Economically, US growth has become increasingly dependent on two drivers: government employment and immigration. The budget deficit and national debt have reached historic highs, rendering growth structurally unstable—sustained only through continued public spending and record levels of immigration.
Since 2020, job creation has been concentrated in publicly funded sectors such as public administration and healthcare, which together account for 43% of total job growth. This dynamic is pushing public expenditure ever higher.
Immigration tells a similar story. Labor force growth in recent years has come almost entirely from immigrants—a fact that fuels political opposition and exposes the fragility of a growth model reliant on demographic inflows. The US economy has never been this dependent on immigration.
The Republican Party sees both government expansion and immigration as vulnerabilities. That’s why it has initiated a deliberate break with the past: budget cuts and reduced immigration.
Geopolitically, the structural rise of China is eroding American hegemony. Not long ago dismissed as a copycat, China now leads in 57 of the world’s 64 most critical technologies. In nearly half, it is on track to establish dominance. Its share of global GDP has surged over the past two decades, overtaking the EU and closing in on the US. The West’s assumptions about technological leadership are being dismantled in real time.
America’s response? More departures from traditional policy. These include an autarkic economic course anchored in import tariffs, and deliberate geopolitical confrontation—from disputes over NATO contributions to a strategic flirtation with Russia, aimed at weakening the China–Russia alliance.
For markets, the result is divergence. The US faces the risk of growth deceleration amid fiscal tightening and rising geopolitical conflict. In contrast, Europe is embracing fiscal expansion. With public debt ratios lower than those of the US, and deficits still manageable (with the exception of France), the EU has room to spend. The €800 billion investment plan unveiled by the European Commission—partially backed by €150 billion in joint debt—signals a structural shift in policy. Germany is preparing an additional €500 billion in strategic investment.
China, too, is pivoting. With its largest budget deficit in decades, Beijing appears to be shifting away from export-led growth toward domestic consumption. Premier Li Qiang has declared higher household spending the government’s top priority for 2025.
The global economy is now splitting along fiscal and strategic lines. America retreats, Europe rearms, China rebalances. For investors, this marks the end of synchronized cycles—and the beginning of regime divergence.
