January is always a time for new beginnings and fresh thinking. But with Donald Trump heading for the White House and a new(ish) Labour government in charge of a faltering UK economy, the onset of 2025 seems especially portentous.

Forecasting is a mug’s game, as former Bank of England governor Mervyn King used to say about predicting exchange rates; but here are some of the big economic questions to ponder, as the new year gets under way:

Will Labour get the stronger economy it promised voters?

Far from signalling recovery, the latest data showed UK GDP flatlining, with confidence weak, as businesses brace themselves for April’s £25bn increase in employer national insurance contributions (NICs).

Given that Labour had ruled out every other big revenue-raiser, it was one of the few places Rachel Reeves could turn to fund public services. But it has fuelled a furious backlash – and set up a narrative that Labour has clobbered the economy.

The rise in NICs is far from the only factor at work. Economic growth was already forecast to slow, with interest rates at 4.75% and the Bank fretting about inflation.

How the next few months play out will be crucial in cementing Labour’s economic reputation.

City forecasters are not expecting a slump – they predict growth of 1.3% in 2025. The Office for Budget Responsibility expects 2%, as Reeves’s higher public spending boosts demand. And strong real wage growth should give consumers some much-needed spending power. But recent data suggest the risks have tilted very much to the downside.

Artificial intelligence: is it a bubble?

Surely the best-titled academic paper of 2024 was “ChatGPT is bullshit”, from experts at the University of Glasgow. They argued that the “hallucinations”, which large language models such as ChatGPT produce – the things they continually make up – are not aberrations, but integral to the way they function.

The Nobel prize-winning economist Daron Acemoglu has been arguing that the economic impact of AI, on productivity and jobs, will be much lower than some of its champions claim. And in a much more strident metric, the tech journalist Ed Zitron has been delving into financial statements from ChatGPT’s creator, OpenAI, to argue that it cannot possibly generate returns that will justify its $150bn-plus (£120bn) valuation.

None of this is yet causing so much as a ripple in financial markets; but it is hard to shake a nagging doubt about whether these technologies can really live up to the extraordinary hype. Given the dominance of tech for the US financial markets, if that fear became more widespread, it would lead to a pretty dramatic shakeout.

Can EU economies get their mojo back?

Mario Draghi, the man who once promised to do “whatever it takes” to rescue the eurozone, published a weighty report in 2024 outlining what he called the “existential challenge” facing EU economies today.

His recommendations included a massive increase in public and private sector investment, and much closer policy coordination across the bloc.

But the prescription was dropped as the EU’s biggest economies, Germany and France, faced political crises, with populist parties in both countries – the AfD and Marine Le Pen’s the National Rally – pulling towards economic nationalism, and against further EU integration.

Both countries face a gloomy economic outlook in 2025 – the European Commission expects growth of just 0.7% in Germany and 0.8% in France. And the bond vigilantes are circling.

How politics and economics align this year in some of the EU’s larger member states could determine whether the club will heed Draghi’s warning – or face fresh crises.

Will Trump’s tariffs fuel a trade war?

The incoming president, who has described tariffs as “the most beautiful word in the dictionary”, arrives in the White House later this month determined to use import taxes as an economic and political weapon.

As just about everyone has said, it is impossible to predict what exactly that will mean in practice.

Trump’s pick for Treasury secretary, Scott Bessent, has previously called the tariffs plan a “maximalist negotiating position”, and suggested it is a way of extracting concessions, rather than the policy end-point.

Like previous recent trade barriers – including the tariffs imposed on China by Trump’s first administration and left in place by Joe Biden – this latest plan will not bring global trade grinding to a halt.

But at best it will throw sand into the wheels of the system, raising costs and increasing complexity; and at worst it will lead to a tedious and time-consuming tit-for-tat trade war that would depress global growth significantly.

Will economic policymakers wake up to the climate emergency?

This is not a new question, but one that becomes more urgent with every passing year. In 2024, we saw a series of apocalyptic weather events.

Each of these is a human tragedy; but they also drive up the cost of important commodities, and necessitate costly rebuilding – and adaptation.

A recent paper from the Centre for Economic Transition Expertise at the London School of Economics suggested policymakers must be ready to adapt to this new reality – by allowing central banks to tolerate higher inflation when it is caused by climate-driven supply shocks, for example, instead of clobbering growth with rate rises.

Will 2025 be the year ideas like this, which acknowledge how much the global economy is already being rocked by global heating, go mainstream? It seems a faint hope, but whatever happens, we can be sure that as Trump dominates the headlines, the economic costs of the climate emergency will continue to mount.