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The year 2025 was very colorful in the world. The main events have a lot too do with the change of course in the US.
“US President Trump‘s policies, including tariff announcements, have meant a return to the past. After decades of moving towards greater international cooperation and freer global trade, this year we have returned to bilateral negotiations, higher trade barriers and protectionism. The US President’s chaotic policies and tariff announcements led to a sharp decline in the stock market in April.However, by the end of the year, stock markets not only managed to recover, but also reached new highs,” comments Swedbank Latvija Chief Economist Līva Zorgenfreija.
Such as, the US S&P 500 stock market index has risen by 14% since the beginning of the year, as has Europe’s STOXX 600. Germany’s DAX has managed to show an increase of more than 20%, even considering that the DAX has basically stood still in the second half of the year.
The abbreviation TACO, or Trump always chickens out. “Indeed, in 2025, it was proven more than once that the statements of the US president tend to be louder than actual action – especially as it pertains to china. In 2025, China made it clear that it would not allow the US president to overtake it. When China announced restrictions on the export of rare earth metals, it became clear to everyone that China has become indispensable to the rest of the world,” says L. Zorgenfreija. China dominates the supply chain of rare earth metals: 60-70% of rare earth metals are mined, and more than 90% of their processing takes place in China.Rare earth metals are in almost all modern technologies – smartphones, cars, production equipment, defense in technologies, etc. “This card is very strong and with it’s help China succeeded relatively easily to cool down The desire of the US president to significantly increase tariffs on Chinese exports to the US,” says Swedbank Latvija’s chief economist.
Relying on TACO, financial markets have developed the skill this year not to take the US president’s announcements very seriously. This has helped the stock market recover. But another major reason for the stock market’s rise is due to the triumph of artificial intelligence (AI) and expectations of AI-related productivity gains. many analysts see the signs of a bubble in the stock market.
“After the April tariff chaos, economists were quick to reduce global economic growth forecasts. Though, it is indeed now clear that most economies have managed to show unexpectedly good growth overall in 2025. This is as the tariffs are still not as high as initially threatened, and also because we are yet to see some of the effects of the tariffs. Growth is also supported by other factors.For example, the US economy has been largely boosted by giant AI-related investments in data centers, wich contributed to both construction, both investments in equipment and software,” comments the economist.
Conversely, in Europe, the economy in 2025 was supported by the stable labor market, and also t
2024: A Year of AI Shifts, Geopolitical tensions, and Defense Industry growth
2024 proved to be a pivotal year in the world of technology and geopolitics. The year began with a challenge to the dominance of US artificial intelligence (AI) giants, followed by a resurgence of American tech leadership. Together,a shifting geopolitical landscape,marked by the return of Donald Trump to the US presidency and a renewed focus on European defense,reshaped global markets and supply chains.
The AI Landscape: A Year of Correction and Reassertion
The AI sector experienced a notable shakeup early in the year. In January,Chinese firm DeepSeek https://www.deepseek.ai/ demonstrated the ability to develop high-performance AI models at a significantly lower cost than their US counterparts. This revelation initially caused a correction in AI stock prices as investors questioned the necessity of massive investments previously seen as crucial for success.
Though, this “DeepSeek shock” proved temporary. US technology giants quickly regained their footing and continued to innovate, achieving new market heights in the latter half of 2024. This suggests that while cost-effective AI development is possible, the US companies maintain a competitive edge through continued innovation and established infrastructure. The competition spurred further investment and development across the board, ultimately benefiting the field.
Geopolitical Shifts and economic Impacts
The return of Donald Trump to the US presidency in 2024 significantly impacted the global geopolitical landscape. A renewed wave of protectionism, characterized by the introduction of new tariffs and assertive rhetoric, created friction between the US, China, and the European Union. Thes policies led to disruptions in global supply chains, forcing businesses to reassess their sourcing and manufacturing strategies.
Europe responded to the changing global dynamics by prioritizing the strengthening of its military production capabilities. This strategic shift resulted in the defense industry becoming one of the fastest-growing sectors in Europe. Increased defense spending and a focus on self-sufficiency drove innovation and expansion within the industry. https://www.reuters.com/world/europe/europe-boost-defence-spending-amid-ukraine-war-nato-pressure-2024-02-15/
Key takeaways
* AI Competition: While DeepSeek challenged the US dominance in AI, American tech giants ultimately reaffirmed their leadership through continued innovation.
* geopolitical Tensions: The return of Donald trump to the presidency fueled protectionist policies and increased tensions between major global powers.
* Defense Industry Growth: Europe’s strategic focus on strengthening military production led to significant growth in the defense sector.
* Supply chain Disruptions: New tariffs and geopolitical instability forced businesses to re-evaluate and diversify their supply chains.
Looking Ahead
2024 highlighted the dynamic interplay between technological advancements and geopolitical forces. As we move forward, continued innovation in AI, coupled with evolving global political landscapes, will likely shape the future of technology and the global economy. The emphasis on national security and self-sufficiency,particularly in Europe,suggests a long-term trend towards regionalization and a potential reshaping of global trade patterns.