In April this year, US President Donald Trump declared a global trade war. However, like any war, this one also has consequences. The global economic climate is also being disrupted by artificial intelligence (AI). Although this tool opens up many opportunities, it also poses serious threats, Monika Kazlauskaitė states in lrytas.lt.
Trump sets his sights on a new country
“If you are not concerned about what is happening in Lithuanian politics, I will try to make you concerned about what is happening in the world,” said Swedbank chief economist Nerijus Mačiulis, opening his speech at the Lithuanian Business Forum on November 13.
He first recalled the tariff war announced by US President Donald Trump in April this year, which rattled global markets and raised concerns among businesses.
“Economists said that import tariffs were a bad idea and that we should prepare for the worst. It wasn’t a good year for economists because things weren’t as bad as expected. The leaders of the US and China met a few weeks ago and reached an agreement – both sides are happy,” said Mačiulis.
Although the agreement between China and the US appears favourable to both countries, the economist argues it is much worse for Europe. With the decline in Chinese exports to the US, a significant portion of Chinese goods began to flood into Europe.
For those who believe that the trade war is already over, Mačiulis drew attention to Trump’s latest statement. He has once again targeted Europe, this time hitting Italy. The US leader is unhappy that Italian pasta producers sell their products in the US at higher prices than on the domestic market and has threatened to impose a 91.7% import duty.
“No one knows how he calculated that tariff, but no one cares. Don’t think that agreements have been reached. We have seen Trump’s negotiating power, how he forces many countries to do what he wants,” added the economist.
Court ruling may be ignored
According to Mačiulis, the main question this month is whether the US Supreme Court can force Trump to cancel the tariffs, arguing that they were illegal.
“There is a very high probability that the court will declare these tariffs, or part of them, illegal. Will Trump listen to the Supreme Court’s decision? Most likely not. The US Treasury will receive an additional USD 300 billion from the tariffs. This is too large an amount to give up. In addition, the US national debt is enormous, approaching record highs. The last time it was this high was during World War II. More than a trillion dollars a year is allocated from the country’s treasury to pay interest rates alone. Any additional revenue that does not irritate US residents and businesses is viewed quite favourably,” Mačiulis assured.
According to him, there are still dark clouds on the US economic horizon: inflation is rising and will continue to rise, and there are many late loans, mainly from the 2009 crisis. The real estate market is not doing well either. Unlike in Lithuania, the US housing market is stagnating, with the number of new construction projects at its lowest level in the last five years.
“However, despite everything, the US economy grew by about 3% in the first three quarters of this year and has hardly slowed down compared to last year. <…> One factor account for almost half of US GDP growth: investments by a handful of companies in artificial intelligence (AI), data centres, and software,” noted the economist, raising the question of how sustainable such investments are.
The growing threat of AI
The economist spoke about so-called carousel investments, in which one company buys from another, agreeing to pay with its shares because it does not have the money to invest in data centre construction.
“The market views this (AI technologies – author’s note) positively. No financial results, revenue streams, or profits are needed – it is enough to announce that you will build a data centre and invest in AI technologies. Immediately, the market capitalisation of companies grows. The first doubts arose last week when OpenAI’s CFO was asked where they would get the USD 1.5 trillion, they had committed to investing in data centres.
He said he hoped the government would invest. This raised the question of whether they had enough capital themselves. The next day, the head of OpenAI began to explain that they did not need to be rescued, but hinted that such data centres could serve as a strategic reserve and that the government could invest in them. After these words, the shares of Nvidia and other related companies went down,” said Mačiulis.
He also drew attention to AI’s side effects. Some experts even compare it to nuclear weapons, while others call the consequences “potentially catastrophic.”
“Because of this, governments are being encouraged to invest in AI to keep them close. <…> We are already seeing the consequences in the real economy, so there will be some resistance from the public. <…> Another effect of AI that is making US residents very angry is a one-third increase in the cost of electricity. Another consequence we will see is that US stock prices will skyrocket and the number of job vacancies will decrease,” added Mačiulis.
Deceiving large companies
The challenges posed by AI may affect not only businesses but also ordinary citizens.
According to the Swedbank economist, it has become clear that the tech giant Meta knows that 10% of its annual revenue comes from fake news and that it displays 15 billion fake ads per day, which, for example, offer to invest in counterfeit funds.
“It’s hard to believe, but it’s true. This shows the kind of world we live in. In addition, AI has improved to the point where it can now create deep fakes (realistic fake visual or audio content – author’s note) in real time. For example, remote conversations can be organised so that an employee cannot even suspect they are talking to AI rather than their manager.
There have been many such fraud cases. An employee of a UK company spoke to their “boss” in Hong Kong via video call. The employee had no reason to suspect that they were talking to a fraudster using AI rather than their boss. Only later did he realise that he had transferred USD 25 million to the fraudsters. This may not bring down the world, but it can certainly cause personal problems,” noted Mačiulis.
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