Tom Théobald, CEO of Luxembourg for Finance, and Carl Tannenbaum, chief economist at Northern Trust, discussed their global economic outlook for 2025 during a Luxembourg For Finance webinar held on 10 December 2024. Photos: LFF; Northern Trust. Montage: Maison Moderne

Tom Théobald, CEO of Luxembourg for Finance, and Carl Tannenbaum, chief economist at Northern Trust, discussed their global economic outlook for 2025 during a Luxembourg For Finance webinar held on 10 December 2024. Photos: LFF; Northern Trust. Montage: Maison Moderne

After an “eventful” 2024, the year 2025 holds both possibility and dangers, with geopolitical tensions, a new US president, demographic challenges and more. Luxembourg for Finance CEO Tom Théobald and Northern Trust’s chief economist Carl Tannenbaum discussed the economic outlook and potential risks.

2024 was an “eventful” year, said Luxembourg for Finance CEO in his introduction to the LFF Focus on 2025 webinar on 10 December. It was a year marked by Russia’s continued war against Ukraine, conflict in the Middle East and elections around the world. The global financial sector also had a “dynamic year,” he added, with “shifting interest rates, a booming crypto market and ongoing debates on Basel implementation, amongst others.” Some regions saw economic recoveries whilst others struggled with inflation and fiscal responsibility.

“Looking ahead, 2025 promises to be a year of both possibility and dangers,” he continued. “Productivity and global growth will, of course, remain key focal points. Key areas to watch include the intersection of sustainability and technology, the continued evolution of artificial intelligence and the urgent need for action on climate change. Additionally, geopolitical developments and their influence on global markets will require close attention.”

Trump, trade and tariffs

A topic that’s top of mind for many in Europe is the incoming Trump administration in the US, noted Théobald. “As a new US administration is in the starting blocks to take over the reins of the world’s leading economy, we, of course, are closely watching any indications that come out of the US in terms of policy or direction of future policies.” In a discussion with Northern Trust’s chief economist Carl Tannenbaum, who’s based in the US, Théobald asked: what should international markets prepare for in Trump’s second term as president?

“On the campaign trail, Donald Trump said that ‘tariff’ is his favourite word in the dictionary, and he does seem to be turning to that page very often as he issues a series of threats of tariffs against various countries,” Tannenbaum replied. These tariffs are designed to address perceived inequities in trade relations, as well as to draw attention to non-economic issues like immigration or drug flows.

Tariff threats are often the first step in a bargaining process
Carl Tannenbaum

Carl Tannenbaumchief economistNorthern Trust

“I think what the world should certainly expect is that there will be a lot of threats. There were a lot of them during the first Trump administration, but importantly, not all of those threats came to fruition,” he added. “Tariff threats are often the first step in a bargaining process,” and “they often end at a level that is far less extreme than threatened at the outset.” An example, said Tannenbaum, is the revamp of the North American Free Trade Agreement (Nafta) under the first Trump administration. “There were a lot of extremes thrown out there, but in the end, the updated agreement was not that different from the one prior.”

“I do want to make one caution,” noted Tannenbaum, saying that many of the analysts he’s spoken with are assuming that the tariff threats will “dissolve” and be less drastic than expected. But “the Trump administration is counting on some additional tariff revenue to fill holes in the budget. They’d like to cut taxes a little bit further, and they’re under some constraints to not increase the American deficit. So they will need some additional revenue, and some incoming members of the administration are hoping that tariffs will fill those gaps.”

Where Europe stands

The first Trump administration was a “difficult” one for US-Europe relations, said Tannenbaum, referring to a photo of a G7 meeting in 2018 where Trump is seated with his arms crossed, surrounded by European leaders--notably then-German chancellor Angela Merkel, who is pictured leaning forward on a table--as an metaphor. This time around, “I think Europe will not be surprised at all by Mr Trump’s approach to things,” he said, adding that he was “encouraged” that French president Emmanuel Macron had invited Trump to the reopening of the Notre Dame Cathedral on 7 December.


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“At the end of the day, Europe and the United States are united in the efforts to maintain security in this part of the world. The United States is going to be asking more of the Europeans, to maybe push harder against China, which is the number one target of the trade sanctions that Washington is thinking of doing. One cannot create adversarial relations with allies as you’re trying to address a common opponent. So, perhaps more hopeful than realistic, but I think the second time around might bit more collaborative than Trump 1.0.”

“Tail event planning”

Russia’s ongoing full-scale invasion of Ukraine has implications for defence spending in Europe. How, asked Théobald, will geopolitical tensions affect global investments?

Looking back a few years, replied Tannenbaum, data shows that countries have been drifting further apart economically since the 2008 financial crisis. “The global order that existed before the GFC--both economically and diplomatically--has gone into something of reverse.” This creates “tail risks all over the world,” he added. “Where large countries step away, bad actors can step in.”

At Northern Trust, “we do a lot of tail event planning. We create a scenario where something falls out of line, and we try and think about what that will do to markets, what will that do to sovereigns, what knock-ons will occur after the first shock? I would recommend that portfolio managers just be aware of how those things may play out.”

Boost productivity to maintain economic vitality

Aging populations bring with them demographic challenges, noted Théobald, including in Europe. What are some possible solutions to address this?

“Older countries have more challenges with pension and health systems,” said Tannenbaum. “Older countries, statistically, are granted fewer new patents; fewer new businesses are formed; entrepreneurship goes down.”

“One of the basic things one learns in economics is that the richer a country gets, the fewer children it has,” he continued. Birth rates have fallen “precipitously” in Europe. In Italy, for example, “the birth rate is below what we refer to as the replacement level; in the United States, we’re just barely keeping pace.”


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To maintain economic vitality, there are two potential strategies to consider. One is immigration, which brings with it other social issues. “I think that zero is the wrong number for immigration, but gauging that properly is something that I know a lot of countries are thinking about.”

“The second avenue to remaining vital is through productivity, and that’s where all that emphasis on artificial intelligence and analytics are coming very much to the fore,” Tannenbaum argued. “The potential there to improve productivity is significant, but the path could be bumpy.” Issues include safeguarding privacy and keeping data secure, for instance. “Sometimes, the models don’t work very well. Sometimes they can be used for ill as well as good.”

“Society has dealt with these kinds of technological transformations before, and we can learn some lessons. But while I’m excited about AI, we do need to manage its progression very, very carefully.”

Long-term solutions for long-term challenges

Théobald and Tannenbaum concluded their conversation by covering upside and downside risks for the global economy in 2025.

As a risk manager, “downsides are the thing I think about the most,” said Tannenbaum. “I think if you believe that there was a lot of value in globalisation in terms of collaboration and holding down prices and economic development for smaller countries, [then] the fact that we’re moving in the opposite direction should worry us a little bit.”

Long-term challenges require long-term solutions and long-term vision
Carl Tannenbaum

Carl Tannenbaumchief economistNorthern Trust

But “on the upside, mankind has forded a lot of rivers that seemed impassable before,” and people are already working on solutions to many of the issues touched upon during the discussion, he concluded. “In the long-term, nobody is served by a lack of compromise and the politics of just trying to get to the next election and get one additional seat. Long-term challenges require long-term solutions and long-term vision on the part of those who represent us. We’ve achieved that before, and I’m hopeful that the gravity of the situations that we’ve discussed today will prompt the kind of action that will out our economies and our societies on strong footing for decades to come.”