Donald Trump’s speech last night was the standout moment from this year’s World Economic Forum annual meeting.

As he loomed over the Davos stage, not unlike the Eye of Sauron, Trump committed more news than a single liveblog could handle – calling for lower oil prices and interest rate cuts, and higher military spending by Nato members.

He threatened tariffs on US imports, claimed Europe and China treated the US badly, tooted his own trumpet about his actions this week,

The fact so many Davos delegates turned up to watch a video call with Trump shows the president’s pulling power, (and perhaps even nervousness that bunking off might somehow attract his ire?).

But the market reaction to the speech is interesting…

Matthew Ryan, Head of Market Strategy at global financial services firm Ebury, explains:

“The lack of clarity provided by Trump with regards to his plans for trade has weighed on the US dollar so far this week, with the greenback trading lower on all G10 currencies.

“So far, Trump has only gone so far as to moot the idea of placing 25% duties on Canada and Mexico and tariffs of only 10% on all Chinese imports - the latter would be considerably lower than the 60% he proposed during his campaign trail.

The WEF annual meeting is now officially over for the year.

Delegates will be scrambling to catch trains home, or enjoying a relaxing lunch at Davos’s Hotel Schatzalp (a short funicular train ride away).

Experts have also been digesting what they learned this week.

Anne Hoecker, global head of Bain & Company’s Technology practice, reports that this week’s discussions have shown there are still enormous potential for AI.

Hoecker predicts:

Many of the AI applications we see today will become even more powerful, while new ones will emerge—driven by a significant rise in AI agents – agentic AI – transforming areas such as finance, customer support and sales and by robotics becoming AI’s next frontier.

“AI will be the driving force behind many technology markets from infrastructure to services – with the potential market we estimate at almost $1 trillion by 2027. It’s exciting to see the innovation that’s being driven by both the largest cloud service providers globally as well as smaller independent software companies. We’ve begun to see a swirl of compelling features and platform enablements emerging across both incumbents and upstarts.

“We’re seeing the focus shifting from trials and proof of concepts to scaling valuable use cases. And companies that successfully scale use of Gen AI into their operations are seeing impressive results. For example, in sales and marketing we’re seeing a 30-50% reduction in time spent on content creation, or for contact centers there’s 20-35% time reduction for manual responses, or in R&D 15%-plus time savings in total software engineering time. To unlock AI’s full potential, companies are focusing not just on the new tools available with Gen AI but on rethinking their business processes and how work gets done.”

This year’s WEF annual meeting wrapped up with Børge Brende, president and CEO of the World Economic Forum, telling delegates that we are at a critical time.

Brende says this year’s meeting happened

I think we all realize during this week that we came together in Davos at the time of immense consequence and uncertainty.

Political, geopolitical and macroeconomic landscape – all are shifting under our feet. At this very moment the clock is quickly ticking down to meet critical political priorities: driving economic growth, reducing carbon emissions, finding ways to end conflict.

The only way to make progress is to work together, he says.

And (with a nod to Donald Trump?) Brende concedes that WEF’s cooperative approaches may need to adapt to a new, more uncertain era.

There is a new political reality that we are faced with.

The session ends with a bit of news.

Saudi Arabia will host regular meetings of the World Economic Forum, starting from spring 2026, Saudi Economy Minister Faisal Alibrahim has announced.

Alibrahim told delegates:

“We look forward to welcoming the global community again in Saudi Arabia in the spring of 2026.”

[WEF holds various other meetings around the globe through the year, as well as the Annual Meeting in Davos]

The President of Singapore, Tharman Shanmugaratnam, tells Davos that the most neglected dimension of national strategy in most parts of the world is social policy.

He argues that this means maximizing human potential in every segment of the population.

Shanmugaratnam explains:

It means finding ways of recreating social compacts so that people feel some sense of solidarity even between different ethnic groups, different nationalities.

And it means, very importantly, thereby building the basis for political consensus to keep economies open and interdependent.

And those three things must go together, the economic strategy of openness, the social policy of not leaving things to a social market, but intervening to help everyone uplift themselves, and the politics that then allows you to carry on being open.

If any one of those fails, each of them falls apart.

Christine Lagarde then gets an unplayable delivery here at Davos.

She’s asked about president Trump’s claim to WEF yesterday that the EU does not treat the US fairly on trade.

Q: Is that true?

Lagarde cries foul – pointing out there is “no way” she can either say yes or no.

But she then makes some good points – when looking at trade, you should consider services as well as goods trade.

And while some countries are in a stronger position than others, they all need each other.

If there is one thing that the Europeans have learned over the course of time since the end of the Second World War, is that you cannot go alone, Lagarde adds.

You have to work together. You have to respect each other and you have to understand each other, she insists.

Q: Is anyone on the panel a fan of tariffs?

No hands go up (no surprise there).

Saudi Arabia’s economy and planning minister Faisal Alibrahim, explains that tariffs can work as a tool, as long as they are objectives-driven and time-bound.

He says they could give an economy time to build resilience or leverage, or give space for the private sector to grow some competitive advantage.

The important thing is to keep dialog on the table and keep the orderly, respectful discussion going, Alibrahim adds.

Onto the interest rate outlook, and Larry Fink says the Federal Reserve still have room to cut, to create a steeper near-term yield curve.

But the next few months of data will determine what happens - Fink points out that there are signs the US economy was very strong in the fourth quarter of the year.

So the Fed may pause for another period of time, and they may ease a little bit, he suggests.

Blackrock’s Larry Fink then says he can see a scenario where we see 5.5% on US 10-year yields.

