From AI Bubble Burst To Trump Tariffs: 5 Key Risks For Global Economy In 2026

From AI bubbles to Trump tariffs, Inflation resurgence and possible oil price spikes, have a look at 5 key risks that loom over the economic outlook for 2026. 

AI bubble bursts

US tech companies fail to monetise AI, questioning the logic of immense investment in hardware/software and related industries. Tech stocks crash, hitting the top 20% of American earners who own the lion’s share of US equities held domestically, as per an ING report. 

Having enabled consumer spending to grow over the past couple of years, even as the bottom60% have struggled, lower household wealth causes a fall in consumption in 2026. AI investment falls abruptly, weighing on the construction and investment that has likely contributed around one percentage point to US growth in 2025 (though less once imported equipment is netted off). This is enough to push the US jobs market into a full-blown recession.

Impact: The US falls into recession, while Europe is less affected. The Fed cuts rates more aggressively.

Inflation Resurgence On AI Supply Bottlenecks

Many economists – not least the Fed’s doves – expect AI to be a massive positive for productivity, which pushes down inflation. But what if that’s wrong? In the short term, massive investment in AI infrastructure could crowd out other forms of economic activity. Data centres are expected to
account for 10% of US power demand by 2030. Electricity grids globally will be under increasing strain, risking blackouts and higher prices. Rising investment needs also risk fresh supply shortages, at a time of tighter immigration rules in the US and Europe. Wage growth risks turning higher again.

Impact: Global inflation rises. Central bank rate hikes draw nearer.

President Trump Slashes Tariffs As Negative Impact Grows

There are two ways the US average tariff – currently around 16% – could fall. First, the US administration opts to lower tariffs ahead of the elections, just as it has done with certain food products recently. The resulting fall in revenue would complicate efforts to convince Congress to
approve ‘tariff rebate’ checks, but it’s possible that once this is done, the president will begin to roll back trade barriers in a bid to lower consumer bills.

Alternatively, the Supreme Court rules that tariffs imposed under emergency powers – most country-level levies – are illegal. The president uses other means, such as Section 122, which allows 15% tariffs for 150 days, to rebuild trade barriers – but the result is messier. He could also widen
the scope of sector-specific tariffs, though this would take time. The result may well be a lower average tariff level.

Impact: Growth rises, inflation eases, but the former is judged as the dominant factor by the Federal US rate cuts are curtailed.

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Ukraine War Ends With Full And Enduring Peace Agreement

If peace negotiations are successful, the wider economic impact will likely depend on the extent to which trickier topics – such as territorial recognition – are addressed, and how enduring any ceasefire is perceived to be. In a more optimistic scenario – where a credible, long-term agreement is reached and investors feel confident about redeploying money in Ukraine – reconstruction efforts would likely have wider ripple effects on activity and, more importantly, sentiment in Eastern Europe.

Lower energy prices, depending on the extent of sanction removal, could also have a stimulative effect on global consumers. However, our energy team notes that Russian oil supply hasn’t materially fallen in recent years, so the impact on the global supply balance may not be
significant. Although, admittedly, it would reduce a large amount of supply risk hanging over the oil market. The impact on the gas market would be more significant, but this would require Europe to start resuming its purchases of Russian natural gas.

Impact: Lower energy prices boost global growth. Some central banks (e.g. the Bank of England) may counterintuitively react dovishly, having recently reacted hawkishly to price spikes on fears of supply-driven inflation.

Oil prices spike on renewed geopolitical tensions

The key upside risk to oil prices remains Russian supply, due to both US sanctions and persistent Ukrainian attacks on Russian energy infrastructure. The widely held view is that Russian oil will find ways to circumvent sanctions. However, if sanctions prove to be more effective than thought, this potentially reduces the scale of the oil surplus expected in 2026, and is an upside risk to our view
that Brent will average $57/bbl next year.

The recent escalation between the US and Venezuela also leaves uncertainty over Venezuelan supply, while the fragility of the Israel/Gaza ceasefire means that supply risks from the Middle East could re-emerge.

Impact: Weaker global growth and higher inflation. Central banks are more likely to hike rates/curtail rate cuts to lean against inflation risk.