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[music] [music] Hello, I'm Tom McCrae. This is Counting [music] the Cost, your weekly look at the world of business and economics.
This week, 2025 is the year of tariffs. The measures [music] are reshaping how the world does business and trade. So, will that create new alliances [music] or a more fragmented global economy? From the US to China, Europe, and Africa, economic power is shifting [music] as supply chains are rewired. Who's gaining leverage? And who risks being left behind?
But how does that affect us all? Rising costs, [music] labor shortages, a housing crunch, and mounting debt are still squeezing households. Will 2026 [music] bring any relief? Disruption and [music] uncertainty, two words that largely define the economy right now.
President Donald Trump's tariffs have landed as a shock to global trade. This is 2025, a global reordering. Major economies are rewriting their playbooks and alliances are being redrawn. From Africa's minerals boom to the global AI race, countries are scrambling for influence. Even as debt piles up, they are spending more, borrowing more, and making tough choices from defense to climate policy and labor shortages. And through it all, people are bearing high costs. So, how did we get here? And what comes next for 2026? Let's break it all down.
In April, the US imposed duties on goods from nearly every country in the world, upending global trade. Some economies like the EU and UK were able to work out new deals. Others are still negotiating. The aftershocks are still being felt across the globe. Nowhere more so than China at the center of the US push to redraw the global trading system. Tariffs have forced Beijing to shift supply chains towards Southeast Asia and Africa, hitting an economy already struggling with a property crisis and weak consumption. To revive growth, the nation is betting big on cutting-edge technology and on securing the elements that power it. And that search for resources has put Africa at the center of a critical minerals boom. China, Europe, and the US are all courting the continent in a bid to secure access to the elements. African nations have seized the moment, pushing for a bigger share of processing and manufacturing.
2025 also marked a leadership moment for the global south. South Africa used its G20 presidency to call on world powers to tackle wealth inequality and ensure no one is left behind. That's reflected a broader trend. Developing nations are demanding a bigger voice in shaping international rules.
Security fears have caused Europe to reassess its priorities. The EU is under pressure from the US to become more self-reliant on defense, and it's boosted military spending to a record high. But countries like France are already straining under high debt. Critics accuse them of choosing weapons over welfare.
And the artificial intelligence revolution continues to change the working world. Tech giants are placing billion-dollar bets in hopes of winning the AI arms race. Supporters say it will make businesses more productive than ever. Others worry millions of jobs could be displaced.
Well, let's discuss all of this further with our panel of guests. Joining us from London is David Luben. He is a senior research fellow at the global economy and finance program at Chatham House. In Hong Kong, we're joined by Trinian, a senior economist at Nexus Research focusing on the Asia-Pacific region. And in Cape Town, we're joined by Xander Sturman. She's an adviser on insights and advocacy at Africa Practice, a strategic advisory firm for investment and development. A warm welcome to all of you. Thank you so much, uh, for being with us here on Counting the Cost.
David, if I can begin with you, and obviously the year all starts with Donald Trump retaking, uh, the US presidency. His tariffs landed a bit like a, a shock to the global trading system. Can you just run us through their global impact since he took power, since he introduced them?
>> In a way, the global impact of the tariff announcements, at least on April the 2nd, has been remarkably small. Um, that's for two reasons, really. One is that the actual tariffs that the world has been saddled with are much lower than were threatened on liberation day on April the 2nd when they were first introduced. [clears throat] And the second is that countries have been remarkably nimble at reconfiguring supply chains in order to avoid tariffs. So the growth of global trade is actually remarkably robust these days. And the word that economists most frequently use to characterize the global economy is resilient. And in terms of trade, what's happened really is that, for sure, China's exports to the United States have absolutely collapsed. But exports from India, from ASEAN, from the Association of Southeast Asian Nations countries, uh, from Taiwan, have all, from Mexico, have all increased remarkably. So, in a way, the, the, the global trading system has has experienced a kind of trade diversion rather than trade destruction, and that's kept the trading system alive, and that, in turn, has helped to keep the global economy, as I said, resilient.
>> Trin, despite, uh, the US tariffs causing major disruption, China's managed to record a $1 trillion trade surplus, a milestone no other country has been able to do. How has it successfully sort of offset the impact of US tariffs?
