Overall, 2026 is going to be an interesting year! This is a commentary and comments are welcome by email to: info@eaa.co.ke . The views expressed here are not necessarily those of the Association.
WHAT DOES 2026 HAVE IN STORE?
A recap of 2025
The past year will perhaps be remembered for a number of things: increased conflicts (the highest number ever of conflicts since 1945 according to the Peace Research Institute Oslo), tariffs, a significant focus on Artificial Intelligence (AI), and Governments being toppled by Gen Z.
As the conflict between Ukraine and Russia enters its fifth year in 2026, on the face of it, there does not seem to be any likelihood of it coming to an end despite President Donald Trump’s best efforts. The Gaza strip issue completed 2 years although it does seem there has been some progress on this front, but given that the Palestinian-Israel issue has been around since 1948, it remains to be seen if there is a lasting solution. On the African Continent, Sudan, South Sudan, Somalia (terrorism related), Mali, Burkina Faso, Niger, Syria, Yemen, DRC, and Ethiopia continue experiencing internal tensions and conflict. Asia too did not fare well with Myanmar, India and Pakistan, Thailand and Cambodia having their share of disputes. In the meanwhile, Iran seems to be on the brink of a major uprising, and both Israel and the US could get involved.
President Trump’s imposition of tariffs globally has probably not had the impact he was looking for. The key point is that at the end of the day, these tariffs are ultimately borne by the American consumer and not the country on which they were imposed upon. Lower income families in the US seem to bear the brunt of this, with higher costs and America’s inflation in 2025 having reportedly risen by up to 0.7% with GDP falling by 0.5%, resulting in less jobs available. The trade deals that the US was expecting as a result of the tariffs have in reality not materialised to the extent that was envisaged, with a number of countries, China in particular, putting into place retaliatory measures. The question of whether President Trump had the authority to impose these tariffs without approval of Congress is in the midst of being decided by the Supreme Court. Thankfully, the world has not entered a full-blown trade war, perhaps, because other countries started looking at alternative markets for trade. However, it must be remembered that the largest consumer population in the world is probably the US and the volumes it generates for export markets, are not going to be easy to fill.
The game changer in 2025 was undoubtedly AI, and this trend is expected to continue in 2026, although concern is being raised about whether it is a bubble that will burst at any moment. Nonetheless, at least for the foreseeable future AI will be a major contributor to global GDP with efficiencies that it has brought in. The impact on employment may not be so rosy with the IMF saying that AI will be a “tsunami” which business are far from prepared for. The World Economic Forum has said that the new phenomenon will impact 40% of the job market with as many as 85 million jobs disappearing. On the more positive side, 97 million new roles are expected by 2030 in the area of data science and AI ethics. 2026 is expected to be the tipping point for AI as it moves to a broad base impact in everyday life.
A recap of 2025 would not be complete without the mention of the Gen Z “uprising” in many parts of the world with Governments being overthrown as a result. In all likelihood, more of this will become apparent in 2026.
Finally, one must ask if 2025 saw the start of change in the world order which has largely remained unchanged since 1948. The current regime in the US has by all accounts upset friends and foes alike and different economic blocs seem to be forming and existing ones becoming stronger. The recent issue around Greenland has already seen European leaders express their distrust of the US and its motives. The US has also started the process of extracting itself from world bodies which may speed up a change in the world order.
The year ahead in geopolitics
“The international system has been ruptured. Russia’s invasion of Ukraine, gridlock at the UN, growing American mercantilism and paralysis at the World Trade Organisation have all contributed to the breakdown of the post-cold-war order of multilateral institutions, rules and conventions”. Mark Carney, Prime Minister of Canada in the Economist’s The World Ahead 2026.
At the heart of the comment from the Canadian Prime Minister in the box, is the decision by the US to pull out of 66 international institutions that have preserved the world order since the end of the Second World War. The upshot is what Prime Minister Carney terms “variable geometry”. In essence, the world seems to be moving forward without the institutions that have effectively held it together for almost 80 years.
The “coalition of the willing” representing several nations that have come together to support Ukraine is a prime example given that NATO and the UN is probably not able to provide the help needed. In the absence of working international systems, this type of formation is likely to play a larger role in shaping the world in 2026 and beyond.
This, and other similar types of coalitions, will likely be formed to address issues that were traditionally dealt with by international bodies. Europe, for instance, has initiated the SAFE Pact to “fast-track defence spending” to remove bureaucratic hurdles that individual nations may face. Europe’s defence spending was already rising in 2025 and will no doubt continue to do so in 2026. Canada is bringing together nations that fear global trade disruptions that are likely to affect supply chains in the critical mineral industry.
Mr Carney is of the view that 2026 will see an increase in this type of arrangement, which in the past was largely handled by the various international organisations, the largest funder of which has traditionally been the US. This is based on the premise that fixing the problems faced by the various institutions will always be a long-drawn process that takes years, and these smaller coalitions will have considerably more flexibility in solving issues.
The world is already seeing strange bedfellows coming together – witness the refreshed relationship between India and China who were arch enemies since as far as back as the 1960s. With the US’s “America First” strategy and the use of tariffs for this and as a form of disciplinary action, these two countries have not caved in to the pressure. Similarly, the recent Greenland move by the US has been met with much stronger opposition than perhaps President Trump expected.
