Presidents Trump and Xi Jinping are fundamentally altering the rules for international commerce.

Gone is any pretense of an inexorable movement toward market-driven globalization, at least as envisioned by the post-World War II and post-Cold War architects of the now marginalized World Trade Organization.

President Trump with tariffs has reasserted American economic power and forced new, asymmetrical trade agreements on partners in Europe, Japan, Korea, the emerging powerhouses in South Asia like Vietnam and Malayasia and several Latin American nations.

His industrial policies seek to reinvigorate legacy manufacturing like steel and autos and legacy technology like chipmaking, address strategic vulnerabilities, such as in rare earth minerals and pharmaceuticals, and promote artificial intelligence development and exports.

He’s secured foreign commitments to invest in U.S. industries like shipbuilding and pharmaceuticals.

He’s wrestled for the federal government a Golden Share in US Steel, 10% stake in Intel and $50 billion equity position in MP Materials and 15% ownership of Vulcan elements in the rare earths mining and magnet industries.

It’s not just Trump. Statecraft has been supplanting multilateralism across the globe.

The standoff with the Middle Kingdom on tariffs and export embargos of U.S. technology and rare-earth minerals demonstrates China can’t be forced to change its state-directed approach to economic development. Xi’s subsidies, opaque import barriers and high-tech vision remain in place.

AI is driving U.S. economic growth.

In 2025, Google, Meta, Microsoft and Amazon devoted about $380 billion to capital expenditures, mostly in AI development and data centers. Plans for 2026 could push that to $500 billion.

Add in firms building AI Agents to boost businesses’ productivity, like Salesforce, Adobe and Palantir and venture capital’s investments in startups, and AI provides the steam to overcome weak investment in other sectors.

Along with the president’s tax cuts, those should motor the economy in 2026.

Still, other disruptions are roiling the labor markets and helping define the midterm elections.

AI is rattling the white-collar jobs outlook. Growing firms like Amazon, Microsoft and Salesforce and those facing challenges, like General Motors, Molson Coors and Booz Allen, are cutting thousands of white-collar staff.

Consider what’s happening at McKinsey consulting. A few years ago, a project team might have consisted of a leader plus 14 consultants but now the latter can fall to 2 or 3 supervising the research and drafting work of AI agents.

AI should boost productivity from by 0.8% to 1.5% a year. But the resulting squeeze on entry and middle level workers is profound, and significantly explains the job search frustrations of new college graduates.

American workers might expect some relief from the president’s tariffs and push for leadership in AI, but the economy suffers from a mismatch between the skills of unemployed workers and recent graduates and those often needed by tariff protected industries and high-tech.

Trump’s limits on immigration create labor shortages and constrains growth in industries where not enough Americans like to work—notably, agriculture, construction and manufacturing.

His policies limit immigration among workers with needed skills—newcomers fill about one-fifth of STEM positions and over two-fifths of doctoral level science and engineering roles.

With a revised immigration policy seeking sufficient newcomers for low-skilled work in agriculture, technicians to build and run factories and scientists and engineers to develop AI, faster growth would create additional new opportunities across the wider economy.

More inclusive growth would boost consumer products, health care, business services and leisure and recreational activities to absorb more white-collar workers displaced by AI.

Not enough jobs and not enough workers is a paradox but that’s what you get with a radical mismatch of skills and severe constraints on immigration by those with eager hands and needed abilities. Hence, we get long, frustrating job searches for displaced white-collar workers.

American society continues to motor but with two, ever-separating tiers—those with and without needed skills and significant wealth invested in publicly traded companies and growing privately held businesses.

That plays out in politics.

New York Mayor-Elect Mamdani’s rise owes much to support from frustrated college graduates—most are employed but not in charmed activities like finance, high-tech and the legal and other professional services that enable them.

Republicans will see this and won’t oppose Trump pressuring the Federal Reserve to prioritize growth over taming inflation.

Over the first three quarters of 2025, the economy survived Trump’s tariffs and delivered strong growth. The economy took a gut punch from the government shutdown in the 4^th quarter but should recover any lost growth in this year.

In 2026, the economy should grow by about 2.5%.

Inflation continuing at 3% is harsher than we endured between the 2008 Global Financial Crisis and COVID shutdowns, but we can survive it.

The prior four decades, inflation averaged 4%, while real economic growth was a healthy 2.9% and stocks delivered 10.5% annual gains.

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Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.