>> Well, US demand is still very important. So, one of the ways that it has done that is by reshuffling supply chains. China deploys a lot of capital to Southeast Asia. So, if you look at China outward FDI, it's geared towards Southeast Asia, and through that, they're able to export to Southeast Asia as a region, but also to the rest of the world. Meaning for non, um, US, they, they still export out of China. If you look at China's export growth, it's not really the most impressive of the region. The highest growth rates are really Taiwan, Vietnam, and so on and so forth. Um, so China managed to grow through two channels. One is the fact that it didn't really import from the world in 2025. And that's a key point to say is that China managed to offset and mitigate the tariffs by the US on China in 2025 and also through Biden and Trump 1.0. But the reality is, the key to that also is that it's not growing its imports from the rest of the world, and that's creating also tensions for China because that one trillion surplus means that, um, um, that, that, that it's gaining comparative advantage. At the same time, it's not really importing much, and what it does with the yuan continues to be a key consideration for the EU, for the rest of Southeast Asia, for the Japanese, and for the Korean, uh, uh, exporters. Um, because the fact is that even though the yuan has appreciated this year, it still underperforms relative to the euro and relative to other, um, Asian traders. And I think moving forward, the question is whether or not China will allow for the reflation of its economy, as in to allow for more imports of goods to support domestic demand, or is it a story in 2026 where China will continue to export to the world, but its imports are not really growing, and is predominantly concentrating on, um, getting rid of this excess capacity.
Okay, Zander, I want to get your thoughts on how you think all of this has has affected, uh, Africa. Has the continent, continent been able to, I guess, make gains through all of this disruption?
>> So, the interesting thing is that, um, you know, broadly, this has been uneven for a number of different African countries. This has opened up, uh, new opportunities, uh, you know, among them, you can count, uh, South Africa and a number of other, uh, southern African nations, including Namibia, Mozambique, and others who have been able to attract either investment back or have, uh, made brand new, uh, trade partnerships, um, that really span the globe from, you know, the UAE, Japan, Brazil, India, and other countries. So, it's, it's difficult, I think, to say very broadly that, uh, that this impact has been negative or positive for Africa. It's been quite uneven across the board. Um, we've seen that also in, in, uh, the reduction of overseas development aid from, you know, again, the US, uh, Europe, and other countries, but very broadly, many of these countries have been able to find completely new, uh, avenues and trade partners, have thought of unconventional, uh, funding and financing opportunities. Um, and all of that, uh, uh, really is the function of the fact that, uh, you know, the, the relationship very broadly between Africa and the US, especially, is now quite different than what it was a year ago before Trump was reelected.
>> David, these tariffs by Donald Trump were all designed to, to cut trade deficits and and bring jobs back to the US. In that regard, have they worked, or has he just pushed up costs?
>> It's really too early to say. I think you would have to give it a couple of years in order to make that assessment. But the chances are that it will fail, that, you know, that the, the, the objectives of the tariffs, uh, won't, won't be achieved. Um, that's partly because the nature of the US trade deficit isn't really determined by the tariff level. It's determined by the growth rate of aggregate demand in the United States. I mean, that the trade deficit in the United States may well fall during 2026, but that's much more likely to be because the US might suffer a slowdown than it would be because of the effects of the tariffs. There are other purposes in Donald Trump's mind for imposing tariffs, and the main one really is to bring manufacturing back to the United States. Um, and also in that respect, I think it's difficult to be too optimistic. Um, it's worth bearing in mind that China accounts for something like 35% of global manufacturing. Uh, and China has a manufacturing wage of about $15,000 a year. In spite of that, China uses 55% of the world's industrial robots. So imagine what it would take for the US to steal manufacturing or capture manufacturing market share from China, given the fact that the United States has a manufacturing wage of $60,000 a year. In other words, four times the level of China. Uh, it would require a huge amount of automation in order for, uh, for the United States to even begin competing with, with Chinese manufacturers. And so, if, even if you could imagine that the United States would be successful in capturing a much larger share of global manufacturing, it would be very unlikely to be supportive of US employment. Um, labor is unlikely to feature much in this revival of US manufacturing. It would require a huge level of automation.
