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How AI offsets Trump’s tariffs...for now

AI may be doing more than driving hype—it’s helping prop up the US economy. Harvard economist and former IMF Deputy Managing Director Gita Gopinath says a surge in AI investment helped offset the economic drag from tariffs. “The positive effect that came from AI offset the negative effect that came from tariffs,” she explains, noting that the two were “almost equivalent.”

As part of a larger conversation in the latest episode of GZERO World, Gopinath cautions that the longer-term impact is still uncertain. While US productivity has been strong, there’s no clear, economy-wide evidence yet that AI is driving those gains. Adoption remains early, and the path to profits is still unclear.

The takeaway: AI may be cushioning the economy for now—but its lasting impact is still an open question.

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A community‑first approach to building AI infrastructure in Canada

Last week, Microsoft shared a five‑point set of commitments to guide its Community‑First approach to building AI and cloud infrastructure in Canada. As the company moves from investment to implementation, these commitments reflect what communities across the country say matters most: affordable and reliable energy systems, sustainable water use, good jobs, strong public services, and access to the skills needed to succeed in an AI‑driven economy.

The Community‑First framework establishes a model for responsible infrastructure development—one that prioritizes affordability and sustainability while supporting long‑term economic opportunity. As demand for AI infrastructure accelerates, these commitments underscore a core principle: meaningful technological progress depends on growing in true partnership with the communities where this infrastructure is built.

Read the full blog here.

Tehran tests Washington’s naval blockade, Spain’s leader visits China again, Ukrainian robots take back land

US blockade faces early test

One day after US President Donald Trump announced that he had started a blockade of ships coming in and out of Iranian ports via the Strait of Hormuz, Tehran is already testing those US commitments. A sanctioned tanker called Elpis that took on cargo in an Iranian port has reportedly crossed the Strait of Hormuz. It’s not the only one: three more ships that stopped at Iranian ports reportedly tried to pass through the waterway. It’s not yet clear what actions the US is taking, but it claimed that no ships have passed through its blockade in the first 24 hours – Elpis appears to have stopped outside the Strait. This comes as Washington and Tehran ponder a second round of talks in Pakistan, after last weekend’s failed efforts. The US reportedly wants Iran to halt nuclear enrichment for 20 years, while Iran is only willing to do so for five years.

Speaking of negotiating, Israel and Lebanon are set to hold their first face-to-face talks in decades in Washington, D.C., today. The two sides are looking to resolve Israel’s war with Hezbollah – the Iranian-backed Lebanese militant group isn’t part of the talks.

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Hard number: School shooting in Turkey

A gunman entered a high school in Siverek on Tuesday and started firing indiscriminately, injuring 16 people before turning the gun on himself. The motive for the attack is unclear, though the assailant was a student at the school. It’s a major shock in Turkey, as school shootings are rare there.

Has far-right populism peaked in Europe?

Hungary’s recent election saw far-right Prime Minister Viktor Orbán and his Fidesz party lose power after riding a wave of anti-migrant and anti-European Union populism for 16 years. Orbán conceded defeat to Péter Magyar and his center-right Tisza party, which captured over two thirds of the seats in Parliament.

The election has been hailed as a triumph of the democratic process: voter turnout exceeded 74%, the highest level in the country’s history. Voters were Hungary for change, and despite high-profile endorsements by foreign politicians – including an in-person appearance by US Vice President JD Vance – and an election playing field tipped in Orbán’s favor, Hungarians were not deterred from choosing new leadership.

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Hungary’s Orbán concedes election defeat

After 16 years in power, Hungary’s Viktor Orbán has been decisively voted out, losing in a landslide to challenger Péter Magyar.

But this wasn’t a shift to the left. As Ian Bremmer explains in Quick Take, the election was driven by frustration over corruption, economic stagnation, and what many voters saw as a system benefiting Orbán and his inner circle, not the Hungarian people.

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As part of a larger conversation in the latest episode of GZERO World, Harvard economist and former IMF Deputy Managing Director Gita Gopinath breaks down the economic impact of the Iran war—and why the US is relatively insulated.

So far, she says, the shock is modest compared to past crises. Global growth is expected to drop by about 0.3 percentage points—a fraction of the damage seen during the pandemic.

But the impact isn’t evenly felt. While rising energy prices are pushing inflation higher worldwide, the US economy is less exposed than most. Gopinath estimates the hit to US growth at just 0.1 to 0.15 percentage points, thanks in part to domestic energy production.

