What happened in 2025?

The year that just ended began with a grim omen for Western economies, as the US economy was expected to enter a recession due to the high tariffs announced by President Trump on 6 April 2025.  Analysts expected a resurgence of inflation due to the transfer of tariff costs within the US, which would lead to higher interest rates and a contraction in consumption.  Equally, in Eastern countries led by China, most analysts expected a slowdown in GDP growth due to reduced trade between the two major powers.  This almost unanimous prediction did not entirely come true.  The Red Dragon exported more to the world and downplayed the importance of the US market.  The United States did not report inflationary increases, and the rest of the world maintained its stable growth rates from 2024.

 US and Europe

The G7 countries, excluding the US, performed poorly, as in previous years.  The European Union did not suffer a setback due to tariffs, as expected, with performance similar to that of 2024 (see Table 1).  In the third quarter of 2025, Japan felt the effect of tariffs on car and steel exports to the US, which will continue in the fourth quarter with almost zero growth at the end of the year.

Source: OECD, Statistics news release,^3rdQuarter, 15 December, 2025 seen in https://www.oecd.org/content/dam/oecd/en/data/insights/statistical-releases/2025/12/g20-gdp-growth-Q3-2025.pdf

The United States slowed, but without entering a recession.  The economy cooled in the first two quarters, and the third-quarter data released by the BEA are unreliable because the offices that handled the work were closed for two months.  On the other hand, the head of the Bureau of Labour Statistics (BLS) was dismissed and replaced by someone close to the president's political group, who may repeat the pattern of distorting statistics to favour the regime, as seen in Latin American and African countries in previous years.  Strictly speaking, the employment data is unfavourable.  The report states that "The number of people employed part-time for economic reasons was 5.5 million in November (2025), an increase of 909,000 from September (2025).  These individuals would have preferred full-time employment but were working part-time because their hours had been reduced or because they had been unable to find full-time employment." Employment Situation Summary, Tuesday, 16 December 2025, seen at https://www.bls.gov/news.release/empsit.nr0.htm

It adds that "Federal government employment has declined by 271,000 jobs since peaking in January (2025).  (Federal employees on leave during the government shutdown were counted as employed in the establishment survey because they received their pay, albeit later than usual, for the pay period that included the 12th of the month.  Employees on paid leave or receiving severance pay are counted as employed in the establishment survey)." In other words, the number of public-sector unemployed more than doubles the number already unemployed in the state, with the measures taken by Elon Musk for DOGE.  What is unaccounted for is the number of migrants who stopped going to work for fear of being detained by the immigration agency, ICE. 

The universe of migrants not legally residing in the United States is 12 million people, accounting for 4% of the country's population, according to the Pew Centre.  This population has jobs abandoned out of fear, with a direct effect on remittances abroad, which have fallen, and on unfilled jobs.  8.5 million undocumented migrants are working, accounting for 4.8% of the country's workforce.  (Pew Centre and Centre for Migration Studies) Employment is concentrated in construction (20%), accommodation and food services (12%), which includes domestic workers and cooks, manufacturing (11%), administrative, support and waste management services (10%) and retail trade (8%).

The BLS projects that construction, transportation and warehousing, manufacturing, health and social care, and professional, scientific and technical services are high-growth activities that depend on undocumented workers who require a university degree, engineers, technicians, etc.  In other words, the impact of the persecution of undocumented immigrants is direct on activities that would be high-growth but are no longer so due to a lack of workforce.

In short, US economic growth data should reflect all these components, added to the substantial contraction in international tourism, which fell by 4.5 million visitors and transformed the tourism trade balance from a surplus of $51 billion in 2019 to a deficit of $70 billion in 2025, according to the New York Times (How Much More Can the US Travel Industry Take? 19 December 2025, seen at  https://www.nytimes.com/2025/12/19/travel/us-travel-tourism-visas.html).  It is a $121 billion turnaround.  There will be no certainty about third- and fourth-quarter GDP growth until the BEA releases its revisions in March.  Nor does there seem to be any certainty about the 2.7% per annum inflation rate announced for 2025, given society's concern about the rising cost of living, known as "the affordability crisis."

