S. recession this year spiked to 38% in overnight trading on Polymarket, from 24% at the start of the month. The war has already caused the largest oil disruption in history, taking out roughly 20% of the world's supply, according to Bob McNally, president of Rapidan Energy and a former George W. Bush energy adviser. Via Truth Social Between the lines: Solid GDP growth is no consolation for higher day-to-day prices, which doomed President Biden's popularity. If the recent energy price surge is sustained, that will be President Trump's burden as well. Headlines in today's Wall Street Journal, New York Times 🥊 Reality check: The U.S. economy has proven exceptionally resilient to global shocks — including throughout the Ukraine war, which initially caused an unpleasant spike in prices but not a recession.

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🌐 Economic world war

Illustration: Lindsey Bailey/Axios

Countries across Asia are imposing emergency measures — rationing energy, closing universities, shortening workweeks and even changing how crematoriums operate — to manage the fallout from the Iran war, Axios' Emily Peck writes. 🇧🇩 Bangladesh closed universities. 🇰🇷 South Korea capped gas prices for the first time in nearly three decades. 🇹🇭 Thailand is encouraging work from home. 🇵🇭 Some local governments in the Philippines ordered civil servants to work four days a week. 🇵🇰 Pakistan has shut schools, mandated a four-day workweek for some government offices and raised gas prices, the Financial Times reports.

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Recession warning

The International Monetary Fund says the war in Iran is weighing on the global economy, and that it could tip the world toward recession if it drags on. "The global outlook has abruptly darkened following the outbreak of war in the Middle East," an IMF economic counselor wrote in the fund's latest World Economic Outlook, published Tuesday. The conflict could still trigger a global "energy crisis on an unprecedented scale," the economist added. Read more

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🇬🇧 Bummed-out Brits

Data: Gallup. Chart: Emily Peck/Axios You thought Americans weren't feeling great? The British are among the most pessimistic in the world, according to a ranking of surveys across 139 countries from Gallup, Axios' Emily Peck writes. Why it matters: The low number speaks to the "depth of the economic malaise in the U.K.," writes Benedict Vigers, Gallup's senior global news writer. 📊 By the numbers: Just 21% of those surveyed in the U.K. last year said their local economy is "getting better." Only Lebanon, Bolivia and Turkey had meaningfully lower numbers. In the U.S., 47% of respondents said their local economy was getting better — slightly more than the global median of 42%.

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The world's currency

Illustration: Sarah Grillo/Axios. Stock: Getty Images

Planet Earth has roughly 180 currencies. But for a vast share of global transactions, people want to use just one: the United States dollar, Axios' Neil Irwin writes. 🌏 Why it matters: This is a unique source of global power and responsibility. America's role in the world over the next 250 years will be determined by its ability to maintain, and wisely steward, this role at the center of the global economy. ⚠️ Yes, but: Other nations are increasingly chafing at the power the U.S. wields thanks to the dollar — and they're seeking alternatives. 💵 How it works: The dominance of the dollar in international trade and finance gives the U.S. the ability to exert its will far from our shores, without firing a gun. This power is evident when the U.S. fines European banks for doing business with Iran or cuts off Russian oil companies from the mainstream financial system. It has also fueled global demand for Treasury debt that allows the U.S. to borrow vast sums, especially in crises. 🧠 This primacy is based on policy choices and structures built over decades — in some cases, centuries. 👀 What we're watching: Some of the underpinnings of U.S. dollar dominance are coming under question. Sky-high U.S. fiscal deficits mean the world is being inundated with Treasury debt. The political independence of the Fed is in question. And many in the Trump administration see the costs of maintaining dollar dominance as a burden for Americans. Perhaps most importantly, the U.S. has used the threat of cutting off access to the dollar-based global financial system as an increasingly all-purpose weapon for economic warfare. That means major U.S. rivals (China, Russia) and frenemies (India, Brazil) are eager for dollar alternatives. ✅ Reality check: So far, other leading powers seem to lack the willingness or ability to build alternatives. More broadly, network effects are powerful things. Everybody uses dollars because everybody else uses dollars. 💰 The bottom line: The role of the U.S. dollar in the world is secure for now, much as America's rivals might not like the status quo. But global angst is simmering, and as the Dutch and British learned long ago, no dominant currency is forever. Read more.