Noahpinion's 2025 Year in Review

Year Five of the Noahpinion Substack.

Art by GPT-5.1

Five years ago, I made the (questionable) decision to launch my Substack over Thanksgiving weekend. So every Thanksgiving or thereabouts, I do a roundup of seven important themes from the past year, along with a few themes to watch for in the upcoming year. Here’s last year’s edition. The links below are all links to other posts I wrote over the past 12 months, so you can use this post as a reference for what I wrote about in 2025.

I’d also like to thank everyone for reading and supporting Noahpinion. A year ago this blog had 280,000 readers; now it has 414,000. I never expected my blog to get that big, and I’m incredibly grateful to all of you for helping to make that happen. Please remember to recommend Noahpinion to your friends, family, and coworkers! I also published a book this past year, though so far it’s only in Japanese; this upcoming year I’m going to write an English-language book about macroeconomics, so be on the lookout for that.

Anyway, here are the seven themes for 2025.

Tariff madness

This was the year that Donald Trump, true to his campaign promises, upended 70 years of American economic policy. On April 2, which he dubbed “Liberation Day”, Trump announced truly enormous tariffs on almost all of the countries in the world. Many of these tariffs were eventually walked back, sometimes after “deals” in which other countries made various promises to the U.S. and/or to Trump and his family. Thankfully, none of the worst-case scenarios have yet reared their heads.

But some tariffs remained in place, and these tended to be tariffs on America’s allies rather than on China. And general uncertainty about future tariffs has exploded. This, along with worries about U.S. political unrest and national debt, has led to a depreciation of the dollar as some investors hedged their bets by moving money out of the country.

The tariffs haven’t yet tanked the economy or raised inflation, but they’re exerting a corrosive influence on the economy, pushing up prices, weighing on employment, and hurting the manufacturing sector. This was entirely predictable; economists have long understood that tariffs on intermediate goods hurt manufacturing by disrupting and shrinking supply chains. Trump’s team, unfortunately, makes it a point of pride not to listen to economists, instead choosing to invent a blizzard of dubious ad-hoc justifications for the President’s whims.

In fact, one reason Trump was able to get away with his tariff policies was that a great deal of B.S. and myth has grown up around trade and trade economics. Lots of people persist in thinking that trade deficits make countries poorer, because of the way GDP is broken down into components. But they do not. It is now widely accepted that globalization hollowed out the American middle class. It did not; in fact, nothing did. The whole case for Trump’s tariffs was based on misconceptions.

Which is a shame, because pure free trade is not the ideal policy. If America were smart about strategic trade, we could craft approaches that would enhance national security, protect infant industries, help American companies scale up, and discourage Chinese mercantilism. This would require America to trade freely with allies while putting tariffs on China, and to implement the kind of Biden-esque industrial policies that Trump had disdained. But at this point, no one in the halls of power seems to be thinking strategically, listening to experts, or worrying about details. And so the madness continues.

The AI boom (and possibly, the AI bust)

The biggest reason that the U.S. economy is still doing OK, despite the pressure from tariffs, is the AI boom. Data centers are being built out at a stupendous rate, exceeding the 1990s telecom boom and drawing comparisons to the railroad boom of the 1800s. A lot of people are worried that this construction bonanza is being financed by shady private credit deals that could hurt the macroeconomy if the AI sector goes bust.

That possibility has fueled a lot of debate over whether AI is as useful as its proponents believe. But this debate misses the key point that railroads and telecoms were ultimately even more useful than their proponents believed, and yet both still experienced busts along the way. If AI fulfills everyone’s wildest dreams, but slightly too slowly to pay back the data center loans, there could still be carnage in the financial markets.

An AI-driven financial bust could also happen if the AI industry turns out to be much less competitive than the traditional software industry. There are plenty of essential industries that make low profits — airlines, solar panels, and traditional agriculture come to mind. Traditional software depends a lot on human capital (engineers), but AI depends a lot on physical capital (compute), so it could end up being a lot more competitive of an industry.

In any case, it seems inevitable that our economy is going to make a giant macro bet on AI.

Meanwhile, a lot of people continue to worry that AI is going to take lots of people’s jobs. But nobody really knows whether that will happen, and the people who make strong claims about it are just being overconfident. So far, it looks as if industries more exposed to AI have been hiring fewer entry-level workers, but hiring more experienced workers. So it’s possible that AI is biasing the playing field toward people with more experience…or it’s possible companies just over-hired young workers back in 2021 and are now correcting. Only time will tell.

The rise of the Electric Tech Stack

AI is only one of the big inventions remaking the world right now. The other big one is what Sam D’Amico and I call the Electric Tech Stack — batteries, electric motors, and power electronics. Together, these technologies have made it economical to use electric power instead of combustion in a large variety of applications — cars, appliances, certain industrial processes, and power generation itself — in addition to enabling lots of new robots, drones, and so on.

The problem is that America is falling way behind China in terms of mastering the Electric Tech Stack. Americans seem to have collectively decided that the Electric Tech Stack is all about climate change, and so it has become a culture-war football, with Republicans trying to cancel battery manufacturing. Very few Americans seem to understand that as battery-powered drones master the battlefield, whoever can build more batteries and motors will rule the skies. The Electric Tech Stack is about power, first and foremost.