China

China's growth projection for 2025 was 5%, the same as the previous year.  Despite repeated predictions that it would stop growing and experience a significant crisis, the Asian Dragon continues on its course.  The expected decline due to the inability to export to the US did not occur, partly because the US accounts for only 12% of the country's total exports.  On the other hand, significant market substitution has led to a contraction in the US's importance in world trade, despite its status as a prosperous economy. 

The engine of the economy is the change in the energy matrix, with all that this implies for technology and the manufacture of mass passenger transport vehicles, private passenger vehicles, and renewable energy generation equipment.  According to the International Energy Agency, world leaders in this field have made it a dynamic axis of the economy.  Sonalie Figueiras writes in the South China Morning Post that "China's climate leadership is pragmatic and trade-driven.  Unlike the West, Beijing does not seek to export ideology or pursue cultural dominance.  Instead, its combination of internal discipline, long-term planning, technological investment and relentless pursuit of clearly defined national goals has led the country to become a pioneer without much of the world noticing." It is equally valid for its leadership in the global economy.  It has the second-highest quarterly real GDP growth rate in the world after India, according to the OECD.

From an environmental standpoint, it is the world's largest consumer of coal and fossil fuels.  However, by 2025, "China's energy and emissions trends have moved closer to the Paris Agreement targets: its total CO₂ emissions are expected to remain stable, with the energy and transport sectors seeing their emissions decline year on year.  Clean energy growth is likely to reach new records and grid energy storage is set to take off." (CREA, China's Climate Transition: Outlook 2025).   What is undeniable is that sales of electric vehicles have accelerated, leading to a significant reduction in transport sector emissions.

China's foreign trade grew despite US tariffs and tensions between the two superpowers.  Exports increased by 6.2% between January and November 2025, while imports rose by 0.2%, resulting in a historic trade surplus.  Trade with Belt and Road Initiative members increased by 6% and accounted for 51.8% of China's total foreign trade value.  Exports of electrical equipment increased, while those of labour-intensive products decreased.  ("China's foreign trade up 3.6 per cent during Jan-Nov", 8 December 2025, CGTN, seen at https://news.cgtn.com/news/2025-12-08/China-s-foreign-trade-up-3-6-during-Jan-Nov-1IVRQwdI2gE/p.html)

Finally, Asian countries, led by China, are growing rapidly, while Western countries, led by the US, are experiencing low growth rates.  While Asians are undergoing an energy transition, in the West, there is inertia to maintain fossil fuels.  In this scenario, Europe is trying to keep a renewable energy policy, but is under pressure from Washington to do the opposite, to its detriment.  Contrary to expectations, it was not a bad year, except for Mexico, which saw almost no nominal growth.

Latin America

  The performance of Latin American countries with trade links to China was positive.  It was not affected by the breakdown of international trade agreements announced by the US president on the day of his inauguration, 20 January, nor by the application of tariffs.  The most threatened country was Brazil (dark blue line), whose performance was relatively stable (see Figure 1).  The country that grew the most in this sample was Argentina, followed paradoxically by Peru, despite its political problems.  The presence of important economic sectors within the Congress of the Republic provides stability for investors and balances the presidential rotation.  The legislative branch governs Peru.  Argentina saw its first year of positive growth since 2023, driven by the implementation of minimal state policies and the US government's support with vast sums to keep the exchange rate stable.  Mexico was affected by a reduction in remittances (see graph 2 below) and a fall in private investment, which has been declining since 2017.  Threats of tariffs affected exports.  However, despite the violence of drug trafficking, the contribution of informal/illegal economies is significant, as in Peru, Venezuela, Mexico and Colombia, allowing for improvements in the living conditions of the population.  In Mexico, distributive policies have improved income distribution, but, in macro terms, it amounts to a different distribution of the same tax revenue.  It did not generate inflation, contrary to orthodox views.  Given that there is no increase in tax revenue, the increased budget revenues are grounded in charging those who do not want to pay.

In contrast to the stable post-COVID recovery in Brazil, Peru, Colombia and Chile, Bolivia's economy is in a critical situation, having halted gas exports to Argentina and failing to export lithium in significant volumes.  Venezuela's economy, impacted by US economic sanctions and the loss of a third of its population to migration, has recovered since 2017 and maintained high growth rates above the Latin American average since 2021, led by the metallurgical sector.  However, it has not regained its pre-2007 size, and it is unlikely to reabsorb 30% of its population again in the short term.