Clearly, the world might find a new way of doing things in 2026, which is not a bad thing, but importantly it must be the entire globe involved at some level, at least. The less developed countries will need to also participate as best as they can.
The year ahead in trade
One clear upshot of the current “America First” strategy is that China is gaining influence around the world. As the Economist puts it: “You know where you are with us” is the new Chinese mantra! On the other hand, China is known, perhaps not in an official capacity, to have a sort of “China First” approach. Indeed, according to the Economist, the country calls for “a realist internal order that offers universal security rather than universal values”. This is not to say that China has any intention of taking over the role of being the world’s police force, but rather a partner in trade, investment and support with infrastructure both in building and financing it.
It is already apparent that China is filling the vacuum that the current US approach is creating. This covers renewable energy systems, a focus on Africa (America has stopped the African Growth and Opportunities Act benefits) with tariff free imports from 53 African countries, and finally, bringing China and India (the two largest populations in the world) closer together.
That said, China’s economy is facing its own challenges and while it has been retaliating against the Trump regime tariffs, this may not be sustainable in the long term, probably for both countries. While the Government figures suggest economic growth in the region of 5% in 2025, there was a drop of 0.9% between the first and fourth quarters of the year. However, despite a reduction in exports to the US, China had a trade surplus of USD 1.2 trillion, confirming its position as the manufacturer of, and supplier to, the world. The real estate market is clearly under stress and consumer spending and capital investment has fallen. The Government addressed the downturn in consumer spending to some extent by offering a cash back facility when replacing common household appliances and motor vehicles, but again this cannot be sustainable in 2026 and subsequent years. Most economists believe that the Chinese economic growth will further contract in 2026 to between 4% to 4.5%.
What seems very clear though is that China is creating its own “coalition of the willing” following the tariffs imposed by America.
The year ahead in AI
There is no doubt that AI will have a big push forward in 2026 – it is clearly seen as the future. A move from the current chat boxes to what is being called “agentic AI” is on the cards which will see systems executing complex algorithms with potentially little or no human input and oversight. There will also be a move to “physical AI” whereby robotics will benefit from reasoning models giving a more human like use.
The major competitors in this area will be the US and China with chips playing a critical role. However, according to the Economist, the US will focus on “Artificial General Intelligence” to have a “model that can perform all cognitive tasks better than most humans” – a scary thought! China, on the other hand, will in 2026 focus on “rapid adoption of existing AI models by both consumers and industry”. The country will be releasing its 5-year AI plan in March this year.
What happens in the AI world in 2026 will certainly be exciting – but questions are being raised about whether this area is a bubble that may burst in the near future, and indeed potential ethical questions. Only time will tell.
The year ahead for the global economy
On 19th January 2026, the IMF released its latest World Economic Outlook saying “Global growth is projected to remain resilient at 3.3 % in 2026 and at 3.2 % in 2027”. Their forecast is premised on “surging investment related to technology, including Artificial Intelligence (AI), more so in North America and Asia than in other regions”. This surge is expected to offset the headwinds “from shifting trade policies”. Despite the tariff shock, the IMF expects “robust domestic demand and rapid adoption of new technologies”. The forecast dip in 2027 – albeit marginal – is said to be because of less spending on new technologies given the significant investment expected in 2026. The IMF also forecast fall in inflation globally from last year’s 4.1 % to 3.8% and 3.4% in 2026 and 2027 respectively.
The key risks and challenges that the global economy will face in the next 12 months will be the continued use of tariffs by the US as a sort of disciplinary measure; increased public debt in the major economies – although the smaller economies will probably face this challenge as well; and geopolitical tensions that hit commodity prices and supply chains. Note that the IMF caveats its growth and inflation projections by assuming “that policies as they stood at the end of December are permanent”. Given what the world experienced with US tariffs in 2025, and will no doubt see the same in 2026, the projections may not stand the test of time.
The US Dollar is under pressure with many countries selling their holdings of US Bonds. Added to this is the fact that many of the coalitions are looking to transact without using the US Dollar. This probably does not bode well for the US.
Growth in Sub-Saharan Africa is expected to rise from 4.4% in 2025 to 4.6% in both 2026 and 2027. Eastern Africa may show better growth bucking the trend as the region has been over the last few years.
OUTLOOK
The world has seen more conflicts in 2024 and 2025 than at any time since the end of the Second World War. As matters currently stand, there is unlikely to be a significant reduction in 2026. The tariff war could well continue in 2026 under the current US regime. AI will be the major focus in 2026 with huge sums being invested in its development culminating in models that could replace humans. The global economy is projected to grow in 2026 but dip marginally in 2027. The world seems to be turning on the US with many countries saying there is a lack of trust and as a consequence we may see a number of coalitions forming in different parts of the world. This process has already started and the upshot could be a new World Order.
Overall, 2026 is going to be an interesting year!
This is a commentary and comments are welcome by email to: info@eaa.co.ke . The views expressed here are not necessarily those of the Association.