The U.S. economy is riding high on the artificial intelligence wave, but according to Mark Zandi, chief economist at Moody’s Analytics, that momentum may not be enough to stave off a downturn. In recent remarks, Zandi cautioned that while AI has provided a measurable boost to growth, mounting headwinds from deglobalization policies, tariffs, and labor market pressures could tip the balance toward recession.
AI's Contribution to Growth
Data shows that AI added 0.63 percentage points to U.S. GDP growth in 2025, helping the economy avoid contraction. Without this support, Zandi argues, the U.S. might already be in recession. However, he questions whether AI’s benefits can scale quickly enough to sustain growth. Like past breakthrough technologies, AI requires deep integration into business operations before its full impact is felt, making short-term gains harder to sustain.
Deglobalization Risks
Zandi points to the Trump administration’s deglobalization policies—including higher tariffs and tighter immigration restrictions—as a major drag on growth. These measures raise costs for businesses, strain the labor market, and reduce competitiveness. Moody’s projects that deglobalization could cut real GDP growth by 1.19 percentage points by 2026, more than offsetting AI’s contribution.
The unpredictability of tariff policy adds further uncertainty. Zandi stressed that avoiding recession depends on "no unexpected derailments," a tall order given the volatile policy environment.
Distributional Concerns
Even if AI continues to lift stock prices and corporate profits, Zandi warns that its benefits may be concentrated among wealthy households and large firms, exacerbating inequality. This limits AI’s ability to drive broad-based consumer spending, a key engine of U.S. growth.
The so-called "AI dividend" risks becoming unevenly distributed, fueling wealth gaps rather than stabilizing the economy.
Additional Headwinds
Beyond deglobalization and inequality, Zandi flagged other risks:
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Government shutdowns, which disrupt expectations and confidence.
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Labor market pressures, as companies cut jobs or freeze hiring amid rising costs.
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Global uncertainty, with trade and geopolitical tensions weighing on investment.
The Bottom Line
Zandi’s analysis underscores a sobering reality: while AI is providing a short-term boost, it may not be enough to counteract structural challenges. The U.S. economy could still avoid recession in 2026, but only if "everything goes smoothly"—a scenario that looks increasingly fragile.
For investors and policymakers, the message is clear: AI alone cannot guarantee economic resilience. Deglobalization, inequality, and policy volatility remain powerful forces shaping the outlook.