AI and Trump enthusiasm cools as markets reassess hype, anticipate trade wars

The global economic landscape is being shaped by two key factors in early 2025: Donald Trump‘s trade policies and the evolving artificial intelligence sector. What began as market optimism around these factors in late 2024 has transformed into growing investor uncertainty.

Market sentiment shift: Trump’s recent trade rhetoric and cooling AI enthusiasm are creating new headwinds for financial markets in 2025.

• Trump’s threat of reciprocal tariffs triggered a stock market decline, with additional steel and aluminum tariffs expected to further pressure markets
• The AI sector faces fresh scrutiny after Chinese startup DeepSeek claimed its training costs were significantly lower than U.S. competitors, raising questions about Big Tech’s massive AI investments

Trade policy developments: New protectionist measures are emerging that could reshape global trade dynamics.

• Trump plans to announce 25% tariffs on all aluminum and steel imports, adding to existing levies
• In a related development, Trump indicated Nippon Steel will invest in U.S. Steel rather than pursue an acquisition
• These moves signal an increasingly protectionist stance that could impact international trade relations

Economic indicators: Mixed signals are emerging from both U.S. and Chinese economic data.

• U.S. job growth slowed to 143,000 in January, below expectations, though unemployment improved to 4%
• Chinese consumer prices rose 0.5% annually in January, while producer prices continued a 28-month decline
• The contrasting Asian market performance saw gains in Hong Kong and Singapore while U.S. markets retreated

AI investment landscape: Major tech companies are maintaining aggressive AI spending despite efficiency questions.

• SoftBank is reportedly finalizing a $40 billion investment in OpenAI at a $260 billion valuation
• Meta, Amazon, Alphabet and Microsoft have committed to $320 billion in combined AI and data center spending
• Google DeepMind’s CEO acknowledged DeepSeek’s achievements while questioning their scientific novelty

Coal market dynamics: Global coal demand remains resilient despite clean energy transitions.

• Global coal consumption reached 8.77 billion tonnes in 2024 and is expected to maintain similar levels through 2027
• U.S. coal exports are increasing to meet international demand, particularly from Asia
• European and U.S. consumption declines are being offset by rising Asian demand

Strategic implications: The convergence of trade tensions, AI investment scrutiny, and persistent fossil fuel demand suggests a complex period ahead for global markets, where technological advancement and economic nationalism are creating new forms of market uncertainty rather than the anticipated stability.