Six Global Issues to Watch in August 2026
US-China Economic Competition
The United States and China, the world’s two largest economies, are finding themselves increasingly in competition to lead the global economy and many of its most important industries. This is most notable in the artificial intelligence (AI) sector, where the two countries have invested huge sums of money to lead this industry into the future, leaving all other countries far behind in the process. Meanwhile, competition between the US and China is also intensifying for control of energy supplies, rare earths and other critical commodities. All of this is taking place amid growing trade tensions between the US, China and many of their key trading partners. At the same time, both countries recorded slower economic growth in the second quarter, something that could further add to these tensions in the coming months.
Russia-Ukraine
So far this summer, there has been very little change to the front lines in eastern and southern Ukraine, with Russian forces paying a massive price in terms of personnel and materiel for very little ground gained. To be sure, Ukraine is also paying a heavy price, and it does not appear to be in a position to drive Russian forces from its territory at this point. Instead, the war is increasingly being fought in the air, with drones making it difficult for both sides to replenish their forces along the front lines, and with both sides striking deep into one another’s territory. Looking ahead, Ukraine is likely to take further steps to bring the war to Russia, which could prompt a larger Russian response in terms of attacks on Russian cities, potentially taking the war to a dangerous new level.
The Health of the Global Economy
The economic results for many of the world’s leading economies in the second quarter of 2026 have been released in recent weeks, and they paint a picture of a global economy that is facing several headwinds. Both the United States and China saw economic growth slow in the second quarter, while the European Union’s rate of growth remained relatively low, despite an acceleration of growth in the second quarter. Meanwhile, much of the world’s growth continues to be driven by investment in AI and spending by wealthier consumers, raising fears that should one of these two pillars of growth falter, the global economy could be headed for a major slowdown. On the other hand, there are hopes that AI and other technological improvements are raising productivity growth levels, potentially leading to stronger growth in the months ahead.
Has the US Military Been Left Exposed
Despite its massive spending and experience advantages over other militaries, there are growing concerns that the United States’ armed forces have been left exposed due to worsening weapons shortages and an increasingly uncertain strategic direction from Washington. This first problem has been caused by the on-again, off-again war in Iran, which has drained the stockpiles of many key US weapons systems. The second problem comes from the chaotic nature in which the US armed forces have been managed of late, with growing uncertainty over the direction of defense policy in the US. At the same time, the wars in Ukraine and Iran have shown how warfare has changed in recent years, forcing the US to reconsider many of its key defense doctrines.
Debt Strains Worsen
While the world is distracted with conflicts, corruption and the rising cost-of-living, one of the biggest threats to the health of the global economy continues to worsen. This threat is the rising level of public and private debt around the world and the fact that too few governments or businesses are doing enough to reduce debt levels. On the public side, debt levels as a share of GDP are rising in most countries and could soon prove unsustainable to some rather large countries without an unexpected increase in government revenues or a dramatic cut in public spending. On the private side, we have already seen that many businesses and individuals are struggling with soaring amounts of debt, threatening to severely curtail business and consumer spending in many countries. What is increasingly clear is that the current trajectory is unsustainable, and eventually some major countries or businesses will succumb to their debt burdens.
The AI Race
The leading players in the United States’ artificial intelligence sector have invested huge amounts of money into AI and its surrounding infrastructure, and this has given them a major leg up in the race for AI supremacy, and provided a boost for the US economy. At the same time, Chinese AI firms are proving adept at creating their own AI models, putting that country in a position to eventually challenge the United States for leadership in AI. In the coming weeks, companies from both countries are expected to announce new models that are likely to be much more powerful than those that exist at the moment. This means that AI models will continue to become more powerful and to have a bigger impact on the economy. They may also be becoming more dangerous as well.