>> [snorts]
>> Tren, you touched on this, uh, in, in your earlier answer, but how, how much has, has China been able to reduce its reliance on, on the US when it comes to supply chains and markets? How has it been able to do that?
>> Well, China is deploying a lot of capital to, um, manufacturing, particularly high, high-skilled sectors. One of the key drivers that is really the fact that the real estate sector has really sagged and it continues to sag, and there's really, uh, it's one of those problems that's amortized over a decade. Um, and as a result, um, a lot of this excess savings in China are being channeled to sectors that are being supported by the government and the government incentives themselves. So, in every sector, you have overinvestment very quickly, and margins are being compressed very quickly. U, moreover, the scale of China is one of the key reasons that is able to compete in the global marketplace. Not only does it have industrial policies, um, it also has supportive FX policy. Um, so on top of subsidies, uh, indirect or direct, you also have a real effective exchange rate that's relatively cheap. So, with the deflated PPI and that, um, it's very competitive in the global marketplace, and I think that's a key reason why, um, um, people tend to, um, be very fearful of China because China specializes in every segment of the supply chain, not just the high-tech where it wants to go, right? It wants to be able to vertically integrate the chip supply chain, but even labor-intensive, people forget that, um, China still has more than 30% global market share of labor-intensive manufacturing. So, that's very low value, um, uh, items in manufacturing and low skill. Why is that the case? Because it's a very large economy. So, when China faces a problem, a margin compression, um, and all those things, it means that everyone else faces the pro, same problems. It means that China will need to export its way out of its problem. And that's exactly what happened this year. Growth in Asia, and especially in China, is driven by exporting its way out. And when it manages to do that, then it means that it's gaining market share in third markets. So, the likes of Thailand, the likes of South Korea are losing market share in third markets, and also onshore when it imports more Chinese goods.
>> Xander, obviously at this point in, in time, everyone is scrambling to get their hands on as many critical minerals as, as possible. I mean, with the likes of the US, China, and Europe all trying to, to do that, where does that leave Africa? And how can they make the most of those opportunities and, and like you've referred to before, make sure that some countries benefit and, and find their way through here and, and try and get the most out of, uh, this potential boom for them?
>> Yeah, I think that, you know, many of these countries have been really quite clever in terms of of not allowing themselves, uh, to be put in a position where, you know, whether it's the US, the EU, or China, um, essentially demanding, uh, that they pick a particular partner and shun others. Um, we've really seen this, uh, come through with, uh, for example, uh, summits out to, uh, the US by Senegal's president, Bassirou. Uh, similarly with, uh, presidents of Gabon, Benin, um, and other, uh, countries, particularly in, in, uh, Francophone West Africa. Um, and we've, we've seen this in, in other regions as well, where, you know, the, the idea that, um, one country or one market predominates all others, especially again, as you said, in the race for critical minerals, that's simply a false binary that, that I think many of, of, uh, these African leaders I just mentioned, and, and many others, have simply decided to reject. Um, we've seen many, uh, leaders make the, the trip out to China, for example, for the Forum on China-Africa Cooperation. Uh, that summit, um, uh, took place, uh, fairly recently. Um, and similarly, you, you saw a number of African leaders travel to South Africa for the G20 summit, where again, uh, the working group on, uh, energy transition, uh, and climate, uh, there came up with, I think, a number of very broad rules, uh, around beneficiation, value addition, um, and not just extractive mining out of the continent, but rather some of these, uh, refining processes happening within the continent as well. And lastly, I'll also say that you've seen a number of private companies, private sector players, uh, come on board and, and start to, uh, get behind the idea of financing, uh, some of these infrastructure, um, and beneficiation, uh, as opposed to, as opposed to, excuse me, uh, just financing extractive, um, operations.
>> David, I want to turn to, to Europe, uh, now. Trump has obviously been pushing, uh, for the EU, among others, to, to pay more for defense, especially when it comes to, to Ukraine, pay their fair share, as he puts it. I mean, they are dealing though with very tight budgets, and can governments really afford doing that without public backlash? I mean, there's been the accusation that they're putting warfare above welfare of their own people.