That doesn’t mean Americans are immune. Higher prices are still adding hundreds of dollars in costs for households. But compared to more energy-dependent economies, the US is better positioned. The takeaway: the Iran war is a global economic shock—but not a balanced one.

Rome wasn’t built in a day, and neither was the long-term ceasefire deal that the US and Iran tried to clinch this weekend. Despite 21 hours of talks between the two sides in the Pakistani capital of Islamabad, Vice President JD Vance had to deliver the “bad news,” capping what has been a rough week for US President Donald Trump’s second-in-command.

“We were quite accommodating. The president told us, ‘You need to come here in good faith and make your best effort to get a deal,’” Vance said. “We did that, and unfortunately, we weren’t able to make any headway.”

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Carney’s Liberal Party looks set to gain an outright majority for the first time since the prime minister took charge in March last year, as voters head to the polls today in three by-elections – special votes to fill these vacant seats in Parliament. Two of the ridings are in left-leaning areas of Toronto. If the Liberals win those, it will be enough for Carney to have a majority government, albeit a slender one.

The Orbán era is over in Hungary

In the end, it wasn’t even close: Péter Magyar’s Tisza party stormed to victory in yesterday’s Hungarian election, ousting Prime Minister Viktor Orbán after 16 years in power. The result sparked scenes of jubilation on the streets of Budapest. Tisza is set to win 138 of Hungary’s 199 parliamentary seats, enough to enact constitutional changes like restoring the independence of the judiciary and ending the system of patronage that critics have called corrupt. Orbán’s Fidesz party will have just 55 seats. The result is a major win for Europe and the European Union: Magyar could greenlight billions of euros of funds for Ukraine’s war effort, which Orbán had held up. Magyar, who will all-but certainly become PM, will have his work cut out. The country became the poorest of the EU’s 27 members last year, following years of inflation, falling real wages, and underinvestment in healthcare.

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The economic impact of the Iran war is already showing up in rising prices. Energy costs have surged, with oil and gas prices driving a sharp increase in inflation and pushing up the cost of everyday goods. But Harvard economist and former IMF Deputy Managing Director Gita Gopinath says the bigger risk is what she calls “structural damage”—long-term economic shifts that don’t show up immediately but build over time.

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Rising energy prices, higher inflation, and growing economic uncertainty — a Harvard economist says the fallout from the Iran war is already being felt.

On the GZERO World Podcast, Ian Bremmer sits down with Harvard economist and former IMF Deputy Managing Director Gita Gopinath to unpack how the conflict is rippling through the global economy. As oil and gas prices surge, inflation is climbing, adding new costs for households and businesses and putting pressure on growth worldwide.

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For 80 years, the US dollar has been the world's reserve currency. Its dominance was built on US economic strength, institutional trust, and the post-World War Two Bretton Woods system, which pegged global currencies to the dollar rather than gold. But today, the greenback is under pressure. The dollar shed about a tenth of its value in the first year of Trump's second term. Tariffs, White House pressure on the Federal Reserve, and rising debt have all shaken confidence.

Xi Jinping has made renminbi internationalization a top priority. Vladimir Putin has repeatedly called on BRICS nations to ditch the dollar. But for all the talk of de-dollarization, when uncertainty hits, the dollar is still what people reach for. Foreign investment in US assets actually climbed in the second half of 2025.

The reason: TINA, there is no alternative. Until another currency offers the depth, liquidity, and institutional backing of the dollar, the greenback isn't going anywhere. Trump's policies are accelerating efforts to diversify, but dethroning the dollar requires a replacement, and no one has one ready.

Is Orbán’s “illiberal democracy” set to end?

Hungarians will head to the polls on Sunday in an election that will be watched worldwide, as politicos of all stripes wait to see whether center-right opposition leader Péter Magyar can indeed oust 16-year incumbent Prime Minister Viktor Orbán. The campaign has been marred by Russian interference, accusations of a plot to blow up a pipeline, and concerns about the integrity of the vote. Even US Vice President JD Vance got involved this week, stumping for Orbán in Budapest – the hard-right Fidesz leader has become something of an oracle for the MAGA movement, showing how one can deliver an anti-woke, anti-immigrant agenda in the modern era. The election also has tangible and immediate implications for Europe: Orbán has been building ties with Moscow – he even held up European Union funds for Ukraine amid its war with Russia – while Magyar’s Tisza Party is more aligned with Brussels. Polls suggest Orbán’s hopes of reelection are hanging by a thread.

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