Every December, Project Syndicate asks its commentators to identify the political, economic, and policy trends to watch in the year ahead. Last year, as the world prepared for Donald Trump’s return to the White House, many warned that 2025 would be a make-or-break year for multilateralism and climate action. Looking ahead to 2026, PS contributors predict a year marked by escalating geopolitical risks and deepening economic fragmentation, with the United States and China competing for technological and military dominance, and Europe struggling to keep pace – and keep Russia at bay.

Mark Blyth

In 2026, the European Union may finally have to confront the harsh truth: the US is not going to protect it from Russia. The Trump administration will abandon peace efforts in Ukraine, leaving Russia free to ramp up the war effort. Europe, true to form, will look for financial solutions to a military problem that money cannot solve. Ukraine, meanwhile, will continue to fight a war the EU still refuses to acknowledge as its own. 

Cristina Caffarra

Confronted with the limits of soft power, value-based rhetoric, and countless think-tank symposia about “protecting democracy” in a world governed by hard power, Europe has so far failed to answer Mario Draghi's desperate plea: “Do something!” But the Trump administration’s unapologetic blunt-force politics – crystallized in its new National Security Strategy ( NSS ) – may finally change the calculus.

This reckoning is reinforced by the belated recognition that Europe is already locked in a de facto trade war with China, one that has steadily eroded its industrial base. Together, these pressures may finally prompt Europe to rebuild its sovereignty in digital infrastructure, frontier tech, defence, and manufacturing.

Amid growing frustration with the EU’s neoliberal institutions, slow-moving bureaucracy, and the retreat of antitrust regulation, many within the European business community believe that industry must take matters into its own hands through initiatives like EuroStack, instead of waiting for sclerotic processes to deliver. As a result, attention could shift away from Brussels towards member states, particularly Germany. If Germany acts, Europe will act. If it does not, Europe will remain stuck.

Control of the cloud enables these companies to advance a narrow vision of AI – centred on large language models rather than more targeted and sustainable forms of machine learning – while capturing a disproportionate share of political attention and investment

Cori Crider

Cloud blackouts, combined with renewed pressure from the Trump administration on the EU and its member states, are pushing major businesses and state agencies to move away from US-based cloud monopolies. AWS, Microsoft Azure, and Google Cloud now control more than 70% of the European cloud market, extracting profit margins of 30-40% from local firms and public agencies. Control of the cloud enables these companies to advance a narrow vision of AI – centred on large language models rather than more targeted and sustainable forms of machine learning – while capturing a disproportionate share of political attention and investment. 

The move away from US providers, which began slowly this year with the German state of Schleswig-Holstein and the International Criminal Court, could accelerate in 2026 through changes to procurement rules and cloud licensing regimes. Some experts argue that computing power has become a commodity and should be regulated as such. If EU policymakers act decisively, 2026 could end with US cloud monopolies holding a significantly smaller share of the European market.

Dalia Ghanem

North African regimes will continue to offer a master class in sustaining semi-authoritarian rule in 2026. Deep structural strains, however, are becoming harder to contain. Algeria, buoyed by gas exports to Europe, appears emboldened, while Tunisia and Egypt are edging towards a fiscal abyss.

But the real threat to the status quo lies in a fraying social contract. Over the past year, the Arab street has shown that its agency should not be underestimated: from Tunisia to Morocco, where the “Gen Z protests” highlighted young people’s refusal to remain silent, public discontent is increasingly visible.

Libya, for its part, will remain a regional quagmire, a fractured state where peace is unlikely to take hold. Meanwhile, jihadist violence is spreading across the Sahel. If left unchecked, it will spill over to developed and developing countries alike.

Big banks will continue to lobby for lower capital requirements, leaving less room to absorb losses. At the same time, AI will continue to spread through the financial sector, accelerating booms and busts and allowing money to move at speeds no human can match

Martín Guzmán

The global economy is entering a phase in which geoeconomic fragmentation is no longer an emerging risk but an organizing principle. As globalization is reconfigured around national-security priorities, trade, investment, and supply chains are being shaped by competition among geopolitical blocs, while sanctions and export controls are increasingly weaponized. Against this backdrop, the debt vulnerabilities of developing economies will play a growing role in how they position themselves between the US and China. The Trump administration, in particular, is treating financial arrangements and trade agreements as instruments of statecraft. The recent currency-swap agreement between the US Treasury and Argentina, quickly followed by the announcement of a bilateral trade deal, offers a telling example.

Simon Johnson

Big banks will continue to lobby for lower capital requirements, leaving less room to absorb losses. At the same time, AI will continue to spread through the financial sector, accelerating booms and busts and allowing money to move at speeds no human can match. This increases the likelihood of crowded trades and sharp reversals when market conditions change. While large banks’ political power shields them from tougher oversight, it also leaves them more vulnerable to shocks. Pay structures that reward return on equity without accounting for risk make such outcomes inevitable.