>> If a country can't defend itself, it's not much of a country. And, and in a way, what Trump has done is to kind of put this challenge to Europe that, that, you know, requires Europe to defend itself and rely less on the security umbrella that's been provided by NATO, uh, over the past 80 years or so. Um, you know, the fact that debt levels are high raises some financial risk, but I would say that that financial risk, at the moment, is limited by the fact that inflation seems to be un, more or less under control at the moment. That's particularly because commodity prices, um, are experiencing deflation. I mean, although, you know, we hear a lot about the extraordinary rise in the price of gold and silver, for example, the reality, reality is that the price of oil and the price of agricultural goods are all in a state of deflation. In other words, these prices are falling at the moment. And that helps to keep inflation on a downward path. And as long as inflation is on a downward path, bond markets will be relatively well behaved. And as long as that's the case, countries that need to borrow more will have a relatively easy time of it to do that.
Tren, obviously Donald Trump is pushing this America First policy as the US, I guess, turns more and more inward. I mean, China is really trying to present itself as a stable global leader. Do you think that message is, is resonating? Is that working for them?
>> Well, I think the, the, the key point was the APEC meeting in South Korea where Trump really spent a day there and then he left. And the, the thesis was that Xi Jinping will inherit Asia. And since then, we have rising fragmentation, um, within the region with geopolitical conflicts between, um, China and Japan, but not only, um, and also within the region, there's a lot of fragmentation. So, I do think that while it is, um, uh, the retreat of the US, um, is a big, um, challenge for the, the Southeast Asian countries and the rest of Asia, but the reality that these smaller countries have come to the conclusion that while, um, he may be unreliable, he's, um, the US is indispensable, particularly for the smaller countries. Um, and, and moreover, the reality is, despite of the fact that tariffs have been a huge hurdle to trade, particularly for the auto sectors in, in Asia, because the 25% tariffs were in effect from April until basically for most of the year, um, the reality is the US is still the key growth driver in terms of exports of the rest of the region. Um, so for China to really, in, in other words, elevate itself, it needs to also start importing from the rest of the region in terms of importing growth and so on and so forth. And so far, tourism normalization and goods normalization haven't really been there. One big, big bright spot is really the deployment of capital by Chinese, um, into, um, Southeast Asia. It is a neutral ground for, for China to deploy capital, and as a result, that's a key area of bright spots, um, and, and then for China to continue to, to do that, it needs to also, um, import a lot of other goods from the rest of the region. [snorts]
>> Xander, you're in, in South Africa, which recently hosted the G20. What did you make of that? Because they really were trying to, to push, uh, the idea of the global south taking more control on the world stage.
>> I think that, uh, what South Africa was able to do, uh, really well, um, and, and, uh, one of the reasons why it was able to, to put, uh, the global south's agenda, uh, at the forefront of the, the G20 meetings, um, is the fact that there was momentum. Um, if you remember, the fact that Indonesia, then India, then Brazil, and then South Africa have hosted the G20 in, in recent years, you've really seen a culmination, um, of a number of these issues, uh, that span the global south, really being at the heart of, of the conversations, uh, through the last year, truly. So, these huge structural factors, um, that global south countries and various, uh, uh, pairings, including BRICS, and other forums, um, have really tried to, to make progress over, um, that, that I think came to the fore, um, uh, in South Africa's G20, with a number of these agreements at least making some, uh, level of, of, uh, progress. Um, unfortunately, that is likely to be undermined by the US, um, going into that G20 cycle. Uh, but at the very least, you've had a number of, of countries come together multiple times to very seriously, uh, uh, discuss, uh, many of these issues that are at the fore for global south countries in a way that they are not for European, uh, or other countries.
>> Right. We'll have to leave it there. Thank you so much. Uh, we really do appreciate your time. David, you're going to stay with us to discuss what this all means to people like you and me. And Triny Union. Xander Sturman, thank you so much for joining us. Now, we're going to hear what's been worrying many people in different parts of the world and how they feel about 2026.
