Sceptical economists scrutinized Trump’s comeback at Davos 2025. They found some reasons for optimism

“Davos has been disintermediated.”

That’s not an easy thing for an expert on a Davos panel to acknowledge. But Karen Harris, the managing director of Bain & Company’s Macro Trends Group and a participant at the 2025 gathering in the Swiss Alps, also noted that it isn't necessarily a bad thing.

Because it provides an opportunity to assess how the state of the world is currently being communicated to the average person, and fine-tune.

“We can talk about all of these economic indicators,” Harris said, “But I think it’s really important that we re-ground in what the majority of the population is saying, which is: their quality of life, their sense of future, their optimism had collapsed, and they want a disruptive alternative.”

2024 was a year when populist political messages resonated far and wide. Maybe nowhere with greater global impact than in the US, where President Donald Trump was inaugurated just as the Annual Meeting in Davos was getting underway.

Trump had been elected as inflation in the US narrowed to 2.4%. “Nobody cares that things are only 2.4% or 3% more expensive than they were,” Harris said. Where prices are now is what matters, she added; and now, in terms of volume, “people are buying less food.” Dwell on headline indicators seemingly headed in the right direction, or on the need to feed a family today? For many voters it likely wasn’t a difficult choice.

It’s possible that a world relying on economic statistics that seem increasingly remote could do with a dose of the “transactional” – a word frequently used at Davos to describe expectations for the new US administration.

Here are a few kernels of hope that emerged.

The current latticework of globalized trade rests, to remarkable degree, “on the US as the buyer,” Harris noted. Places like China and Germany export, the US consumes.

That hasn’t worked out very well for many American workers, or the country’s efforts to revive its own manufacturing. So it might help to take a step back and view much of what’s being proposed by the new US administration as a “wrenching attempt at rebalancing,” Harris said. That’s created a lot of uncertainty. Longer-term, ideally, it could have a positive impact on a lot of peoples' lives.

Gilles Moëc, chief economist at AXA Investment, said during a Davos panel that, best case, the new administration’s approach invigorates domestic productivity – which encompasses not just manufacturing but all manner of things that can be generated with an hour of work.

“You do deregulation, and you offer very, very cheap energy, and you get lots of investment,” Gilles said. “And the US continues to widen its productivity gap with the rest of the world. Great.”

About the rest of the world…

Moëc had a message for China, Europe and anyone else outside of the US: “Obviously everyone will need to engage with Washington, D.C., but don’t forget to put your own house in order.”

“There’s a lot we need to do domestically, and we can do it,” he said. Even in the midst of potentially tense relations with the world’s biggest economy.

In a more multipolar world, Europe might take the opportunity to do some internal work on its capital markets, Harris said – in ways that better connect them across borders, to channel money to companies that need it to grow (and compete globally).

“Europe has the opportunity to create a common capital market and re-invest and be a ‘pole,’ but my goodness,” Harris said, “let’s get a move on” (a comprehensive capital markets union is a long-sought goal for the region).

Another cue from the new US administration that places like Europe might take, according to economists: deregulation. “There is something to say about the regulatory burden,” Moëc said.

“By cutting red tape in the US,” said Banco Bradesco Chief Economist Fernando Honorato Barbosa, during a Davos panel, “maybe countries will compete to some extent to cut their red tape.”

“This might be a positive for the global economy.”

Any discussion at Davos about onerous new taxes being slapped on foreign goods headed to the US was inherently difficult, because they remained theoretical at that point (they have since become far more concrete).

For Moëc, tariffs represented “a sort of Swiss knife” for the new US administration – useful for just about anything. “The question for me,” he said, “is how much of this is going to be tailored."

“If it’s a uniform tariff on everyone, it’s kind of okay,” he said. That’s because the playing field might change, but in the same relative ways for everyone.

Honorato Barbosa suggested that a tariff-laden system might spur a more concerted internal focus on developing technologies. “If companies realize we’re living in a world of more fragmentation and less consistency, they’ll invest more in AI,” he said.

Wielding tariffs like a negotiating tool could, ideally, even help mediate an increasingly volatile world. “Suddenly I’m asking myself whether trade and tariff talks can help lower the temperature,” International Crisis Group President and CEO Comfort Ero said during a Davos panel discussion focused on conflict.

“We’re moving into a more Westphalian world,” Harris said, conjuring images of a relatively atomized, 17th century Europe. “With the nation state taking pre-eminence over multinational and multilateral orders.”

“I prefer the word ‘club-ification’ of the world economy,” Moëc offered. “The problem is that the clubs we were thinking about even just a few months ago are not necessarily the clubs which we’ll have six months from now.”

Whatever term you choose for it, Harris said, “it’s not de-globalization ... because actually there’s no necessary diminishment in global trade, but the direction is changing.”

More bilateral agreements are likely, the economists said, as are regional trade combinations that might surprise us. Different, but not dormant.

Which is likely a good thing, given that relatively free-flowing global trade has been credited with a fourfold reduction of people living in poverty since 1990.

The economists felt that at least some added inflation would result from foreshadowed US policy. The country’s central bankers apparently agree; earlier this week, the Federal Reserve halted its ongoing process of making borrowing money cheaper, and opted instead for a wait-and-see approach on interest rates (which didn't go over well at the White House).

But with so many as-yet-unknowns and potential variables, it’s still reasonable to try to envision the best-possible outcomes. Larry Summers, an economist and former US Treasury Secretary, used an ice rink to make a related point.

Nearly 40 years ago, Summers noted, Trump gained a crucial bit of early publicity by managing to repair a popular New York City ice-skating rink under budget – something the city government had failed to do on its own. “I am now renting him out to other cities,” New York’s Democratic mayor joked at the time.

“That is a small metaphor for a huge thing that needs to get corrected in our country, and everywhere else,” Summers said.

Governments might want to focus less on pondering the future, he said, and more on executing now.