Şebnem Kalemli-Özcan

In the year ahead and beyond, globalization is set to become more fragmented, more complex, and more unequal. Supply chains will grow longer and riskier, while the technological arms race between the US and China could destabilize the global economic system. Paradoxically, dollar dominance may coexist with a weakening dollar.

This shift is unfolding in an increasingly zero-sum geopolitical environment shaped by global and regional rivalries. Social welfare is set to decline worldwide, even as an AI-driven productivity surge benefits a narrow set of firms, sectors, and countries. Multilateral institutions will be more necessary than ever, but politics and policymaking will continue to drift away from cooperative economic frameworks.

The precarious state of US public finances, combined with sustained pressure on the Federal Reserve’s independence, could bring about the return of bond-market vigilantes and a potential crisis in the US treasury market

Desmond Lachman

All signs point to a difficult year ahead for the global economy and for financial markets. The precarious state of US public finances, combined with sustained pressure on the Federal Reserve’s independence, could bring about the return of bond-market vigilantes and a potential crisis in the US treasury market. Such a shock could puncture the AI bubble, depress US equity prices and investment, and tip the American economy into recession.

Elsewhere, China’s continued reliance on exports and investment as growth engines risks provoking a protectionist backlash in Europe, dealing another blow to an already fragile international trading system. In Japan, Prime Minister Takaichi Sanae’s reckless budget policy could trigger a “Liz Truss moment”, marked by soaring government-bond yields and currency depreciation.

The absence of effective US economic leadership under Trump adds another layer of uncertainty. In the event of a broader crisis, coordinating an international response would be far more difficult.

Zaki Laïdi

The year ahead will be dominated by the war in Ukraine, though a definitive settlement remains out of reach. Whether the fighting subsides at all will depend on four factors: the balance of forces on the ground, the level of US engagement, European support, and Ukraine’s domestic political dynamics.

With both sides mired in a war of attrition, the balance of power on the battlefield is unlikely to shift significantly. Europe, under pressure from the US, China, and Russia, is entering what may be its most difficult year since 1945. And Ukraine’s fragile and unpredictable political system further complicates the search for a sustainable settlement.

Because Europe cannot impose a resolution on its own, any change in the war’s trajectory still depends on the US. That does not bode well for Ukraine, given the Trump administration’s continued hostility to US support for the war effort. The only question is what Trump will offer Russian President Vladimir Putin to stop the fighting.

Against this backdrop, it is clear that the war won’t end in 2026. At best, there may be a temporary lull, driven not by agreement but by exhaustion.

Nancy Qian

In Donald Trump’s worldview, only three countries truly matter: the US, China, and Russia. The coming year will test that foreign-policy approach in three important ways. First, investors and governments around the world will be looking for a steadier economic relationship between the US and China. Without it, long-term planning will become little more than educated guesswork. Second, any deal that brings the Russia-Ukraine war to an end will be read as a verdict on America’s reliability – not just in Europe, but also in Taiwan, Japan, and South Korea.

Lastly, Europe must decide whether it is prepared to pay for power. France and Germany are angling for a more assertive international role, but only serious and sustained defence spending will earn them a seat at the table.

Pressured by uneven development, fiscal constraints, demographic change, and impatient voters, state governments [in India] are increasingly driving regulatory reform, rather than focusing solely on delivering services and welfare

Shruti Rajagopalan

Across India, economic futures are being negotiated in state capitals rather than in New Delhi. Pressured by uneven development, fiscal constraints, demographic change, and impatient voters, state governments are increasingly driving regulatory reform, rather than focusing solely on delivering services and welfare.

This marks a quiet but significant evolution in Indian federalism, from administrative decentralization toward genuine economic agency. India’s constitution places land, agriculture, and public health under state governments’ jurisdiction, and ambitious leaders have recognized that reform is now their comparative advantage.

The contrast with the past is telling. India’s 1991 structural reforms were necessarily centralized, aimed at dismantling a national system of controls. Today’s constraints are different, and so are the solutions, which require local knowledge, institutional experimentation, and political accountability at the state and local levels, where leaders are directly answerable to citizens. If 1991 signalled India’s turn towards markets, the current moment may mark the coming of age of Indian federalism.

Sami Mahroum

The 2026 Fifa World Cup will tell us whether its three host countries – the US, Canada, and Mexico – can still cooperate after an exceptionally turbulent 2025. How they manage the logistics of such a global event, from borders and visas to security and public rhetoric, will matter as much as the matches themselves. The tournament will also test whether international institutions, including sports, can still bring people together rather than drive them further apart.

Kingsley Moghalu

Democratic backsliding, alongside a surge in youth-led uprisings across Africa, will widen the divide between democratic and autocratic regimes. Nigeria, already plagued by terrorism, could face a political reckoning if current trends persist and security deteriorates further.

