Global outlook: exceeding previous expectations but downside risks remain.
According to Allianz Trade, global GDP growth remains strong, for now. It is expected to reach +2.9% in 2026 following a robust +3% in 2025. The +0.4pp upward revision in the forecast is largely driven by the US and China, which together account for over two-thirds of the adjustment.
Despite resilience so far, significant downside risks remain. Firstly, institutional risks, including central bank independence, protectionism and election outcomes, increase the likelihood of negative policy shifts. Secondly, geopolitical risks and national security priorities will continue to cause volatility. Finally, financial risks, such as the possibility of an AI-equity correction, renewed de-dollarization pressures, turbulence in private credit markets and concerns over the sustainability of public debt, will continue to increase throughout 2026, pushing the limits of a benign late financial cycle.
The US economy is expected to grow by +2.5% in 2026 though increasingly running on two speeds
Such forecast represents a major increase from the previous one (+0.9pp), as policy uncertainty eases, macro loosening gains traction and AI capex continues to power ahead. The negative impact of the trade war has been significantly reduced, with a revised estimate of -0.6pp in 2025, down from the -1.6pp projected back in Q2. This stems from strategic trade deals and sector-specific tariff reductions, which have significantly reduced the trade uncertainty and the impact on growth and inflation.
The strength of AI spending has also surprised on the upside. We estimate that AI spending, particularly in capex, alone contributed more than 25% to US GDP growth in 2025. Moreover, consumer spending has held up well to tariffs and policy uncertainty, despite persistently depressed sentiment recorded in surveys. Tariffs and weak job creations have contributed to the gloom. US households have continued to spend, though much of the spending has stemmed from more wealthy households.
While consumer spending is a key downside risk for the outlook, we think that macro easing should help to support spending and labor demand in the quarters ahead. Tax cuts are coming through 2026 from the One Big Beautiful Bill, and there is increasing evidence that the Fed’s easing since September has started to feed through to higher credit creation. We expect GDP growth to cool to +2% in 2027 on the back of fading euphoria for AI capex and lower equity market valuations.
China’s economic outlook remains resilient with growth to soften to +4.7% in 2026
Amid outperforming exports, soft domestic demand and policy support expected to continue into 2026, we are revising on the upside our GDP growth forecasts for China to +4.7% in 2026 (+0.5pp), after +5% in 2025 (+0.2pp). Growth has exceeded expectations, buoyed by stronger-than-anticipated external demand (and soft imports). This surge was driven by frontloading from the US in the first half of the year, strategic rerouting to circumvent tariffs, expanding market shares in the rest of the world, a weaker currency and competitive prices. Meanwhile, domestic demand still struggles to recover sustainably, with further policy support needed and likely to be announced by Q1 2026. In this context, and with many sectors in overcapacity, price pressures remain low.
Global trade surprised on the upside in 2025, but will slow to +1.3% in 2026
Amid a transformative year for global supply chains, global trade showed resilience through 2025, and will continue to do so through the beginning of 2026. Yet, the negative impact of higher tariffs should ultimately translate into slower growth. Rerouting and trade diversification meant that higher US tariff rates have had a milder impact on global trade than previously feared. Additionally, there has been a visible softening in the tone of US trade policy since autumn. In this context, global trade will likely continue to show resilience through the end of 2025 and we have raised our forecast for full-year growth in volume terms by +1.5pps to +3.5%, before slowing to +1.3% in 2026.
The continued outperformance of AI-related sectors and the resilience of the global economy have also lifted global trade this year more than we had forecast. This resilience should continue in the beginning of 2026, with potential upside to our trade forecast as uncertainty persists. North America and Asia Pacific are expected to face the largest decelerations through 2026, while Europe should come out among the most resilient, driven by improvements in Germany and the UK compared to the previous year.
Trade growth to decelerate in Asia
Going into 2026, softer trade growth will likely be driven by a slowdown of Asian exports, in particular from Taiwan, Thailand, Indonesia, Vietnam and China. Yet, ongoing negotiations of free-trade agreements, including those with the EU, India, ASEAN and the UAE, as well as the implementation of already signed ones (such as the EU-MERCOSUR), could provide upside risks to trade growth in 2026, and in the long-term could contribute to shifting the shape of global trade in the future.
In the US, the effective tariff rate likely remained around 11-12% in October, still at the highest level since the 1940s. As there is likely limited room for further upside going forward, we estimate it could reach 14% at most by year end. However, the year ahead will not be without surprises. With tariffs likely to be overturned by the US Supreme Court, the White House may resort to other tools, such as Section 338 or Section 122, to keep them at a high level. In parallel, ongoing Section 232 investigations could result in the introduction of tariffs on new products as well.
The global rise in insolvencies to decelerate to +3% in 2026 from +6% in 2025
Our headline indicator currently shows a +6% increase year-to-date globally for Q3 2025, with a persisting upside trend in most countries despite already high levels. We expect 2025 to end with business insolvencies rising or stable in two-thirds of countries, representing 70% of global GDP, and with three out of four countries exceeding 2016-2019 levels. The largest increases are expected in Hong Kong, Türkiye, Greece, Italy and Switzerland in relative terms (+44%, +40%, +40%, +35% and +28% year-on-year, respectively), while the largest decreases are likely in India (-27%), Russia (-25%), Canada (-22%) and the Netherlands (-15%).
Looking ahead to 2026, the global rise in insolvencies is expected to continue for the fifth consecutive year (albeit at a slower pace of +3%), driven primarily by North America (+4%) and Asia Pacific (+4%). Western Europe would be an exception on the downside (-2%). Our forecasts for 2027 anticipate a more widespread downside trend, with all regions contributing to the dynamic except Asia Pacific, which could still be boosted by China (+4% with China or -4% excluding China).
