By David Born

Assessing the current state of the US economy is no easy task. On the one hand, the economy is growing at around 2% and the stock market is booming; on the other hand, inflationary pressures are resurfacing and the labor market is losing momentum. Forecasts vary widely, even among Federal Reserve officials, highlighting the impact of shifting policies and conflicting data on the outlook. A significant part of the recent growth can be attributed to substantial investments in AI infrastructure, which raises the crucial question of whether AI can truly deliver the productivity and profit potential that many currently anticipate. For the time being, the fundamental strength of the US economy appears to prevail. According to the latest projections, GDP growth is expected to reach 2.4% in 2026 and 2027, with inflation gradually easing toward 2.5% by the end of 2026. This stable baseline remains contingent on effectively addressing the current challenges.

Key risks of the US economy

In 2025, President Trump's economic policy has been the principal source of volatility. On April 2, also known as “Liberation Day", the administration imposed sweeping US import tariffs aimed at narrowing the goods trade deficit, reviving domestic industry, attracting foreign investment, and raising fiscal revenue. Imports fell in April, narrowing the deficit, but exports remained largely stable; subsequent months showed limited further adjustment. Following a period of negotiations with the EU, a consensus was reached on the establishment of a tariff cap set at 15% accompanied by the commitment of EU investments of USD 600 billion in the United States. Meanwhile, tariff receipts have more than quadrupled since March but still represent less than 8% of total federal revenue in 2025, limiting their fiscal impact even as inflation expectations spiked near 7% post‑April before easing back to 4.5%. Beyond trade, public debt has climbed to about 120% of GDP, with interest outlays estimated at USD 950 billion in 2025. A new headwind is emerging from restrictive immigration policies: for the first time since the Great Depression, net migration may turn negative, undermining labor supply and the country's traditional innovation edge. Labor-market indicators are mixed; unemployment is projected to rise from 4.0% (2024) to 4.2% this year. Equity markets rebounded to new highs after an initial dip, driven partly by AI and crypto. However, valuations appear stretched, and regional bank jitters highlight fragility. Two fundamental vulnerabilities compound risks for the US economy: (1) manufacturing's eroded global share, pressured by high wages and China’s manufacturing ascent, and (2) the increasing reliance on imported inputs, notably rare earths from China, as well as other intermediates such as chemicals and electronic components.

The big bet on AI

One sector has, so far, cut through pervasive uncertainty: artificial intelligence. AI‑related capital expenditure contributed 1.1% to US GDP growth in H1 2025, outpacing consumer spending as a primary driver of economic expansion. When grid upgrades and intellectual property are considered, the contribution could be even higher – remarkable for a sector that constitutes only a small share of total GDP. Notably, the boom has been largely financed through tech giants' cash flows, rather than through leverage, which has contributed to its resilience against high rates and escalating electricity costs. However, the precise timing of these payoffs remains uncertain. According to a recent study by MIT, a staggering 95% of firms have yet to generate profits from AI deployments. Yet, the investment momentum persists: VC funding in AI is set to exceed USD 200 billion in 2025, and the ten most prominent AI start-ups have reached around USD 1 trillion in combined valuation – despite operating losses. Should these companies fail to cover computing costs in a sustainable manner, knock‑on effects could hit chipmakers and infrastructure vendors that have contributed to the stability of broader indices. The upshot: the current surge looks part boom, part secular shift, with dynamics that don't compare neatly with previous bubbles.

The US economy's fundamental strengths

Despite imminent challenges, the US retains formidable fundamental strengths. It is a diverse, high‑productivity economy with a global leadership position in digital technologies, defense and aerospace, pharmaceuticals and medical technology, energy, finance, and media. The Silicon Valley ecosystem, world‑class universities, corporate R&D, and a vibrant start‑up scene continue to generate frontier innovation. Affordable domestic energy supports energy‑intensive activities, including the data center backbone of AI. A large domestic market with high disposable incomes underpins demand, while the US maintains its position as the leading destination for foreign direct investment (FDI) and a significant source of outward FDI. Deep capital markets and the US dollar's reserve status preserve financing advantages that few peers can match.

How companies should prepare

The US market is strong, but volatile. To stay competitive, companies with a US footprint must focus on two priorities: building resilience and implementing AI.

Resilience is achieved by embracing scenario planning as a tool to help anticipate multiple futures and prepare actionable, effective responses. It is equally important to foster an adaptive culture that encourages rapid course corrections and learn-fast cycles.

AI is the second imperative. AI is here to stay, it is a permanent and integral port of business operations, contributing to enhanced process productivity, the development of new products, and the exploration of innovative business models. To capitalize on the opportunity for significant value creation, organizations must look beyond merely adopting specific technologies. The effective implementation of AI requires a transformation in both culture and processes, as well as careful management of potential risks and uncertainties, including IT infrastructure security, regulatory compliance, and talent shortages.

For non-US players, it is important to reassess localization versus export strategies in light of tariff pressures. Exporters should double down on cost efficiency, standardization, and automation across the supply chain to defend their margins and maintain their competitive edge in the global market.