As 2025 turns into 2026, the outlook for the global economy in general appears uncertain. The continuing paradigm shift in global trade from one moving toward freer trade to one moving toward more protectionism has not yet been completed, making strategic planning more challenging than it perhaps has been in previous decades.
For evidence of this instability, one needs to look no further than the price of gold, which has essentially doubled over the last six years (since the start of the pandemic) to over $4,000/ounce as of this writing. Gold is an asset whose price tends to increase substantially during times of instability, as it is seen as a stable source of value. And lest one be tempted to believe this is simply due to the policies of a singular American administration, consider that in the 2000s, the price of gold was between $200 and $300 per ounce. In other words, the world has been moving toward more instability for a significant amount of time, and the process of a shifting global trade paradigm is well underway.
Speaking specifically on the U.S., after some hesitancy, the Federal Reserve appears to have embarked on a path of loosening monetary policy. We expect this to continue in the new year. The effect of this lowering of interest rates will likely be the weakening of the U.S. dollar relative to other major currencies and hard assets such as gold and silver. How much weakening will depend on what the eurozone, Japan, Switzerland, etc., do with their monetary policies.
However, the current geopolitical dependency of Europe on the U.S. due to the war in Ukraine argues in favor of Europe pursuing a monetary policy that leaves the U.S. with a weaker currency, a condition that tends to be favorable to U.S. companies that export to Europe.
Another factor still creating uncertainty at the present time is the various tariff policies being pursued by the current administration. However, some trade agreements have been concluded over 2025, including with the European Union (EU). This has substantially reduced the overall levels of uncertainty relative to what they were in early 2025.
That being said, the situation cannot be said to have largely stabilized until there is a broad-based trade agreement between the U.S. and China. Although there appears to be something of a truce in the trade war, as of now there is not a comprehensive deal in place. With the U.S. and China together accounting for more than 40% of global gross domestic product (GDP), a trade agreement between the two (assuming it happens) would be a huge step toward reducing overall levels of economic uncertainty in the U.S. and the world at large.
However, the overall economic instability we have seen in recent years is likely to continue for some years going forward. Obtaining trade agreements removes one source of instability (uncertainty), but there is also instability created as companies adjust their operations and business models to the new rules of the game, whatever these happen to be. This process takes time to play out, and it is likely to take more than a single year as individual companies adjust and figure out what works and what does not under the new rules.
For current U.S. pump companies who do business internationally, especially in Europe, the current trade agreement between the U.S. and EU removes some uncertainty and allows them to begin to formulate longer term business strategies than what was possible in the recent past. For those focused on the U.S., the trend toward lower interest rates will reduce the carrying cost of debt, perhaps even to the point of providing an affordable source of capital for expansion. In the longer term, the need to repair and upgrade the nation’s aging water and wastewater infrastructure will be a source of demand for their products.
A further potential source of demand could appear if the administration’s desired effect of the tariff strategy, namely expansion of U.S. manufacturing capacity, were to happen as factories were built out. However, whether this happens and to what extent is a few years out.
The View From Europe
Political issues
With regard to European politics, although right-wing parties have become stronger this past year, the consensus is that western Europe is, in general, politically and economically reasonably stable. Both Poland and the Czech Republic are looked upon as having similar levels of stability and democracy as the West. Other former eastern block countries are generally thought to be less so. In general, it is thought that the western European democracies, although polarized, still contain a significant centrist faction,
which tends to stabilize things. In contrast, the U.S. is thought to be polarized between the right and the left with virtually no centrist constituency, leading to continued instability both as an ally and a trading partner.
There are questions regarding the overall situation with China, primarily due to the demographic problems that have resulted from the one child policy. A general view is that the large Chinese market is expected to be weaker in the long term because of this but still exceedingly large. Concern exists over a possible U.S.-China conflict, which is thought to be a remote possibility but could have disastrous economic effects if it were to occur.
