Noah Smith delivers a sobering assessment of a year where economic orthodoxy was dismantled not by crisis, but by a deliberate, chaotic rejection of expert consensus. In his 2025 year-in-review, Smith argues that the United States is navigating a perfect storm: self-inflicted trade wars, a speculative AI bubble, and a geopolitical retreat that has inadvertently ceded global leadership to Beijing. This is not just a recap of headlines; it is a diagnosis of a nation that has lost its strategic compass, trading long-term stability for short-term political theater.
The Tariff Trap
Smith opens with a scathing critique of the administration's trade policy, which he describes as a departure from seventy years of American economic tradition. He writes, "On April 2, which he dubbed 'Liberation Day', [the administration] announced truly enormous tariffs on almost all of the countries in the world." The result, he notes, has been a corrosive uncertainty that has weakened the dollar and disrupted supply chains without delivering the promised manufacturing renaissance.
The author's analysis is particularly sharp when he dismantles the intellectual underpinnings of these policies. He points out that the administration "makes it a point of pride not to listen to economists, instead choosing to invent a blizzard of dubious ad-hoc justifications for the President's whims." This refusal to engage with economic reality has led to a policy mix that hurts allies while failing to effectively counter China. Smith argues that a smarter approach would have been strategic trade policy—protecting infant industries and national security while maintaining open trade with partners. Instead, the current strategy is driven by myth. He notes, "Lots of people persist in thinking that trade deficits make countries poorer... But they do not." This misconception, he suggests, has blinded policymakers to the fact that globalization did not hollow out the middle class, yet the administration continues to act as if it did.
The whole case for [the administration's] tariffs was based on misconceptions. Which is a shame, because pure free trade is not the ideal policy.
Critics might argue that Smith underestimates the political necessity of appearing tough on trade to secure domestic support, but the economic evidence he cites regarding the damage to the manufacturing sector suggests the cost is too high. The historical parallel to the Smoot-Hawley Tariff Act looms large here; just as in 1930, the attempt to shield domestic industry through blanket tariffs risks triggering a global contraction that hurts the very workers it aims to protect.
The AI Bubble and the Electric Stack
Shifting to technology, Smith identifies the Artificial Intelligence boom as the primary engine keeping the U.S. economy afloat despite trade headwinds. He draws a compelling comparison to historical infrastructure booms, noting that data center construction is "exceeding the 1990s telecom boom and drawing comparisons to the railroad boom of the 1800s." However, he warns that the financial architecture supporting this growth is fragile. "A lot of people are worried that this construction bonanza is being financed by shady private credit deals that could hurt the macroeconomy if the AI sector goes bust," he writes.
Smith's insight here is that a bust could occur even if the technology succeeds. He explains that railroads and telecoms were ultimately transformative, yet both experienced devastating crashes because the capital investment outpaced the immediate revenue. "If AI fulfills everyone's wildest dreams, but slightly too slowly to pay back the data center loans, there could still be carnage in the financial markets," he cautions. This reframes the debate from "will AI work?" to "can the financial system survive the wait?"
Simultaneously, Smith highlights a critical failure in the U.S. approach to the "Electric Tech Stack"—batteries, motors, and power electronics. He argues that the U.S. has allowed this vital technology to become a "culture-war football," with Republicans attempting to "cancel battery manufacturing." This has created a dangerous gap between the U.S. and China. "Very few Americans seem to understand that as battery-powered drones master the battlefield, whoever can build more batteries and motors will rule the skies," Smith writes. The irony, he notes, is that while the U.S. debates the climate implications, China is securing its dominance in the technologies that will define future warfare and industrial power.
The Rise of the Chinese Century
Perhaps the most provocative claim in the piece is the assertion that the world has officially entered the "Chinese Century." Smith argues that the administration's isolationist instincts and feuds with allies have accelerated this shift. "Trump's battles with domestic opponents, isolationist instincts, and eagerness to start fights with allies have accelerated the rise of Chinese power," he writes. The result is a geopolitical landscape where China dominates the manufacturing technologies decisive for a protracted conflict.
However, Smith refuses to paint China as an unassailable superpower. He points to internal fractures, specifically the phenomenon of "involution," where excessive industrial policy has led to companies competing profits to zero, causing deflation and leaving workers exhausted. "China's leaders are a bit too focused on feats of technical and social engineering, and not focused enough on making their people happy," he observes. Furthermore, the looming succession issue presents a significant risk. With the current leader in his seventies and no clear heir, Smith warns that "either a superannuated leader or a vicious succession battle could present major problems for China."
The Collapse of the Left and the Gangster Regime
Smith turns his critical eye toward the American political landscape, arguing that the progressive movement has lost its way. He contends that progressive approaches to crime, infrastructure, and education have proven inadequate. "Progressive procedural requirements have made building infrastructure, transit, housing, and green energy very difficult in America," he writes, noting that this has hampered the very causes progressives claim to support. He also criticizes the embrace of "degrowth" and the online culture that has become "ghoulish," cheering violence against business executives.
On the right, Smith describes a "gangster regime" that has abandoned institutional norms. He writes that the administration has spent its early days "feuding with American institutions — the media, the Fed, the courts, the electoral system, and so on." This has led to a palpable shift in the national character. "The U.S. now feels like a much more authoritarian country than it did a year ago," he asserts. The administration's rhetoric has escalated to the point where officials have used "the rhetoric of civil war," and the administration has threatened restrictions on free speech following political violence.
The U.S. now feels like a much more authoritarian country than it did a year ago. This sadly fits with the global trend toward strongman rule.
Smith suggests that despite the ferocity of the rhetoric, the movement is hollow. "Contrary to the hopes of its adherents, Trumpism is not building any new communities, institutions, or organizations in America; instead it's just a blast of mostly online rage." He predicts that without the personal charisma of the leader, the movement may fracture into a more ideological, crusading force that could be difficult to manage in a diverse democracy.
Bottom Line
Noah Smith's 2025 review is a masterclass in connecting disparate economic and political threads into a coherent narrative of strategic failure. His strongest argument is that the U.S. has squandered its unique position by rejecting expertise in favor of populist whims, leaving a vacuum that China is filling with disciplined industrial policy. The piece's greatest vulnerability is its reliance on the assumption that the current administration's incompetence will remain a liability rather than a political asset; however, the economic data on supply chain disruption and the geopolitical shift toward Beijing suggest the long-term costs are already being tallied. Readers should watch closely for the intersection of the AI financial bubble and the administration's trade wars, as this convergence could trigger the very economic instability the policies were meant to prevent.