The 5 megatrends that will dominate 2026

2025 was dominated by Trump and his tariffs. And 2026, well, that will be the year that China will dominate the global economy. More and more governments will hit a debt limit. The AI bubble will not pop and China will blockade Taiwan. Hey, I'm Yuri. I have a PhD in economics and every year at the end of the year, I predict the five key mega trends that will dominate the global economy in the next year. Last year, my predictions did surprisingly well, predicting that demographic

decline will start to bite in Europe, Japan, and China. Trump's trade war will start slow because Trump's most aggressive tariff suggestions should be seen as more of a negotiation tactic than a real policy. And that Elon Musk's Doge would probably not succeed because it would be unlikely that he will figure out American politics in just a year. My next big predictions were that the global economy will struggle, that governments will face tough choices to reign in debt, and finally that the

green energy revolution will continue to amaze. Now, looking back, all of these predictions actually materialized. The global economy again had a disappointing year. Europe and Japan grew especially slowly. Governments from France to Brazil to the UK, which I had mentioned as being especially risky last year faced that crisis. And as you can see here, while the Trump trade war chaos came very quickly, most of it was part of his negotiation strategy as actual

tariffs only followed slowly. Finally, on the bright side, the green energy revolution powered ahead as 2025 EV, solar, and wind turbine adoption are again on track for yet another record year. Actually, the only prediction that I got really wrong was that most of my predictions will not come true. Which honestly got me thinking, why did my main predictions do so well last year given that economists have such a bad reputation making predictions and that I myself said last year that a nonhuman

complex system like for example the weather can only be reliably predicted for just a few days ahead. The outcome of a really small human complex system like a sports game is also notoriously hard to predict by both experts and scientists. So to think that anyone can reliably predict the global economy for a full year ahead is frankly madness. Well, actually if we look at stuff like financial markets or big geopolitical events, a lot of research says these are indeed fundamentally unpredictable.

However, when it comes to big macro trends such as globalization or deglobalization, as you can see here, actually these trends are pretty predictable. And that's what I mostly predicted last year, right? Big macro tense that are already reshaping the world. They will continue to do so next year. So, to switch things up a little bit this year, I'll take some more risks such as with my bubble and Taiwan blockade predictions. But first, let's get into a prediction that I'm actually

very confident about. Prediction number one, China will dominate more and more industries. Now the core of this prediction is that after musling their way into the smartphone industry, ship building industry, battery industry, drone industry, and car industry, China will challenge previously untouchable Western giants like Elon Musk's SpaceX in 2026. Yes, Elon, sorry, it's happening again. When Tesla entered the Chinese market in 2018, it was the most advanced EV company by far. But now it's

playing catch-up with hundreds of Chinese car brands like Yang Wang, Xiaomi, Zeer, MG, and many, many more. Yes, in 2026, China is challenging SpaceX in the space sector. But that's not all. It's going after Nvidia in the advanced chip sector, Fiser and Nova Nordisk in the bioarm pharmacy sector, Germany's BASF in the chemical sector, and the German middle in general when it comes to making advanced machines. Tennis increased dominance is one of these relatively predictable macro

trends. So, I'm pretty confident in this prediction, giving it an 80% probability. But importantly, I don't know which of these sectors the Chinese will dominate next year. A lot of China's incredible industrial successes are the result of the country getting richer. When Europe got rich, when Japan got rich, when Korea got rich, they all naturally started to compete globally in advanced industries. What differentiates China though is that its government is

trends. So, I'm pretty confident in this prediction, giving it an 80% probability. But importantly, I don't know which of these sectors the Chinese will dominate next year. A lot of China's incredible industrial successes are the result of the country getting richer. When Europe got rich, when Japan got rich, when Korea got rich, they all naturally started to compete globally in advanced industries. What differentiates China though is that its government is

making these 5-year plans in which they first boost specific sectors with subsidies in such a way that it creates intense competition. Then second, they let this intense competition process play out and they stop subsidizing as much. Then a lot of companies fail. But the toughest ones who have survived this process of intense competitions, these emerge as worldclass companies. This process has yielded China some incredible results. In 2006, the Chinese government started heavily supporting

the ship building industry. Today, China dominates the ship building industry. In 2015, China explicitly started targeting the battery, solar, and EV industries. Today, China dominates all of them. But importantly, China's process does not always work for each sector. For example, China has previously also targeted airplane manufacturing of the type currently done by Boeing and Airbus. So far, their efforts have largely failed. So, I'm not saying China will dominate all of these sectors in

2026, but I am saying with 80% confidence that China will dominate more and more industries in 2026. But, of course, this will invoke a response, which leads us to prediction number two. The trade war will broaden. You see, just as Trump's trade war was a response to Chinese subsidies already in 2025, more and more countries responded to perceived unfair competition from China with tariffs such as Brazil's steel tariffs, Mexico's car and good tariffs or with nationalization such as the

