US economy in 2025: Promising start fueled by tax cuts, AI investments

Foreign Affairs unveils in a latest article that at the start of 2025, the US economy was a beacon of optimism. With promises of tax cuts, deregulation, affordable energy, and large-scale investments in artificial intelligence, it seemed poised for continued growth. 

During January's World Economic Forum in Davos, the US was hailed for sparking an economic “animal spirit,” particularly in the tech sector. Analysts lauded the US as the prime global investment hub, while casting Europe as overregulated and stagnant.

However, nearly four months later, the landscape has drastically changed. The Trump administration’s erratic trade policies, coupled with retaliatory measures and conflicting statements from Washington, have started to create uncertainty. The once-flourishing US economy now faces rising challenges, with many markets and businesses misjudging the administration's economic strategies. Worse, Trump's attacks on the judiciary, scientific institutions, and universities are undermining the foundations that have traditionally made the US a powerful global force. Meanwhile, America’s allies and neighbouring countries have grown increasingly disillusioned, questioning the reliability of Washington.

Europe now faces a critical moment in its history. For over 80 years, the Euro-American alliance has been the cornerstone of global stability and progress. But the Trump administration appears set on weakening this relationship, using aggressive policies aimed at undermining Europe’s success. From territorial demands on Greenland to efforts to cozy up with Russia, the US is increasingly isolating itself from its closest allies.

In this new reality, Europe can no longer rely on appeasing the United States. To avoid becoming subordinate to Washington or drawn into Russia’s sphere, Europe must chart its own path. The continent possesses the resources, talent, and pro-European sentiment to forge ahead, but the challenges ahead will require time, leadership, and unity.

As Europe grapples with the decline of its transatlantic partnership and an ongoing conflict on its eastern border, its resolve to build a stronger, unified defence and economic future remains firm. The EU's actions in the coming months will be crucial as it seeks to emerge more resilient from this rift.

By Naila Huseynova