(Of course, saving the world from climate change isn’t nothing. Right now it’s China that’s doing that, by flooding the developing world with cheap solar panels and batteries.)

Anyway, I’m pretty worried that Americans’ rejection of the Electric Tech Stack is a sign that they’re starting to fear the future itself. It’s possible to see anti-electric sentiment as of a piece with anti-AI fears, antivax craziness, and various other anti-tech outbursts. If so, it’s a very bad sign.

The Chinese Century and its discontents

This year was really when China’s ascendance over the developed democracies became apparent. Trump’s battles with domestic opponents, isolationist instincts, and eagerness to start fights with allies have accelerated the rise of Chinese power, and helped to undo much of the damage China did to its own image through “wolf warrior diplomacy” during the Biden years. Meanwhile, China’s economy is now bigger than America’s by most reasonable measures, and it dominates the manufacturing technologies that would prove decisive in a protracted military confrontation.

It’s therefore safe to say that we’re now living in the Chinese Century. Demographic and macroeconomic factors will present headwinds for China, but won’t be able to knock the country off its perch.

But even at its glorious peak, China’s civilization may prove underwhelming in certain ways. It’s a scientific and technological leader, but it doesn’t yet seem to be driving breakthrough progress the way the U.S., Britain, Japan, and Germany did in their heydays (and which the U.S. still does). It’s cities are visually impressive, but sprawling messes on the ground.

Meanwhile, China is making some mistakes. In recent years it has unleashed the biggest industrial policy push in the history of the world, intent on replacing the real estate industry and filling the hole left by that industry’s collapse. But by paying a bunch of Chinese companies to compete each other’s profits to zero, China unleashed “involution” that is hurting corporate balance sheets and causing deflation. And thanks to that involution, China’s people are working hard but seeing relatively few benefits. As Dan Wang wrote in his popular book Breakneck, China’s leaders are a bit too focused on feats of technical and social engineering. and not focused enough on making their people happy.

And in the distance, Xi Jinping’s succession looms. The most powerful Chinese leader since Mao is 72, but he has not yet picked an heir apparent, and appears intent on ruling well into his dotage. Either a superannuated leader or a vicious succession battle could present major problems for China.

The ongoing collapse of progressivism, and the rise of new ideas on the left

Trump has generally been a terrible President in his second term. The only thing still keeping him afloat — indeed, the only thing that allowed him to win in 2024 despite all he’s done and said — is the American public’s deep disdain for the Democratic Party. Some of that disdain is due to Democrats’ seeming weakness in confronting Trump. But a lot is due to general exasperation with the progressive movement, which has lost credibility on a wide number of fronts in recent years.

On one issue after another, progressive approaches have proven inadequate to America’s needs. Many progressive state and local governments have gone soft on crime, allowing a breakdown in public order that victimizes the most vulnerable and also makes it politically impossible to build dense transit-rich cities. Progressive procedural requirements have made building infrastructure, transit, housing, and green energy very difficult in America — thus hampering a lot of progressive causes. The progressive approach to education has emphasized “equity” instead of teaching kids how to do math.

Ideologically, progressives remain enamored of the disastrous idea of degrowth. They’ve ignored or dismissed the recent successes of free-market economics, instead blaming “corporate feudalism” for America’s problems without much evidence. Progressive online culture, once so dominant, has become downright ghoulish, cheering the murders of business executives and spending untold hours trying to “cancel” each other on Bluesky and in other deeply progressive spaces. Progressives have embraced “land acknowledgements” that might seem harmless, but which ultimately delegitimize the U.S. as a country. And so on.

Some progressives have begun to think of useful alternatives to the canon inherited from the 2010s. Derek Thompson and Ezra Klein published a blockbuster book called Abundance that proposed a new progressive agenda based on getting Americans more material stuff. Some progressives leapt to attack the new book, but their attacks fell short and looked petty. Hopefully the abundance movement will be able to steer progressivism out of its current dead end.

Besides embracing abundance, progressives also need to moderate on all the issues where their approaches have demonstrably failed — and to be honest with themselves and with their activist base about why they failed in the first place. The liberalism of Bill Clinton and Barack Obama, and the idea of liberal nationalism itself, represent a much better way forward for the Dems than an accelerating slide into radicalism. Fortunately, the recent No Kings protests displayed plenty of patriotism, suggesting that the tide may be turning on the left more generally.

Trump’s gangster regime

This whole year was lived in the shadow of Donald Trump’s 2024 election victory. Trump’s first term turned out to be relatively benign, and even featured some important successes. There was always the possibility that his second term would be similar. Sadly, this was not what ended up happening.

As I predicted, Trump has spent much of the early days of his administration feuding with American institutions — the media, the Fed, the courts, the electoral system, and so on — and threatening his domestic enemies. As it became apparent that institutions weren’t resisting him as they had in his first term, Trump began to overreach, issuing a blizzard of executive orders that assumed far more executive power than U.S. Presidents have exercised in the past except in the middle of total war.