Global trade protectionism is likely to abate but not disappear in 2026, as the Trump administration’s tariffs face mounting judicial and political challenges at home. Meanwhile, the AI boom will intensify debates over the ethical and labour-market implications of emerging technologies.

Jan-Werner Mueller

We now find a frequent pattern in European elections: far-right populists finish first at the polls, but all other parties refuse to form a coalition with them, maintaining a “firewall” between the far right and the rest of the political spectrum. This pattern is likely to repeat itself in 2026, particularly in Germany’s state-level elections.

Centre-left parties’ refusal to govern with far-right forces has drawn fierce criticism from European populists’ allies around the world. Most notably, US Vice President JD Vance has condemned this approach as undemocratic, a charge echoed by the Trump administration’s new NSS, which accuses European elites of overriding popular “sovereignty”.

But are voters really being disenfranchised? In a parliamentary system, a party that fails to secure an outright majority does not have an automatic right to govern. The lesson from recent elections is not that “the people” demand far-right rule, but that most voters reject it.

Far-right populists have become adept at casting themselves as victims of shadowy “elites” and at persuading others that they alone represent the “real people”. Too often, their claims of exclusion from power are treated as legitimate. Viewed through the lens of democratic theory, however, these complaints are spurious at best.

The US-China rivalry will cross a critical threshold in 2026, with policy-driven decoupling solidifying into separate technological systems across AI, advanced semiconductors, and data 

Carla Norrlöf

The US-China rivalry will cross a critical threshold in 2026, with policy-driven decoupling solidifying into separate technological systems across AI, advanced semiconductors, and data. Global commerce will continue to flow, but strategically important sectors will increasingly split into parallel supply chains and competing standards regimes.

As a result, competition will become structural rather than episodic, waged less through diplomacy or force than through export controls, sanctions, subsidies, and regulation. While the world economy will remain interconnected, it will be divided into two incompatible technological orders, pushing countries into rival geopolitical blocs and reshaping the balance of global influence.

Hannah Wanjie Ryder

The year ahead will be one of opportunity and challenge for Africa. South Africa’s G20 presidency in 2025 helped lay the groundwork for greater coordination on key global reforms, reaffirming the continent’s commitment to homegrown policy responses. Investment and trade flows into Africa are expected to grow, driven by private firms and domestic banks, as well as by emerging economies like the Gulf countries, China, and India, which increasingly view African development as a long-term national interest.

At the same time, economic insecurity – rooted in decades of underdevelopment and felt most acutely by a growing cohort of educated, globally connected yet unemployed young people – will continue to fuel instability, particularly in West and East Africa. Outdated relationships with the G7 and G20, often marked by interference and unfulfilled investment commitments, will not help – and may even exacerbate these problems. African leaders would therefore do well to proceed cautiously, resist divide-and-rule tactics, and stand firm in negotiations with external partners, including the Bretton Woods institutions.

Dennis J. Snower

Even as political polarization deepens, the coming year may begin to reveal the outlines of a broader sociopolitical adjustment. Governments are beginning to understand that division and identity politics offer few solutions, prompting a tentative move toward capability-building and broader measures of well-being. Communities, disillusioned with national politics, are returning to local problem-solving through participatory governance, while businesses face growing pressure to align profit with purpose.

At the same time, institutions that shape moral meaning – faith communities, universities, and independent media – are reasserting themselves in response to algorithm-driven mistrust. Recognizing that digital platforms have become the central arena of public debate, some governments have begun experimenting with reforms that give citizens greater control over their data and ensure that AI serves the public good.

If these trends persist, today’s technological revolution may facilitate a political and social rebalancing. Such a shift would not eliminate conflict or competition, but it could foster global cooperation on shared challenges like climate resilience, financial stability, and planetary stewardship. Amid geopolitical and domestic upheavals, this quiet transformation might prove to be the most consequential.

Susan Stokes

The coming year will be volatile for American politics. An ageing, egomaniacal president – unable and unwilling to restrain himself to protect his allies or his party from legal and electoral jeopardy – will confront an increasingly angry electorate squeezed by the rising cost of healthcare, housing, and groceries.

If November’s midterm elections cost Republicans their majority in the House of Representatives, the aftermath is unlikely to be orderly. Expect allegations of fraud, calls for militarized intervention, and Trump-led pressure on the outgoing House leadership to contest or delay the certification of election results.

Michael R. Strain

Trump’s declining popularity is loosening his grip on the Republican Party and the broader conservative movement. Democrats’ commanding victories in November’s off-year elections have accelerated this shift, driving Republican politicians to push back against Trump’s refusal, for example, to release the Epstein files and his calls to abolish the Senate filibuster.

This trend will continue in 2026 as the consequences of Trump’s policies grow in severity and become more salient to voters. Trump’s tariffs have raised consumer prices, while the administration’s anti-vaccine agenda has triggered measles outbreaks, alienating even Republican voters. As his political standing weakens, competition on the right over the post-Trump future will intensify.

Copyright: Project Syndicate