The global economy entered a decisive new phase in 2025. Against a backdrop of renewed US protectionism, Chinese industrial overcapacity and intensifying geopolitical tensions, businesses are being forced to rethink their strategies. Growth prospects, insolvency risks and margin pressure will shape the year ahead. Our economists analyse the key trends for 2026 and share insights to help European companies strengthen their resilience in an increasingly unstable environment.
2025: A Year of Global Economic Disruption
The year 2025 will stand out as a major rupture in the global economic landscape. Donald Trump’s decisive return to the White House in late 2024 ushered in a new wave of protectionism, symbolised by “Liberation Day” in April 2025 and the rapid rollout of broad‑based tariffs. This sudden shift sent economic uncertainty to levels comparable to those experienced during the COVID‑19 crisis.
Beyond trade policy, the geopolitical order itself has been shaken. Global fragmentation has intensified, with a new and unsettling development: tensions within the transatlantic alliance. Economic interdependence is now openly being used as a political weapon, through tariffs, export controls and sanctions.
Fragmentation is accelerating and the economy is increasingly used as a tool of coercion. What is worrying today is no longer just the fragmentation of the Global South, but the cracks within the transatlantic relationship itself
– Frédéric Wissocq, Western Europe & Africa Underwriting Director at Coface.
European businesses now find themselves under pressure from multiple fronts: US protectionist measures, aggressive Chinese competition, and growing regional instability. As a result, confidence among economic players has weakened, consumption remains subdued and investment decisions are increasingly cautious.
European Competitiveness: Between Strategic Vision and Execution Gaps
In this challenging context, Europe has at least succeeded in clearly identifying its structural weaknesses. The Draghi report on competitiveness and the Letta report on the Single Market highlighted persistent issues: lagging innovation compared with the US and China, fragmentation of the internal market, high energy costs and critical strategic dependencies.
In response, the European Union launched the “Competitiveness Compass”, a roadmap aimed at 2029, built around three key priorities:
- closing the innovation gap in advanced technologies,
- reconciling decarbonisation with industrial competitiveness,
- strengthening economic security by reducing strategic dependencies and accelerating political integration.
What is worrying today is not the diagnosis, but the slow pace at which the recommended measures are being implemented.
- Jean-Christophe CAFFET, Chief Economist at Coface.
While some initiatives have been launched—such as gigafactories, administrative simplification for SMEs and faster mining permit approvals—the scale and speed fall short of what the situation requires. The Draghi plan estimated annual investment needs of €750–800 billion, yet budget constraints and political resistance to joint debt issuance continue to limit concrete action.
Germany illustrates this tension particularly well. The election of Friedrich Merz in 2025 marked a significant shift in economic doctrine. Long known for fiscal discipline, Germany announced a €850‑billion recovery plan over ten years, including €500 billion for infrastructure, over €200 billion for defence, and €100 billion for the green transition.
It’s a double miracle: Germany has finally woken up after three lost years and moved away from strict fiscal orthodoxy.
- Jean-Christophe Caffet
While this could generate positive spillover effects across Europe, especially for neighbouring economies and suppliers, uncertainty remains around the timing and actual implementation of this spending.
European Businesses Between US Tariffs and Chinese Overcapacity
Contrary to initial fears, US tariffs have not caused major distortions for European exporters so far. Average effective global tariff levels now stand at around 16–17%, affecting Europe in a broadly similar way to other regions.
"Europe is not more heavily taxed than the rest of the world — and in some cases, even less.", highlights Jean-Christophe Caffet. At the macroeconomic level, around 80% of the tariff burden is ultimately absorbed by US companies and consumers, not foreign exporters.
The real threat to European industry lies elsewhere: the emergence of a second Chinese shock. Massive overcapacity in China, combined with reduced access to the US market due to tariffs, has resulted in a surge of low‑priced Chinese exports into Europe and third‑party “connector” countries such as Vietnam.
What European companies fear most today is Chinese dumping caused by structural overcapacity.
- Frédéric Wissocq, Western Europe & Africa Underwriting Director at Coface.
This offensive exerts strong deflationary pressure. Since the post‑pandemic reopening, the price gap between Chinese and European manufactured goods has widened by around 30 points — exceeding 40 points once exchange‑rate effects are factored in.
Chinese overcapacity is compressing prices, revenues and margins for European manufacturers. This is not cyclical, it is structural.
- Jean-Christophe Caffet, Group Chief Economist at Coface.
The most affected sectors include electric vehicles, capital goods linked to the energy transition, and metals, whose core markets — construction and automotive —are slowing. In Germany, profit margins for non‑financial companies have fallen by five points in just three years, with even sharper declines in specific manufacturing segments.
2026 Outlook: Sluggish Growth and Elevated Insolvency Risks
Looking ahead to 2026, Coface expects a continuation of moderate global growth amid persistent tensions. Global GDP is forecast to expand by around 2.4 – 2.5%, down from 2.6 – 2.7% in 2025 ; well below pre‑pandemic potential, now considered the new baseline.
United States : Growth should stabilise just under 2%, driven largely by massive investment in artificial intelligence and digital infrastructure. AI alone accounts for roughly 20% of US growth in 2025, with significant spillover effects on consumption through equity markets.
Europe : Growth is expected to hover around 1%. Germany could reach this level thanks to fiscal stimulus, while France’s outlook (0.6%) remains clouded by political and fiscal uncertainty.
China : Economic deceleration continues despite official growth targets of 5%.
India : Remains a bright spot, supported by domestic demand and limited exposure to US trade measures.
Corporate insolvencies are expected to keep rising in 2026, though at a slower pace. In France, business failures are projected to reach around 69,000 in 2025 — well above the 2009 crisis peak.
Globally, insolvencies are at 10‑ to 15‑year highs, although we are starting to see early signs of stabilisation in some markets.
- Jean-Christophe Caffet
For 2026, Coface forecasts a global increase in insolvencies of +3% to +4%, compared with +6% to +7% in 2025. Construction and hospitality remain particularly exposed, along with mid‑sized firms carrying heavy social and employment costs.
These are often historically fragile companies whose decline has been precipitated by the general context.
- Frédéric Wissocq
The gradual disappearance of “zombie companies” has begun, but a new wave of failures could emerge as technologies like artificial intelligence reshape value chains — what Coface economists describe as a phase of “destructive creation” during the transition.
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