There is no shortage of headlines to suggest we are living through an era of instability. From geopolitical unpredictability to flip-flopping trade policies, businesses could be forgiven for assuming the global economy is in a state of constant crisis.
The challenge in making sense of the economic outlook is not just about understanding what might be happening – it’s about filtering out the noise. Beneath the surface, the reality is often more stable than it appears.
Markets, for example, can be volatile at the best of times, and when they appear to react with shock to announcements they may simply be displaying the routine variability that is part of their nature.
When President Trump recently announced tariffs on Canada and Mexico, despite reports of significant market sell-offs, the movements were in fact not much larger than this routine volatility might suggest – even before before Trump signalled a possible rethink. And such back-and-forth tactics are part of Trump’s negotiating approach – something we have seen before in politics and trade.
The temptation is always to focus on the headlines, but the broader economic picture is often more nuanced. In my day job as an economist, I spend a lot of time analysing data, and the numbers reveal a world that is, in many respects, remarkably resilient.
Take the UK’s trade relationship with Europe. Despite Brexit, trade between the UK and EU has risen, not fallen. That may come as a surprise, but it illustrates the point that the details of trade agreements can be overcome by commercial determination and of course geographical proximity – business adapts. Economic relationships do not simply stop because political structures change. While I personally saw no economic case for leaving the EU, I did feel that business would continue to operate, find solutions, and grow.
Similarly, global business activity remains strong. Yes, there are pressures – trade tensions, rising costs, shifting regulations, geopolitical risks – but companies have always faced challenges. The key is to keep a level head when weighing risks and opportunities.
There is an analogy I often draw when looking at today’s global situation, with a rather idiosyncratic character in the White House. When Ronald Reagan entered office in the early 1980s, many dismissed him as reckless. His tough rhetoric and defence policies, particularly his controversial Star Wars initiative, caused real concern. Yet his very unpredictability ultimately helped bring the USSR’s Mikhail Gorbachev to the negotiating table, significant nuclear disarmament, and for a while at least the ending of the doctrine of “Mutual Assured Destruction”.
That is not to say history will repeat itself, nor that every unpredictable leader will generate positive outcomes. But it does highlight the importance of considering a range of possibilities rather than assuming the worst. If we only look for negative risks, we perhaps miss the potential for unexpected progress.
For businesses in Wales and beyond, the challenge is to maintain a focus on fundamentals – products, markets, customers – rather than being overly distracted by the latest headlines. That is not to ignore risk, but to keep it in perspective.