Several sources questioned for this article pointed out that, although Greenland is in the news due to its supposed natural resources and the interest of the U.S. and China, Africa is likely to be the next point of geopolitical conflict. Africa is resource rich, and these resources are much easier to extract than anything that might be found in Greenland. China is quite involved in Africa, as is Brazil, and the view is that it is inevitable that the U.S. will become involved in the future.
The war in the Ukraine continues with no obvious end in sight, but this is not the primary concern like it has been over the past three years. It appears today to be “background noise” and seems, in economic considerations, to be mostly ignored. In fact, several sources commented that uncertainty over what the U.S. administration will do next has led to Europe spending a lot to strengthen its militaries and that this could lead to a short-term boom.
Economics
The single word that describes European pump manufacturers' view of the world today, from an economic standpoint, is “uncertainty.” The tariffs are an obvious issue, especially for Switzerland, which was hit with an arbitrary 39% rate until the recent trade agreement with the U.S. brought it down to the EU rate of 15%. However, the main issue is generally seen as not the tariffs themselves, but the general feeling that the U.S. is out of control and things can be changed suddenly. There seems to be a consensus that moving production to the U.S. and investing in U.S. manufacturing is not an option because what is done this month may next month prove to have been the wrong thing.
Trade agreements tend to increase stability over time to some extent, but planning can still be difficult if the situation can change overnight. There is significant concern that what is done today might be wrong for tomorrow with respect to the U.S. market.
Some thoughts on the overall economic situation for pumps from Europump’s economic consultants are:
• Nothing too dramatic will occur at this time, but there will be a slight growth slowdown over the next two years with a slight pickup in 2027-2029.
• There will be a modest yearly consumption rise.
• Expect a weaker Chinese market in the long term, and this will be a drag, but it is hard to say the total effect.
• Demand from general industry will be hit hard by tariffs.
• Weakening global oil demand will reduce oil and gas refining, but the regional split will vary.
• Lackluster industrial outlook will reduce chemical growth.
• A softer outlook for construction will reduce demand from the water and wastewater sector.
Regulatory environment
As in previous years, the general focus of the European pump industry through Europump continues to be on environmental and energy savings issues in conjunction with the EU Green Deal initiative, Europe’s agenda for sustainable growth in all industries. The Green Deal, however, is quite complex with a total of 176 individual measures. This has been described by European industry groups as a “tsunami of regulations.” Others have referred to it as a “manufacturing industry killer.” In 2025, the European Commission has put forth a package of proposals aimed at simplifying sustainability-related rules to boost competitiveness and reduce administrative burdens on companies. Key proposals include postponing deadlines for some reporting requirements and simplifying reporting obligations. While the basic components and goals of the Green Deal remain, there now seems to be a political will in the EU to lighten the burden on firms, particularly small firms, to allow manufacturing in the EU to remain strong and competitive. The European pump industry remains committed to sustainability and energy savings, but there is considerable relief over the European Commission’s new initiatives for simplification and moving deadlines.
One area of regulatory concern for European manufacturers that export to the U.S. relates to deregulation of environmental initiatives at the U.S. federal level. The concern is that individual states will make their own regulations. This is something that is now being seen with different per- and polyfluoroalkyl substance (PFAS) regulations that are being proposed in a number of states, which, if implemented into law, will bring extreme confusion to companies attempting to sell into the U.S. market.
In conclusion, U.S. pump companies can expect the general trajectory of economic conditions to be generally positive with a generally weakening U.S. dollar improving export prospects, while a trajectory of lower interest rates will likely mean lower borrowing costs. Meanwhile, structural conditions of aging water and wastewater infrastructure will continue to provide demand for pump companies that cater to this market segment.
However, the uncertainty generated by either new trade deals as companies work to navigate them in some cases, or the current lack of a trade deal in others, will continue to make strategic planning and investing decisions challenging. As the world adjusts to what appears to be a restructuring of the global trading system, maintaining strategic flexibility will be a key factor in a company’s ability to effectively navigate this period of uncertainty—a period that is likely to continue for the foreseeable future.