Dutch nationalization of Chinese-owned chip maker Nexia. In 2026, I predict that this trend will continue for two reasons. The first is that China's incredible manufacturing machine starts with initial government subsidies. Therefore, many advanced manufacturing nations view Chinese competition as unfair and they feel they have to respond to protect their industries that were not subsidized to the same extent. The second reason is that China is breaking the traditional Asian growth

model known as the flying geese economic model. In a nutshell, the flying geese model states that as Asian countries gets rich, they move up the value chain. China is doing that just as Japan and Korea have done before it. However, according to the flying geese model, as Asian countries get richer, they naturally will become too expensive for low wage simple manufacturing industries. Therefore, Japan moved a lot of its lowcost manufacturing to Korea and Taiwan, giving them a chance to

develop. Korea and Taiwan then did the same for China. But now China is breaking that pattern. Its national security strategy is about becoming self-reliant in all of manufacturing. Therefore, it's now promoting factory automation which helps to keep simple manufacturing stuff like pencil manufacturing for example in China despite rising wages in China. So through its policy of self-reliance, China is now threatening both industries in advanced and developing nations. This

develop. Korea and Taiwan then did the same for China. But now China is breaking that pattern. Its national security strategy is about becoming self-reliant in all of manufacturing. Therefore, it's now promoting factory automation which helps to keep simple manufacturing stuff like pencil manufacturing for example in China despite rising wages in China. So through its policy of self-reliance, China is now threatening both industries in advanced and developing nations. This

is why I predict the trend of both developing nations like Brazil, Mexico and India as well as advanced nations like the Netherlands and Canada hitting China with more and more tariffs or other restrictions will continue. But hold on, that wasn't my full prediction. I said the trade war will broaden in general, not against China per se. This means that I predict in 2026 nations will start hitting more countries with tariffs and other barriers than just China. Again, this is already happening

to an extent. Mexico did not just hit China with tariffs. It hit India with those tariffs as well. This is not surprising. As I talked about in my multipolar order video, one of the main predictions of the emerging field of geoeconomics is that as we transition from a world dominated by one superpower to one by multiple great powers, it's likely that we see more use of economic weapons like tariffs, sanctions, and other economic weapons as countries experiment with how far they can go in

this new economic order before facing blowback. Still, I'm only giving this prediction a 60% probability. The reason has to do with the fact that while mega trends like this are quite predictable over the long term, you could very well have multiple years of small reversals. For example, let's go back and look at the deglobalization mega trend in the 1920s and 30s. Actually, there were quite a few years where international trade recovered before following the

deglobalization mega trend again. 2025 was an exceptionally tariff-heavy year, mostly coming from Trump in the US coupled with retaliation from China. But both countries have seen that they are actually quite exposed to each other. So it could be that 20 26 will be a correction year making my prediction of a broader trade war wrong. In that sense I'm more confident about prediction number three. Government debt will increasingly be a limit. Indeed this is basically the same prediction as I made

last year. The reason for it is simple. The world continues to age. The world is used to using stimulus to get out of crisis. Last year, wear governments like the UK and French governments changed spending plans as a consequence of their high debt and increasing interest rates. But they did not tackle the underlying issue, which is that France and the UK spend way more than other countries on pensioners. To raise the pension age by a lot or reduce pension payments, that

last year. The reason for it is simple. The world continues to age. The world is used to using stimulus to get out of crisis. Last year, wear governments like the UK and French governments changed spending plans as a consequence of their high debt and increasing interest rates. But they did not tackle the underlying issue, which is that France and the UK spend way more than other countries on pensioners. To raise the pension age by a lot or reduce pension payments, that

was politically unacceptable. The more people age, the more difficult it will become for democracies to lower pensions. given that more and more voters receive these pensions or will do so soon. Global public debt compared to GDP in advanced economies is now higher than it was during the First World War at levels only seen during the times of Napoleon. Therefore, I think there's an 85% chance that just like last year, several high debt, rapidly aging countries will again have to make tough

choices to deal with this debt or face increased inflation or a falling currency like Japan did. Luckily, this could be offset a little by my fourth prediction, which is prediction number four. The AI bubble will not burst yet. The AI bubble. AI bubble. >> AI bubble. Yes, people are still investing enormous amounts of money into the AI sector. Yes, there are clear parallels to the 2000 internet.com bubble where despite the genuine promise of the technology of the internet,

people still got way too excited about a lot of internet companies at the time. >> When the ball drops on the year 2000, it will be a momentous event for the world and for the US economy, which is closing in on its longest expansion ever.

