Elena Duggar and the Global Economic Slowdown: Implications for Chile

In an era marked by geopolitical turbulence, technological transformation, and shifting trade paradigms, Elena Duggar—Managing Director at Moody’s Macroeconomic Board—has emerged as a leading voice in diagnosing the structural headwinds facing the global economy. Her recent assessment that “the global economy is going to grow below potential this year and next” carries profound implications not only for major economies but also for emerging markets like Chile, whose fortunes are deeply intertwined with global trade dynamics, commodity cycles, and external demand.

Duggar’s analysis centers on a confluence of factors: fading front-loaded trade activity, heightened policy uncertainty, and the re-emergence of tariffs as a central instrument of U.S. economic policy. While early 2025 saw a temporary boost in economic indicators—driven in part by stockpiling ahead of anticipated tariff hikes—Moody’s forecasts a marked slowdown in the second half of the year. This deceleration is expected to persist into 2026, with U.S. growth moderating to 1.5%, the euro area expanding modestly at 1.1–1.4%, and China’s growth tapering from 4.7% to 4%. For Chile, a small open economy heavily reliant on copper exports and sensitive to global financial conditions, these trends signal significant challenges.

The Tariff Shockwave and Chile’s Vulnerability

The most immediate channel through which Duggar’s global outlook affects Chile is via trade. The United States’ dramatic shift toward protectionism—marked by an average tariff rate surging from 2.7% to an estimated 18%—has upended decades of trade liberalization. Though Chile is not a primary target of U.S. tariffs, the ripple effects are unavoidable. As Duggar notes, “tariffs are beginning to show up, weighing on consumer spending and company margins,” which in turn dampens global demand for raw materials, including copper—Chile’s top export and a critical source of government revenue.

Moreover, Chile’s deep integration into global supply chains means that any contraction in U.S. or Chinese demand reverberates through its manufacturing and mining sectors. China, Chile’s largest trading partner, accounts for nearly 40% of its copper exports. A slowdown in Chinese growth—exacerbated by domestic property sector woes and external trade pressures—directly translates into lower export earnings, reduced fiscal space, and weaker investment sentiment in Santiago.

Spillovers Through Financial and Commodity Channels

Beyond trade, the global slowdown Duggar describes affects Chile through financial markets and commodity prices. The Federal Reserve may maintain higher interest rates for longer as inflationary pressures from tariffs and fiscal expansion continue to constrain U.S. monetary policy. This environment strengthens the U.S. dollar and tightens global financial conditions, making it pricier for emerging markets like Chile to service dollar-denominated debt and attract foreign capital.

Copper prices, already volatile, are likely to face downward pressure in a low-growth global scenario. Historical precedent shows that during periods of synchronized global slowdowns—such as in 2015 or 2020—copper prices plummet, triggering fiscal deficits and currency depreciation in Chile. The Central Bank of Chile may be forced to maintain a hawkish stance to defend the peso, even as domestic growth falters—a classic policy dilemma for commodity-dependent economies.

Domestic Policy Challenges Amid External Headwinds

Chile’s own domestic uncertainties further complicate its ability to cushion these external shocks. Political polarization, constitutional reform debates, and regulatory unpredictability in the mining sector have already dampened investor confidence. In this context, Duggar’s warning about “unprecedented uncertainty” resonates deeply. If global firms delay investment decisions due to tariff ambiguity—as Drew DeLong of Kearney observes—Chile may struggle to attract the foreign direct investment needed to diversify its economy and transition toward green technologies, where it holds significant potential.

However, there are positive aspects. Chile’s strong macroeconomic fundamentals—low public debt, an independent central bank, and a credible fiscal rule—provide buffers absent in many peer economies. Additionally, its network of free trade agreements (including with the U.S., EU, and CPTPP members) offers alternative markets should U.S.-China tensions escalate further. Strategic positioning in lithium and renewable energy could also insulate parts of the economy from traditional commodity cycles.

The AI Wildcard and Long-Term Prospects

While Duggar cautions that AI investments have yet to yield broad productivity gains—citing MIT research showing minimal returns on generative AI spending—Chile could still benefit indirectly. If AI-driven efficiency boosts U.S. and European demand for clean energy and battery metals, Chile’s lithium reserves (the largest in the world) may become even more strategically valuable. However, this hinges on the country’s ability to modernize infrastructure, streamline permitting, and invest in human capital—challenges that require political consensus currently in short supply.

Conclusion

Elena Duggar’s sobering assessment of a subpar global growth trajectory serves as a timely warning for Chile. The confluence of tariff-driven trade fragmentation, slowing major economies, and financial tightening creates a challenging external environment. Yet, Chile’s resilience will depend less on global forces—which it cannot control—and more on its domestic choices: restoring policy predictability, deepening structural reforms, and leveraging its natural advantages in the energy transition.

As Duggar reminds us, “On average, trade wars make everyone worse off.” But in a world of managed decline and strategic realignment, countries that adapt swiftly and credibly may still carve out paths to sustainable growth. For Chile, the road ahead is narrow—but not closed.

