Podcast Summary: Goldman Sachs Exchanges — Outlook 2026 Episode 2: Regional Perspectives

Date: January 15, 2026
Host: Alison Nathan
Guests: David Mericle (Chief US Economist), Andrew Tilton (Chief Asia Pacific Economist), Jari Stehn (Chief European Economist)

Episode Overview

In this episode, host Alison Nathan takes listeners on a global economic tour for 2026, delving into the US, China/Asia, and Europe with Goldman Sachs regional experts. The discussion unpacks expected growth, policy headwinds, and tailwinds, offering a nuanced forecast for each major region and highlighting crucial risks and divergences.

United States Outlook (00:45–07:38)

Expert: David Mericle, Chief US Economist

Key Discussion Points

• Tariff Policy and US Growth (00:47–02:34)

  • The anticipated effective tariff rate for the US is expected to decline slightly in 2026.
  • The administration is unlikely to raise tariffs further, especially with coming midterms.
  • Potential Supreme Court actions may cap replacement tariffs at 15%.

  “We actually think that the effective tariff rate will fall a touch in 2026… so not down a huge amount, but down a little bit.”
  — David Mericle (01:47)

• Impact of Fiscal Policy (02:34–03:37)

  • A front-loaded fiscal boost expected in the first half of 2026, worth over half a percentage point on GDP growth, driven by tax cuts (personal and business) and spending.
  • By year-end, the fiscal effect fades; slight negative impulse likely in the following year.

  “The fiscal impulse will be worth more than half a percentage point on GDP growth... a combination of many things hitting at the same time.”
  — David Mericle (02:48)

• Financial Conditions and Fed Outlook (03:37–06:28)

  • Recent easing in financial conditions (especially equities) continues to give the economy a mild boost.
  • Inflation expected to come down, with Fed likely to follow through on two rate cuts—already priced into the market.
  • Ongoing debate within the Fed about the terminal rate.

  “Our forecast is that FOMC participants will compromise by meeting in the middle at about three to three and a quarter. That would be two more 25 basis point cuts.”
  — David Mericle (05:54)

• Risks: Focus on Labor Market (06:28–07:36)

  • Main uncertainty: the labor market, which has softened and faces possible further weakening due to AI-induced layoffs and tepid hiring.
  • Risks to stronger monetary policy accommodation if the labor market deteriorates.

  “If instead we see ongoing labor market softening, I think that could feel like a pretty different outcome for the US economy and certainly it could mean a pretty different outcome for monetary policy.”
  — David Mericle (07:11)

China & Asia Outlook (07:43–14:21)

Expert: Andrew Tilton, Chief Asia Pacific Economist

Key Discussion Points

• China: Headwinds (08:07–11:09)

  • Prolonged property sector downturn: ongoing impact, with about 1.5 percentage points off GDP in 2026.
  • Consumer demand weakened by falling home prices (housing ~2/3 of household wealth) and a soft labor market.
  • High savings rate (over 30%) and substantial household deposits, but consumers are reluctant to spend due to limited social safety nets.

  “The property sector took almost 2 points off Chinese GDP growth in 2025. We estimate that drag to be smaller in 2026, but still almost 1 1/2 points.”
  — Andrew Tilton (08:34)

• China: Tailwinds (11:09–12:44)

  • Highly competitive manufacturing with significant cost advantages in many tech sectors.
  • Robust export volume growth, with China’s market share rising globally.
  • Technological progress in batteries, EVs, electronics, and semiconductors—though China trails global top players.
  • The region's other economies struggle to compete; must boost domestic demand or find niche exports.

  “We expect Chinese exports to grow 5 or 6% annually in volume terms over the next few years.”
  — Andrew Tilton (11:32)

• Japan & Other Asia (12:44–14:21)

  • Japan: Steady (just under 1% GDP growth), slightly above average for Japan.
  • Inflation above the 2% target but expected to subside.
  • Marked monetary policy tightening—highest rates and yields in 30 years, contrasting with regional peers’ easing.

  “The Bank of Japan just raised rates to 3/4 of a percent... the highest level in 30 years.”
  — Andrew Tilton (13:33)

Europe Outlook (14:28–21:09)

Expert: Jari Stehn, Chief European Economist

Key Discussion Points

• Structural Challenges & China’s Competition (14:40–15:53)

  • Europe faces high energy costs, regulatory burdens, high wages, and aging demographics—limited progress on reforms.
  • Lagging competitiveness has left Europe vulnerable as China strengthens its export position.

  “Europe continues to struggle with these structural issues... It hasn't really done very much to improve the structural outlook.”
  — Jari Stehn (14:57)

• Cyclical Bright Spots (15:53–17:33)

  • Expansionary fiscal policy in Germany (public spending rising by about 2% of GDP).
  • Fading trade tensions and more constructive global growth.
  • High saving rates and resilient labor markets, especially in southern Europe, support consumption.

  “We are seeing that inflation has fallen, the saving rate is high in Europe, labor markets are resilient... support consumption as we go through the year.”
  — Jari Stehn (16:53)

• Growth Forecasts (17:33–18:36)

  • Euro area growth forecast at 1.3% for 2026—slightly above consensus.
  • Biggest improvements expected in Germany and southern Europe (Spain, Portugal, Greece), driven by immigration, public investment, and structural shifts.

  “We see the biggest improvement in Germany, where we are going essentially from years of stagnation to an above trend growth pace.”
  — Jari Stehn (17:52)

• Central Bank Policy (18:36–21:09)

  • ECB: Likely on hold at 2% throughout the year; only extreme scenarios might trigger a rate move.
  • Bank of England: Expects three rate cuts (from 3.75% to 3%) due to rising unemployment, improving inflation, and still-restrictive policy stance. Dovish view relative to market pricing.

  “Our estimates are that a neutral rate is closer to 3%, maybe a little bit below, and we think the bank will lower rates towards that level through the year.”
  — Jari Stehn (20:16)

Memorable Moments & Notable Quotes

• On global divergence:

  “That success both in technology and manufacturing and exports creates a challenge for other Asian export oriented economies. … Without those kind of differentiated export exposures, differentiated advantages, it will be very difficult for other economies in the region to grow goods exports.”
  — Andrew Tilton (12:28)

• Labor market as the key US risk:

  “If instead we see ongoing labor market softening, I think that could feel like a pretty different outcome for the US Economy… the case for rate cuts, possibly earlier and larger, would be a lot stronger.”
  — David Mericle (07:11)

Suggested Listening Timestamps

• US Tariffs & Policy Outlook: 00:47–02:34
• US Fiscal Boost: 02:34–03:37
• US Growth & Fed Forecast: 04:31–06:28
• US Labor Market Risks: 06:28–07:38
• China Property & Consumer Headwinds: 08:23–11:09
• China Manufacturing & Regional Impact: 11:09–12:44
• Japan Policy Shift: 12:44–14:21
• European Structural Issues & China Competition: 14:40–15:53
• Europe’s Bright Spots: 15:53–17:33
• ECB & BOE Outlook: 18:36–21:09

This episode offers a comprehensive forecast of the world’s key economic regions for 2026, highlighting key policy drivers, ongoing risks, and underlying structural challenges. Each expert balances optimism with caution, especially regarding labor markets and competitiveness in a shifting global environment.