We just saw this as a unique opportunity to combine forces with the leading brand on the internet. And that's an opportunity just don't pass up. >> Yes, AI, just like the internet then is really changing how people work. And yes, just like internet adoption in 2001, AI adoption is still in its infancy. However, that does not mean that the companies that investors are betting big on today, like unproven billion-dollar startups, or even giants like OpenAI and Nvidia, will make enough

money in the future to justify their incredibly high stock prices today. Serious research firms like Bane and JP Morgan have calculated that AI companies need to make so much more money in the upcoming years to justify their current valuations that it seems clear that there is a bubble today. However, the AI industry today is different than the internet industry in 2001 for two reasons. First, some of the most valuable companies today like OpenAI do have unprecedented numbers of active

users. I mean, OpenAI already has double the number of users than Netflix and its valuation is just above that of Netflix. Of course, OpenAI has not proven that it can get many of its users to pay as much as they do Netflix yet. And this brings us to reason number two. If we compare US stock price today compared to earnings that they actually earn, the picture still looks much less like a bubble than it did in 2001, especially when it comes to the biggest winner now,

users. I mean, OpenAI already has double the number of users than Netflix and its valuation is just above that of Netflix. Of course, OpenAI has not proven that it can get many of its users to pay as much as they do Netflix yet. And this brings us to reason number two. If we compare US stock price today compared to earnings that they actually earn, the picture still looks much less like a bubble than it did in 2001, especially when it comes to the biggest winner now,

Nvidia. They are already earning the revenue now that justifies their high stock price. Yes, some have pointed out that a lot of these companies finance each other. That could be risky, absolutely. But it could also be completely rational if these companies live up to their promise. So, in theory, this bubble could grow quite a bit further. It could pop in 2027. Maybe that's a 25% chance. It could pop in 2028. Maybe that's a 20% chance. Maybe it could pop later or never at all.

Nvidia. They are already earning the revenue now that justifies their high stock price. Yes, some have pointed out that a lot of these companies finance each other. That could be risky, absolutely. But it could also be completely rational if these companies live up to their promise. So, in theory, this bubble could grow quite a bit further. It could pop in 2027. Maybe that's a 25% chance. It could pop in 2028. Maybe that's a 20% chance. Maybe it could pop later or never at all.

Let's give that a 30% chance. If we do that, then actually the chance that it pops next year is pretty low. So, my argument is this. Yes, we see signs of a bubble, but looking back at the Chinese real estate bubble, for example, that was called already in 2015 and didn't pop for five more years, then it's very unlikely that the AI bubble will pop in 2026. Although, my final prediction could ruin that prediction as it may tank the global economy. Let's talk about

prediction number five. China will blockade or quarantine Taiwan. Okay, folks, let's just be honest here. I am an economist. What do I know about geopolitics? Well, since Russia's invasion of Ukraine ruined all inflation predictions in 2022, economists like me have been forced to adapt. Since then, I intensely follow experts on geopolitics, such as the folks at the Center for Strategic and International Studies. Now, alarmingly, in a recent report, they pulled 35 Taiwanese experts and 52

US experts, and most of them thought that while China does not have the capability to invade Taiwan yet, they do have the capability to isolate it from the outside world through a naval blockade, which could the island. A blockade means that China would block all entry to Taiwan via the sea and potentially air. Under international law, a blockade against another nation is considered an act of war. However, only a few nations recognize Taiwan as a nation. So, if

Taiwan is not a nation, then maybe its coastline is simply Chinese waters. So, what if the Chinese Coast Guard just sails into Taiwanese waters and starts demanding to inspect and potentially authorize all incoming and outgoing ships? As you can see here, the experts overwhelmingly think the Chinese Coast Guard is ready to enforce such a quarantine of Taiwan tomorrow if it wants to. As you can see in this graph from a CSIS war game, a Chinese blockade would cause

Taiwan to run out of gas in just 3 weeks, run out of coal in 8, oil in 15, and this all would the economy of Taiwan in no time. And there are very worrying signs indeed that China has been preparing all year for such a blockade. In the summer, it did blockade like military exercises. In July, they escalated their military moves in the entire region. And in November, they expanded their navy with a new state-of-the-art aircraft carrier. Combine this with the fact that the

Chinese manufacturing economy is riding relatively high right now, the US is distracted in the Middle East and in Venezuela, and that China's population will soon start dropping. Well, with all of those factors, it's not hard to make the argument that the chance of a Chinese quarantine or blockade in 2026 is higher than ever. And dang, the consequences on this one could be horrible for the global economy. Of course, it would be horrible for the people of Taiwan first and foremost. On

top of that, a quarantine has a high likelihood to escalate eventually into a blockade, which in turn could lead to a war. This all of course then could lead to way more sanctions, which would be truly devastating for the global economy as the West crucially depends on China for rare earths, many minerals, and a lot of manufacturing in general. In fact, the consequences for the West could be so bad that they could decide that actually it's not worth it to fight

a Chinese reunification at all. If the Trump team caved over Chinese rare earth magnet restrictions so quickly in the trade war, perhaps he will just let China have a quarantine around Taiwan as well. It's a real possibility. I am including it in my predictions this year, even though I only give it a 25% probability. But wait, at 25% probability. So then why predict it? Well, last year I did what all economists typically do, make predictions that are relatively safe

based on mega trends. That's why I got them all right. But the goal of this video is ultimately not to get everything right, per se. It's to help the viewer, you to think about what could most impact the global economy in 2026. Now, to achieve that goal, I felt it was essential to make also some riskier predictions. this time given how big the consequences could be. But yeah, let me know. Did I succeed in that? Did this video give you a more informed look at 2026? If so, I have good news for

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