Growth under threat as tariffs take toll and AI disrupts decision making

Common C-suite consensus has long acknowledged that business is never black and white – rather a colourful grey littered with bright and dark spots.

But don’t confuse the day-to-day rollercoaster ride with the impact of severe market uncertainty. That is more than just a corporate inconvenience.

For many executives, the unstable economy of today represents a serious threat to growth due to prolonged planning and delayed investment. This disrupts the very foundation of strategic decision-making, leaving CEOs hesitant, investors cautious and innovation stalled.

At the halfway point of 2025, the headline is that the global economic outlook has worsened since the start of the year – rising economic nationalism and tariff volatility is fuelling uncertainty and risks hindering long-term decision-making.

According to the Chief Economists Outlook – published by the World Economic Forum – a “strong majority” (79%) of surveyed economists view the current geo-economic developments as signs of a “significant structural shift” for the global economy rather than a temporary disruption.

Within this context, current US economic policy is expected to have a lasting global impact, with 87% of economists expecting it to delay strategic business decisions and heighten recession risks. In parallel, artificial intelligence (AI) is expected to drive growth but 47% anticipate net job losses.

“Policymakers and business leaders must respond to heightened uncertainty and trade tensions with greater coordination, strategic agility and investment in the growth potential of transformative technologies like AI,” observed Saadia Zahidi, Managing Director of World Economic Forum.

“These steps are essential for navigating today’s economic headwinds and securing long-term resilience and growth.”

Trade policy shocks continue

Unlike risk – which can be measured and managed – uncertainty is murky and often unquantifiable. It creates a climate where forecasting becomes guesswork and long-term planning is fraught with doubt.

Consequently, businesses tend to delay investments, freeze hiring and reduce spending, all of which drag down economic momentum. Even day-to-day decisions, such as pricing, expansion, or supply chain commitments, become harder to justify without a clear outlook.

Ultimately, when confidence is shaken, so is performance.

Based on the Chief Economists Outlook, global uncertainty is viewed as “exceptionally high” by 82% of the chief economists. While a narrow majority (56%) expect conditions to improve over the next year, concerns persist.

Nearly all the chief economists (97%) place trade policy among the areas of highest uncertainty, followed by monetary policy (49%) and fiscal policy (35%). This uncertainty is expected to weigh on key economic indicators, including trade volumes (70%), GDP growth (68%) and foreign direct investment (62%).

Most chief economists (87%) anticipate that businesses will respond to uncertainty by delaying strategic decisions, increasing recession risks.

Debt sustainability is also a rising concern, cited by 74% of respondents for both advanced and developing economies. An overwhelming majority (86%) expect governments to meet rising defence spending needs through increased borrowing, potentially crowding out investment in public services and infrastructure.

“Uncertainty is the defining theme of the outlook for the global economy,” noted Aengus Collins, Head of Economic Growth, Revival and Transformation at World Economic Forum. “Since the beginning of the year, a series of trade-policy shocks has darkened the outlook, and threatens to paralyse economic and commercial decision-making.

“Business as usual is not an option anymore. At the same time, making the right decisions in an environment of exceptional uncertainty has become increasingly difficult.”

Businesses assess double-edged AI sword

Companies thrive on predictability and stability – conditions that allow for bold moves and strategic bets.

Without that, the default position becomes caution, which may preserve capital but often comes at the cost of progress. And in a competitive market, standing still can be just as dangerous as moving in the wrong direction.

Hence why the AI pendulum continues to swing between risk and reward.

According to the Chief Economists Outlook, AI is poised to drive the next wave of economic transformation, unlocking significant growth potential but also introducing serious risks.

Nearly half (46%) of chief economists expect AI to deliver a modest global real GDP boost of 0-5 percentage points over the next decade, with a further 35% projecting gains of 5-10 points. Key growth drivers include task automation (68%), accelerated innovation (62%) and worker augmentation (49%).

Despite its potential, concerns persist: 47% expect net job losses over the next decade, compared to just 19% who expect gains.

“Technology replaces tasks, not jobs,” countered Fabien Curto Millet, Chief Economist at Google. “Most jobs are made up of multiple tasks, many of which are hard to automate economically.

“Employees are adopting AI before employers even realise it. A McKinsey report showed companies underestimate AI usage internally by a factor of three.”

In direct disagreement to the perceived mass unemployment threat created by AI, Millet likened the currently phase of adoption to the early days of electrification or computing – transformative technologies that took time to reorganise the economy around them.

“With the right policy, AI can create more opportunities than it displaces,” he added.

Above all, economists highlighted the misuse of AI for disinformation and societal destabilisation as the top risk to the economy (53%). Other key risks include rising concentration of market power (47%) and disruption of existing business models (44%).

To fully harness AI’s potential, the chief economists emphasised the need for “bold action” from both governments and businesses.

For governments, top priorities include:

• Investing in AI infrastructure (89%)
• Promoting adoption across key industries (86%)
• Facilitating AI talent mobility (80%)
• Investing in up-skilling and redeployment (75%).

For businesses, the focus is on adapting core processes to integrate AI (95%), re-skilling employees (91%) and training leadership to steer AI-driven transformation (83%).