#economics

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Prominent economists, including from Morgan Stanley and JPMorgan Chase, calculate that the AI buildup was directly responsible not for 92 percent or 39 percent of gains to the U.S. economy in 2025, but as little as zero.

Software engineering accounts for nearly 50% of all AI agent tool calls. Healthcare, legal, finance, and a dozen other verticals are barely touched, each under 5%. That’s 300 vertical AI unicorns waiting to be built.

AI is great. However, I also just read a report from Morgan Stanley wrote "Promises are big, but adoption is only 15-20%." And "Productivity gains not yet in evidence, concentrated among tech companies themselves."

Can this level of spending be justified?

In just over a decade, investment in AI has surpassed the cost of developing the first atomic bomb, landing humans on the moon and the decades-long effort to build the 75,440km (46,876-mile) US interstate highway network.

Unlike these landmark projects, AI funding has not been driven by a single government or wartime urgency. It has flowed through private markets, venture capital, corporate research and development, and global investors, making it one of the largest privately financed technological waves in history.

Global private investment in AI by country, 2013-24:

US: $471bn, supporting 6,956 newly funded AI companies
China: $119bn, 1,605 startups
UK: $28bn, 885 startups
Canada: $15bn, 481 startups
Israel: $15bn, 492 startups
Germany: $13bn, 394 startups
India: $11bn, 434 startups
France: $11bn, 468 startups
South Korea: $9bn, 270 startups
Singapore: $7bn, 239 startups
Others: $58bn

Ford said the US car maker's tariff costs were $900m (£660m) higher than expected last year because of a last minute change to the Trump administration's tariff relief program.

Chief executive Jim Farley said Ford spent double what it had expected on tariffs in 2025 - roughly $2bn - due to "the unexpected and late year change in tariff credits for auto parts".

Separately, Ford had previously disclosed a $19.5bn hit as a result of its shift away from electric vehicle plans. Those charges also contributed to its fourth-quarter net loss of $11.1bn. The vehicle manufacturer had said it was backing away from plans to make large EVs, citing lacklustre demand and recent regulatory changes under Trump. The business case for leaning heavily into EV production, specifically large-sized EV models, has "eroded", the company had said.

In research released Thursday by the Federal Reserve Bank of New York, a group of analysts and economists found that in 2025, the average tariff rate on imported goods rose to 13% from just 2.6% at the start of the year. The New York Fed found that 90% of the cost of increased tariffs, which Trump imposed on goods from Mexico, China, Canada and the European Union, was paid for by companies and often passed on to shoppers. "US firms and consumers continue to bear the bulk of the economic burden of the high tariffs imposed in 2025."

The reaction from exporters in 2025 was essentially the same in 2018, when Trump imposed certain tariffs during his first term in office – the cost of goods for consumers rose, with little other economic impact recorded, the New York Fed said at the time.

The Kiel Institute for the World Economy, an independent research firm in Germany, said in a report last month that it had found "near-complete pass-through of tariffs to US import prices." Kiel researchers analysed 25 million transactions and found that in exporting countries like Brazil and India, the price of goods from those countries did not decline. "Trade volumes collapsed instead," the Kiel report said, meaning exporters preferred to cut the amount of goods being shipped into the US rather than lower prices.

The National Bureau of Economic Research also found that the pass-through of tariffs was "almost 100%", meaning the US is paying for the increase in prices, not exporting countries.

Similarly, the Tax Foundation, a Washington DC-based think tank focused on US tax policy, found that increased tariffs on goods in 2025 increased costs for every American household. Defining tariffs as a new tax on consumers, the Tax Foundation said the 2025 increases cost the average household $1,000 (£734.30). In 2026, tariffs will cost the same household $1,300. The Tax Foundation said even the "effective" tariff rate, an average rate that takes into account people buying fewer goods in response to increased prices, is now 9.9%, making it the "the highest average rate since 1946". With such impacts on people, the Tax Foundation said any economic benefits of tax cuts included in Trump's "Big Beautiful Bill" will be offset entirely.

Last year the US added an average of just 15,000 jobs a month, very few by historic standards.

Layoffs have remained limited, apart from some high-profile cuts at firms such as Amazon and UPS and the unemployment rate has held steady at around 4.3%. Meanwhile, the wider economy continues to grow, expanding at a robust annual pace of 4.4% in the most recent figures.

Last October the investment bank Goldman Sachs put out a report, which was widely cited, suggesting the US could be facing a new period of "jobless growth" thanks to the arrival of new technology and artificial intelligence (AI) in particular, allowing companies to do more with fewer workers.

Research suggests job losses due to AI have remained concentrated to just a few sectors. And many US firms, especially in tech, still have on their payrolls a glut of workers who were brought on during the pandemic, when there was a small hiring boom. That could also help explain the lack of new vacancies.

Laura Ullrich, director of economic research at Indeed, said in her view another reason hiring appetites took a hit last year was the uncertainty stemming from the Trump administration's cuts to government spending and his programme of tariffs. Assuming the economy remains strong, she does not think the new jobs numbers will stay this low. "I would definitely not call it a new normal, because I don't think it's normal," she said. "I don't think you can sustain the kind of labour market that we're in over the long term. "Having a very low-hire, low-fire, low-quits environment in a period of economic growth can only last so long."