In an era marked by geopolitical turbulence, technological transformation, and shifting trade paradigms, Elena Duggar—Managing Director at Moody’s Macroeconomic Board—has emerged as a leading voice in diagnosing the structural headwinds facing the global economy. Her recent assessment that “the global economy is going to grow below potential this year and next” carries profound implications not only for major economies but also for emerging markets like Chile, whose fortunes are deeply intertwined with global trade dynamics, commodity cycles, and external demand.

Duggar’s analysis centers on a confluence of factors: fading front-loaded trade activity, heightened policy uncertainty, and the re-emergence of tariffs as a central instrument of U.S. economic policy. While early 2025 saw a temporary boost in economic indicators—driven in part by stockpiling ahead of anticipated tariff hikes—Moody’s forecasts a marked slowdown in the second half of the year. This deceleration is expected to persist into 2026, with U.S. growth moderating to 1.5%, the euro area expanding modestly at 1.1–1.4%, and China’s growth tapering from 4.7% to 4%. For Chile, a small open economy heavily reliant on copper exports and sensitive to global financial conditions, these trends signal significant challenges.

The Tariff Shockwave and Chile’s Vulnerability

The most immediate channel through which Duggar’s global outlook affects Chile is via trade. The United States’ dramatic shift toward protectionism—marked by an average tariff rate surging from 2.7% to an estimated 18%—has upended decades of trade liberalization. Though Chile is not a primary target of U.S. tariffs, the ripple effects are unavoidable. As Duggar notes, “tariffs are beginning to show up, weighing on consumer spending and company margins,” which in turn dampens global demand for raw materials, including copper—Chile’s top export and a critical source of government revenue.

Moreover, Chile’s deep integration into global supply chains means that any contraction in U.S. or Chinese demand reverberates through its manufacturing and mining sectors. China, Chile’s largest trading partner, accounts for nearly 40% of its copper exports. A slowdown in Chinese growth—exacerbated by domestic property sector woes and external trade pressures—directly translates into lower export earnings, reduced fiscal space, and weaker investment sentiment in Santiago.

Spillovers Through Financial and Commodity Channels

Beyond trade, the global slowdown Duggar describes affects Chile through financial markets and commodity prices. The Federal Reserve may maintain higher interest rates for longer as inflationary pressures from tariffs and fiscal expansion continue to constrain U.S. monetary policy. This environment strengthens the U.S. dollar and tightens global financial conditions, making it more expensive for emerging markets like Chile to service dollar-denominated debt and attract foreign capital.

Copper prices, already volatile, are likely to face downward pressure in a low-growth global scenario. Historical precedent shows that during periods of synchronized global slowdowns—such as in 2015 or 2020—copper prices plummet, triggering fiscal deficits and currency depreciation in Chile. The Central Bank of Chile may be forced to maintain a hawkish stance to defend the peso, even as domestic growth falters—a classic policy dilemma for commodity-dependent economies.

Domestic Policy Challenges Amid External Headwinds

Chile’s own domestic uncertainties further complicate its ability to cushion these external shocks. Political polarization, constitutional reform debates, and regulatory unpredictability in the mining sector have already dampened investor confidence. In this context, Duggar’s warning about “unprecedented uncertainty” resonates deeply. If global firms delay investment decisions due to tariff ambiguity—as Drew DeLong of Kearney observes—Chile may struggle to attract the foreign direct investment needed to diversify its economy and transition toward green technologies, where it holds significant potential.

However, there are positive aspects. Chile’s strong macroeconomic fundamentals—low public debt, an independent central bank, and a credible fiscal rule—provide buffers absent in many peer economies. Additionally, its network of free trade agreements (including with the U.S., EU, and CPTPP members) offers alternative markets should U.S.-China tensions escalate further. Strategic positioning in lithium and renewable energy could also insulate parts of the economy from traditional commodity cycles.

The AI Wildcard and Long-Term Prospects

While Duggar cautions that AI investments have yet to yield broad productivity gains—citing MIT research showing minimal returns on generative AI spending—Chile could still benefit indirectly. If AI-driven efficiency boosts U.S. and European demand for clean energy and battery metals, Chile’s lithium reserves (the largest in the world) may become even more strategically valuable. However, this hinges on the country’s ability to modernize infrastructure, streamline permitting, and invest in human capital—challenges that require political consensus currently in short supply.

Conclusion

Elena Duggar’s sobering assessment of a subpar global growth trajectory serves as a timely warning for Chile. The confluence of tariff-driven trade fragmentation, slowing major economies, and financial tightening creates a challenging external environment. Yet, Chile’s resilience will depend less on global forces—which it cannot control—and more on its domestic choices: restoring policy predictability, deepening structural reforms, and leveraging its natural advantages in the energy transition.

As Duggar reminds us, “On average, trade wars make everyone worse off.” But in a world of managed decline and strategic realignment, countries that adapt swiftly and credibly may still carve out paths to sustainable growth. For Chile, the road ahead is narrow—but not closed.