Dispatch from Davos: The divide is shrinking between Davos and DC
DAVOS—The week in the Swiss mountains began with delegates huddled around small TV screens in hotel lobbies watching US President Donald Trump’s inaugural address and ended with delegates watching Trump address the annual forum on a massive screen inside the Congress Center.
The heads of state of more than fifty countries, as well as the CEOs of the world’s largest businesses, gathered at the annual World Economic Forum in Davos, Switzerland, and nearly everyone struck a note of optimism—and tried to send an olive branch to the new president. European Commission President Ursula von der Leyen outlined Europe’s competitiveness strategy and highlighted the number of US jobs created by European companies (approximately four million by her accounting). Chinese Vice Premier Ding Xuexiang said that China does not seek to run a trade surplus with the world (although no one asked him why, then, his country was running such a large one). BlackRock CEO Larry Fink said it’s possible there will be enormous growth in the United States (but warned about the risk of reigniting inflation).
The message was clear—everyone wants to find a way to work with the United States. They have good reason: there is no alternative. The United States is one of the strongest advanced economies in the world, and Trump returns to office with economic tailwinds at his back. Look at how the United States stacks up to its peers. In 2016, when Trump was first elected, the United States comprised 50 percent of the Group of Seven’s (G7’s) gross domestic product (GDP). In comparison, today it makes up 60 percent.
And it goes beyond the G7. China’s economy is significantly weaker than it was eight years ago. In 2017, China’s economy was growing at almost 7 percent. Today, our analysis with Rhodium Group indicates that China’s GDP growth is closer to 3 percent. Investors know the reality, and that’s why global capital continues to be drawn to the United States like a magnet. The S&P 500 closed at record highs this week—a stark contrast to the constant coffee chatter on the sidelines of the meetings about economic malaise in the eurozone.
Trump, for his part, extended his own version of an olive branch. Tariffs were hardly featured in his inaugural address on Monday. In the days that followed, however, he did threaten Europe, Mexico, Canada, and China with tariffs—including by complaining how unfairly Europe treats the United States in his virtual speech on Thursday. But delegates took it in stride and privately said the fact that he didn’t come up with new tariffs on day one was a sign of moderation. Indeed, when Trump mentioned a 10 percent tariff on China, instead of the 60 percent campaign promise, he sent markets into a state of mini-jubilation.
But the good feelings weren’t only limited to Wall Street. Silicon Valley might have been the biggest winner of the week—both in DC and Davos.
During Monday’s inauguration, Trump was surrounded by several CEOs of the so-called “Magnificent Seven”—including Meta’s Mark Zuckerberg, Amazon’s Jeff Bezos, and Google’s Sundar Pichai. And it was those companies—and the artificial intelligence (AI) platforms they are pouring investment into—which dominated the debate in Davos. From the stage of the Congress Center to the storefronts on the promenade that these companies took over, AI was the talk of the town. On medical breakthroughs, the future of work, and the coming productivity surge, the financial optimism was dwarfed by techno-optimism. At the same time, however, the voices of concern could be heard as well, even if sotto voce. Some of the challenges discussed included issues of trust, energy usage, corporate concentration, legal guardrails, and whether this new technology would help the lives of those who need it the most.
And so, as the delegates decamp from the mountain, the question is whether this optimism can hold. While the economic signals are bullish, the geopolitical ones are anything but. Ukrainian President Volodymyr Zelenskyy called out European leaders directly in his speech, and he said that if Europe does not step up on defense, then it will become increasingly irrelevant. It was a stark reminder of the war that still raged less than a thousand miles to the east. To the north and west, political dysfunction in Germany and France loomed like a storm cloud rolling into the valley. And while leaders took heart in Trump’s mild step down on tariffs, everyone knows that nothing is certain. Nearly every business we spoke with privately said they are preparing for worst-case trade scenarios.
The last time Trump spoke at Davos was in January 2020. He predicted, as did nearly everyone else that week, that the virus that had started in Wuhan and was spreading in China would not be a major problem and was “totally under control.” It’s a reminder of just how quickly the world can change.
Josh Lipsky is the senior director of the Atlantic Council’s GeoEconomics Center and a former adviser to the International Monetary Fund.
Ananya Kumar is the deputy director for future of money at the GeoEconomics Center.
Research and data visualizations provided by Jessie Yin.
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Image: US President Donald Trump makes a special address remotely during the 55th annual World Economic Forum (WEF) meeting in Davos, Switzerland, January 23, 2025. REUTERS/Yves Herman