Business Daily – "What Next for the Global Economy?"

BBC World Service | January 5, 2026
Host: Will Bain
Guests: Darshini David (BBC Deputy Economics Editor), Michelle Fleury (BBC North America Business Correspondent)

Overview

In this episode, Will Bain convenes BBC's top economics correspondents to examine the outlook for the global economy in 2026. The panel explores the aftermath of dramatic tariff hikes, persistent cost-of-living pressures, and the looming questions about central bank independence. They also discuss how these macroeconomic trends are impacting everything from consumer spending and investment to political movements, and take a forward-looking view on the potential role of AI and corporate power in shaping the business landscape.

Key Discussion Points & Insights

1. The Tariff Shock of 2025 and Its Fallout

• Tariffs Dominate Economic News: President Trump’s rapid and robust implementation of tariffs, dubbed “Liberation Day” (April 2, 2025), upended expectations for a calmer economic year and rewired global trade flows.
  • Darshini David: "We saw the world trading order turned on its head much quicker than we thought and much more dramatically." [03:25]
• Varied Global Reactions:
  • Winners: China & Brazil adapted quickly, seeking alternative revenue streams and markets.
  • Tech Exporters: Taiwan & Vietnam benefited by supplying AI-related goods to the US.
  • Losers: Europe suffered due to lost US trade and a lack of alternative markets.
  • Darshini David: "It’s a really diverse picture..." [05:39]

2. The US Economy: Resilience or Bifurcation?

• K-shaped Recovery: The US landscape splits between upper-income earners (enjoying the stock market boom) and lower-income consumers (struggling with mounting debt and inflation).
  • Michelle Fleury: "Affordability, affordability, affordability, that is the word we keep hearing from the President." [04:21]
• Delayed Impacts: While consumers are starting to feel tariff effects, correspondents caution that the real pain or payoff will appear in 2026.
  • Michelle Fleury: "The impacts are still... actually going to show up in 2026." [04:17]

3. The Central Bank Crossroads: Independence and Interest Rates

• Interest Rates Take Centre Stage: Debates about rate policy are more prominent and mainstream than at any time in the last decade.
  • Darshini David: "Central bank independence has come under the spotlight in a way that it hasn't for a couple of decades, which is in itself fascinating." [07:50]
• Public Concern: Ordinary people are attuned to rate policy because persistent inflation hits everyday essentials and jobs.
  • Michelle Fleury: "[There’s] this worry now that the labor market is beginning to show signs of weakness..." [08:36]
• Risks to the Fed: Questions about future Fed leadership and political interference loom, with Supreme Court cases and impending appointments.
  • Michelle Fleury: "There are real questions about the independence and that will have a huge bearing on global markets..." [09:25]

4. The Growth Challenge: Can the West Reignite Its Engines?

• Low Growth, High Debt: Western economies are grappling with weak growth prospects, high public debt, and little policy room.
• Political Ramifications: There’s a rising frustration with “nothing seeming to work,” fueling political movements and interest in radical solutions.
  • Darshini David: "That breakdown of... the American dream... is becoming a bit of a constant Western theme." [13:05]

5. The Search for New Solutions: Radical Politics and Affordability

• Spotlight on Radical Politicians: New York City’s incoming mayor Zoran Mamdani exemplifies the electorate’s yearning for bold answers on affordability. Even political rivals, such as Trump, are finding common ground on this concern.
  • Michelle Fleury: "Affordability – whoever gets that right, you have to assume will be rewarded politically." [14:52]
• Business Leaders’ Dilemma: While wary of radical policy, executives agree the affordability issue must be addressed head-on.

6. Trade Diversion and Potential European Response

• China’s Trade Redirection: As tariffs reroute trade, Europe receives more Chinese exports, creating new economic tensions.
  • Darshini David: "We are seeing a certain amount of that diversion and it's happening very quietly..." [15:40]
• European Response: With frustration high, there's speculation Europe may mount its own response, both to China and to post-Brexit UK.
  • Darshini David: "There's certainly an appetite on both sides for closer workings...” [16:16]

7. Looking Ahead: Key Words and Wildcards for 2026

• Tariffs and Trade Remain Hot: Both correspondents agree tariffs will still headline the year. Immigration is also mentioned as a contender.
  • Michelle Fleury: "I think tariffs and trade will continue to be probably still up there at the top." [16:41]
• The Rise (or Bubble) of AI: AI's impact is now central to financial confidence and productivity debates—will its boom continue or prove fragile?
  • Michelle Fleury: "AI... the stock market confidence we've seen here on Wall Street has been phenomenal..." [17:07]
  • Darshini David: "If there is the downside, then there is... the fallout for financial conditions around the world." [17:22]
• Changing Corporate Stars: With companies like Nvidia (Jensen Huang) at the center of trade and tech, hosts ponder if rising cycles will get even shorter.
  • Will Bain: "Someone like Jensen Huang feels like someone like that, doesn't he?" [17:59]
  • Darshini David: "I wonder if these cycles are going to get ever shorter and we're going to be talking about somebody... we haven't even dreamt of talking about at the moment..." [18:38]
• M&A on the Horizon: Deregulation may spur new corporate mega-mergers, especially under a Trump administration.

Notable Quotes & Memorable Moments

• On the shock of tariffs:

  • "Tariffs... turned on its head much quicker than we thought and much more dramatically."
    — Darshini David [03:25]

• On the K-shaped US economy:

  • "Affordability. Affordability, Affordability, that is the word we keep hearing from the President..."
    — Michelle Fleury [04:21]

• On the central bank’s new visibility:

  • "Central bank independence has come under the spotlight in a way that it hasn't for a couple of decades..."
    — Darshini David [07:50]

• On the breakdown of the 'American Dream':

  • "That breakdown... is becoming a bit of a constant Western theme at the moment..."
    — Darshini David [13:05]

• On political incentives:

  • "Affordability – whoever gets that right, you have to assume will be rewarded politically."
    — Michelle Fleury [14:52]

• On AI as the next big theme:

  • "AI... stock market confidence... a lot of that has been built on AI, and I think... is it a bubble that could burst?"
    — Michelle Fleury [17:07]

Timestamps for Key Segments

• US Tariffs and Global Trade Upheaval: 01:20 – 06:49
• Bifurcated US Economy & Resilience: 04:32 – 05:39
• Interest Rate Obsession & Central Bank Concerns: 06:49 – 09:53
• Growth Stagnation & Political Change: 11:31 – 13:27
• Affordability as the Defining Political Issue: 13:27 – 14:57
• Trade Diversion to Europe & Euro Response: 15:10 – 16:16
• Quickfire Predictions for 2026 (Tariffs, AI, Corporate Cycles): 16:30 – 19:04
• Mergers & Acquisitions Outlook: 19:04 – 19:26

Final Thoughts

This episode delivers a sweeping yet incisive look at the volatile state of the global economy—defined by political shocks, persistent inflation, strained trade, and a restless public. With 2026 shaping up as another year of uncertainty, the correspondents point to tariffs, AI, and affordability as the watchwords that will steer both economic policy and political debate worldwide. The power cycles in business and technology are getting shorter, and the next disruptor may already be waiting in the wings.