10-year Treasuries are currently trading at a yield around 4.6%, so Fink’s forecast implies a rise in benchmark borrowing costs.

That would be bad news for the UK, as our gilt yields tend to move in line with US debt.

Q: Is the inflation genie back in the bottle?

IMF chief Kristaline Georgieva demonstrates that the head of the genie is back in the bottle, most of the body is in too, but the legs are dangling out.

She then points out that historically, rising inflation has led to a rise in interest rates that caused a recession.

This is first time so far that inflation is being brought down, interest rates are still somewhat high, but growth is still positive (though below historic norms), she says.

Georgieva explains:

If we succeed to bring inflation down but maintain economy functioning so people still have jobs…and more confidence, that would be a very good outcome.

Larry Fink cautions, though, that “the genie may be coming out of the bottle”.

Fink cites increased demand for power for AI systems, and predicts labour shortages that would lift wages – a good outcome for workers, but also an inflationary one. There could also be shortages of materials.

IMF chief Georgieva tells Davos that the world is changing very rapidly.

“We are experiencing a tremendous technological transformation,” she says.

IMF chief Kristalina Georgieva says growth in the US is so strong, compared to other countries due to productivity growth.

The US is “marching ahead” with high productivity, because capital markets allocate money to dynamic firms, she says, such as technology companies.

Also, the US has – relatively speaking - abundant, and thus cheaper, energy.

Larry Fink then explains that the US economy has a major advantage over Europe – the deep foundations of its capital markets make it easier for entrepreneurs to raise capital.

That allows the US to change direction and modify faster than another other economy in the world.

It’s time for the final set-piece event in Davos today – a session on the global economic outlook.

On the panel we have IMF managing director Kristalina Georgieva, Saudi Arabia’s economy and planning minister Faisal Alibrahim, BlackRock CEO Larry Fink, ECB president Christine Lagarde, and Singapore’s president Tharman Shanmugaratnam.

The introduction to the session says:

Nearly five years since the COVID-19 pandemic upended the global economy, growth is slow but stable, inflation has gradually declined in advanced economies and trade trends have turned positive. Despite this, there remain challenges such as high public debt burdens, ongoing geo-economic tensions and the potential impact of industrial policies on smaller countries.

Given this landscape, what are the plausible scenarios for the global economy in 2025?

The US and China could be dragged into a catastrophic war within the next two decades, if they fall into the “Thucydides trap”, Davos has heard.

Political scientist Graham Allison is explaining that Athenian historian Thucydides argued that rapidly rising power seriously threatens to displace a ruling power, usually through a war and frequently through a catastrophic war.

Allison reveals that the late Henry Kissinger, in the last year of his life, would regularly tell Allison he was seeing more and more signs we are heading towards a 1914-style scenario.

Allison says that tension between an incumbent (the US, in this scenario) and an upstart (China) is rooted in animal and human behaviour.

He, like Thucydides, believes that 75% of this story is “in the structure”.

That, he says, means:

If I was betting, over next two decades we will see a catastrophic war between the US and China.

But that still leaves a 25% where actions – either by US and Chinese policymakers, or others such as in Europe – could lead to different conclusion.

More positively, Allison predicts that in a year’s time we will be surprised to the upside by US-China relations.

Q: Who wins in a catastrophic war?

In a world of mutually-assured destruction, there are no winners, Allison replies. A nuclear war cannot be won, because however much damage you’ve done to the other side, if you’ve lost your own country you can’t claim a win.

Europe has a role to remind US and China that we live on a small planet, so they shouldn’t screw it up, he says.

Graham Allison is Douglas Dillon professor of government at Harvard Kennedy School of Government, and has written a book on Thucydides’s Trap.

Sir Robin Niblett, distinguished fellow at Chatham House, argues that we could end up in a situation short of full-blown war – such as if China blockaded Taiwan.

Would the US try to break that blockade, and would Europe help?

Ministers from World Trade Organization member countries have held an informal meeting on the sidelines of the World Economic Forum here in Davos, Switzerland.

Business secretary Jonathan Reynolds has left the door open to joining a tariff-free trading scheme with Europe, following a meeting with the EU trade commissioner here in Davos.

Jonathan Reynolds met with Maros Sefcovic on Thursday, after Sefcovic suggested Britain could join the Pan-Euro-Mediterranean Convention (PEM), which allows for tariff-free trade of goods across Europe, as well as some North African and Levantine nations.

Reynolds described Mr Sefcovic’s comments as “incredibly positive” and “helpful”, and suggested joining the PEM could be acceptable as it “is not a customs union”.

“We can improve the terms of trade with the EU in a way which doesn’t revisit customs unions or single markets or the arguments of Brexit, and we can do that whilst pursuing closer trade links around the world.”

As we reported in the blog yesterday, Reynolds does not expect the UK to be badly affected by any tariffs imposed by Trump, because we are not among the countries with which the US has a large trade deficit.

Back in the UK, the future of Thames Water is hanging in the balance after the UK government reportedly approached multiple restructuring advisers for the role of special administrator for the company.

Teneo, Interpath and EY are among the companies reportedly contacted by the government as it prepares contingency plans should Britain’s largest water company be forced into nationalisation.

My colleague Jasper Jolly explains:

Thames Water, which provides water and sewerage services to 16 million customers in London and south-east England, has been teetering on the edge of collapse for months as it struggles under a £15bn debt pile.

A special administration regime, or SAR, would take the company into temporary government ownership in order to ensure that vital water supplies continue to function even if the company becomes bankrupt. The government previously appointed Teneo to run the SAR for Bulb, an energy company that collapsed in the aftermath of Russia’s invasion of Ukraine.