Eventually the Supreme Court emerged as the one institution in the country that Trump wasn’t willing to openly defy, producing an uneasy stalemate. But the U.S. now feels like a much more authoritarian country than it did a year ago. This sadly fits with the global trend toward strongman rule.

The assassination of Charlie Kirk by a leftist radical prompted Trump and his allies to issue dire threats against Democrats, and to threaten restrictions on freedom of speech. Some Trump officials even used the rhetoric of civil war for a few weeks after the assassination.

In foreign policy, Trump has abandoned the liberal nationalism that marked both Republican and Democratic administrations since World War 2, acting instead like a bully trying to extract tribute from weaker nations. Although he did manage to broker a successful cease-fire in Gaza, Trump’s abdication of America’s traditional stabilizing role in world affairs has pushed the world a bit closer to war.

But despite the ferocity of its rhetoric and its reckless assumption of power, the MAGA movement feels strangely weak. Contrary to the hopes of its adherents, Trumpism is not building any new communities, institutions, or organizations in America; instead it’s just a blast of mostly online rage. And Trump’s policies seem startlingly incompetent, from his rejection of vaccines to his infinite tax cuts that explode the national debt. The Tech Right, which was supposed to provide an injection of elite human capital into the MAGA movement, has instead withdrawn after the failure of DOGE. International actors are quietly laughing at America’s fumbling lack of competence.

And the biggest question — what happens to the right after Trump and his personalistic rule are gone — has yet to be resolved. The most likely scenario is that without Trump’s personal charisma to hold it together, MAGA will become more ideological, conceiving of itself as a crusade to save Western civilization from immigration and liberalism — in other words, a typical right-wing movement. Whether that sort of movement can succeed in America has yet to be seen.

America’s identity crisis

Why is America being forced to choose between Trumpian gangsterism and dysfunctional progressivism? The fundamental reason is the age of sociopolitical unrest that began in the U.S. around 2014. That era of unrest is slowly fading at the grassroots level, as Americans tune politics out, but we’re still dealing with the institutional and political consequences.

Fundamentally, unrest was touched off by social media, which threw Americans all into the same room as each other, destroying our ability to spread out and tolerate our differences from afar. Curbing social media use among the youth and fragmenting the internet into more private, curated conversation spaces will help undo some of the damage. But the more fundamental crisis — the thing social media revealed — is a crisis of identity. As America diversifies, ethnic notions of nationhood are being strained, even as the internet fragments our cultural unity.

This identity conflict was most intense in 2014-2021, but it’s still roiling, especially online. Anti-Indian sentiment has risen on the right, and antisemitism has made a comeback on both the right and the left. Immigration, once cast as an economic issue, is now the main culture-war flashpoint, with both rightists and some progressives seeing it as a tool for reengineering the American populace. The Trump administration’s xenophobic policies are a reflection of that conflict.

And in the background of all of this is the end of the aftermath of World War 2. The liberal, tolerant values that emerged from the resolution of that conflict have weakened as the generation that fought for them has passed away.

Still, I am optimistic that America will eventually resolve its identity crisis. These things have happened in the past, and the nation always emerged stronger after a period of unrest and division. We just might pull it off again.

Looking ahead to 2026

If 2025 was Trump’s blitzkrieg, 2026 will be a year of retrenchment. The administration’s falling popularity, as well as emerging divisions between various factions on the right, will act as a partial check on Trump’s program. So I predict a more static, less terrifying year in the world of politics and policy.

The Democrats, meanwhile, will be energized by Trump’s low poll numbers and by the likelihood of retaking the House of Representatives in next year’s election. That feeling of confidence will paper over some (but not all) of the bigger divisions and recriminations that followed Trump’s victory in 2024. But there will still be a constant ongoing debate between those who want to take the party in a more leftist direction — led by the charismatic Zohran Mamdani — and those who want to moderate in order to win.

Economically, the big looming question is whether there will be an AI crash. I personally doubt that 2026 is the year — the big AI “hyperscalers” are still funding too much of the data center build-out with their own considerable cash reserves, and borrowing still hasn’t hit the absurd levels that we usually associate with a major crash. The continuing boom will keep the economy mostly afloat, though we’ll keep seeing some signs of tariff-related deterioration as more tariffs go into effect.

If, as I expect, the AI boom continues for another year without a crash, it’ll convince a lot of people that a crash is never coming — which of course will induce more reckless borrowing, and set things up for an actual crash in the years to come.

The international situation is the biggest question mark by far. Will this be the year that China’s leaders finally decide to pull the trigger and invade Taiwan? If so, will Trump try to put up a fight or just let them have it? Will this be the year that Trump finally pulls the trigger on aid to Ukraine, and washes his hands of the conflict? What effect will that have on the war? Will Europe step into the gap? I don’t know the answer to any of these questions, but the danger of a further expansion of great-power war is certainly there.

All in all, Trump’s loss of momentum, the looming uncertainties of an AI crash, AI itself, and the volatile international situation mean that 2026 is likely to be a year where America finds itself at the whim of events beyond our control.

But whatever happens, I’ll be there to write about it and hopefully to explain what’s going on. Hang in there, and enjoy another year of Noahpinion.

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