Noahpinion's 2025 Year in Review
Year
Five of the Noahpinion Substack.
Nov 27, 2025
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 more 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.