>> Oh my gosh. I run a business in Hershey, Pennsylvania, and everything comes in from Europe. So, I'm paying 25% tariffs on everything. So all my cost of doing business is up, and it catches up to you. At first, you don't notice it, but then six, seven months later, you're going, oh my gosh.
>> I'm a pensioner, so I can manage. But for people who earn the minimum wage, it's getting harder and harder. Also for those who've lost their jobs, buying things has become more expensive, but it's acceptable. I think the economy will get better and better and incomes will rise.
>> With the economy the way it is here, I don't think things will get better. These sorts of things worry me.
>> Fuels up. Um, all food, anything touristy, everything's, yeah, it just seems way more expensive.
>> Well, joining us with David is Ugo Pinea from Geneva. He's a professor of economics and the Bet Chair in Finance and Development at the Geneva Graduate Institute. Thanks so much for joining us here on Counting the Cost. Uh, first of all, Ugo, some countries, do you think are potentially heading for recession in the coming year, and, and who, if any, would be most at risk, and, and what will that mean for people there?
>> The baseline scenario is, uh, for at least the, the, the large economic areas, which is like the, the US and Europe, the baseline scenario is not that, uh, of a recession. Um, there are, um, you know, we expect a fiscal stimulus, at least in some countries in Europe, especially in the largest economy, in Germany. Um, the same thing in the US. So, um, again, we do not expect a recession with high probability. However, there are risks, there are big underlying risks. For instance, the, the US is mostly pushed by massive, uh, investment in artificial intelligence. Very high equity prices in this segment of the market. Uh, and this is financed with very strange and high levels of debt with very strange debt structure. If something were to, uh, go wrong there, then, you know, we could have indeed a recession. But that's not the baseline expectation.
You mentioned artificial intelligence, obviously. Just briefly, do you think that it's actually going to increase productivity like some are saying, or, or is it going to transform, transform the world economy, or, or is it really just going to disrupt jobs and livelihoods here?
>> It's probably going to do, uh, both of them. It's going to change the way in which we work. Um, but there's also going to be massive disruption. So, so the, the recent Nobel laureates Simon Johnson and, and Daron Acemoglu wrote a book which describes how artificial intelligence could, uh, disrupt, uh, the way we work, a little bit like how it happened during the first industrial revolution. And one point that, uh, that Daron and Simon, they make is in the long run, this led to, uh, very high productivity growth, but it was a very long period for which people were actually worse off.
>> David, I want to finish with you. What do you, without getting your, your crystal ball out, uh, and trying to foresee into the future, I mean, are people going to struggle, the everyday person on the street, are they going to struggle more in 2026, or are they going to be better off than they have been in the last year?
>> Um, the two engines of the global economy are the United States and China. Uh, and although, as Ugo says, the, the probability of recession in either country is pretty low, it does look like both of those economies are in a process of slowing down. Retail sales growth in China has completely collapsed. Um, the growth rate of fixed asset investment is now negative. And it's also the case that in the United States, the labor market, labor demand seems to be softening. Uh, and so the probability seems to be that there's going to be some moderate slowdown in these two engines of the global economy in 2026, and that should have some negative consequences for the growth rate of global trade and for the glo, the growth rate of, of the global economy. And so it's difficult to be super optimistic at this stage, particularly against the background where in 2025, as I said earlier, um, you know, the, the, the worst expectations of many economists at the beginning of the year and after liberation day have been proved to be way too pessimistic. Um, in other words, you know, the global economy performed much better than expected this year. I suspect that next year is going to see some signs of slowdown, uh, and a bit more difficulty for, for households globally.
>> We'll have to leave it there, and, uh, we really do thank you very much for your time. We appreciate it, David, and Ugo. Thanks for joining us here on Counting the Cost. And that is our show for this week. Do get in touch with us on X. I'm at tomccra_nz. [music] You can use the hashtag ajctc when you do, or drop us an email. [music] counting the cost at aljazeera.net is our address. There's much more for you online as well at [music] aljazeera.com/ctc. That will take you straight to our page, which has individual reports, links, as [music] well as entire episodes for you to catch up on. Well, that is it for this edition of Counting [music] the Cost. I'm Tom McCrae. From the whole team here, thanks so much for joining us. The news on Al Jazeera is coming up next.