Geopolitical Concerns
Europe must choose between America and China
Oren Cass, The Financial Times
Kurt M. Campbell and Rush Doshi, Foreign Affairs
Trump and Xi’s Tariffs are Preparation for a US vs. China War Nobody Wants
Daniel Ten Kate, Bloomberg
Trade Wars Are Easy to Lose: Beijing Has Escalation Dominance in the U.S.-China Tariff Fight
Adam S. Posen, Foreign Affairs
In the evolving geopolitical landscape, Europe faces a crucial decision regarding its future alignment, needing to choose between a United States-led bloc and closer ties with China. This dilemma arises as the US acknowledges the end of its unipolar dominance and the emergence of a multipolar world, a view articulated by Secretary of State Marco Rubio in February and echoed by the “New Right” in Washington. The Trump administration’s proposed new US-led economic and security alliance demands members commit to balanced trade, prioritize their own security, and exclude China from their markets. While nations like Mexico, Canada, Japan, and India appear to be aligning with this vision, with India’s trade minister indicating positive negotiations with Washington, Europe, particularly Germany, faces significant challenges in abandoning its export-intensive model, bolstering its military, and confronting subsidized Chinese competition. Vice-President JD Vance’s February remarks at the Munich Security Conference and Treasury Secretary Scott Bessent’s warnings highlight US concerns about Europe’s potential pivot towards China, especially as the EU began discussing lowering barriers to Chinese electric vehicles. The US recognizes its diminished solo leverage against China’s extensive scale, boasting twice the manufacturing capacity and the world’s largest navy, and thus necessitates a new strategy centered on “allied scale” and “capacity-centric statecraft”. This approach requires transforming traditional alliances into platforms for integrated and pooled capabilities across military, economic, and technological domains, moving beyond a security-centric model to one of deep coordination and codependence.
The imposition of steep tariffs by the Trump administration on China, exceeding 100% by April 2025, and China’s retaliatory tariffs of 125% are interpreted by some as preparations for a broader conflict that neither nation desires. Despite figures like Treasury Secretary Scott Bessent suggesting the US holds the advantage due to the $263.3 billion trade deficit in 2024 (with US imports from China at $462.5 billion and exports at $199.2 billion), analysts argue that China possesses “escalation dominance” in this tariff fight. The US economy’s dependence on vital Chinese goods, from pharmaceuticals to inexpensive semiconductors and critical minerals, means that drastically reducing or halting these imports risks stagflation and critical shortages, as President Trump himself acknowledged the US’s inability to produce enough antibiotics. This situation led some to view Trump’s economic approach, marked by events like the April 2 “Liberation Day” tariff announcement, as a self-harming act akin to a “Vietnam War” for the economy. Furthermore, Trump’s aggressive tariff policies, even towards allies like Canada and Germany, who criticized the measures with Canadian Prime Minister Mark Carney declaring the end of an era of US-led economic leadership, have damaged US credibility and fostered distrust, potentially pushing some nations to increase economic ties with China. The prevailing view among some experts is that without a strategy built on genuine allied scale and mutual trust, recognizing China’s growing dominance in several key technologies and overall productive capacity, the US risks being overshadowed by a China with unprecedented economic and military capabilities.v
Geoeconomics
A flight from the dollar could wreck America’s finances
The Economist
What is behind the Treasury sell-off?
Gillian Tett, The Financial Times
Liquidity worsens in $29tn Treasury market as volatility soars
Kate Duguid, Harriet Clarfelt, and Costas Mourselas, The Financial Times
Sterling’s Past and the Dollar’s Future by Barry Eichengreen
Berry Eichengreen, Project Syndicate
A potential exodus from the dollar poses a serious risk to U.S. financial stability, given that the dollar’s global dominance—often referred to as the “exorbitant privilege”—has long allowed the U.S. to run large deficits and accumulate significant debt with relative ease. By April 13, 2025, alarm bells were ringing: the dollar had dropped over 4% against a basket of major currencies since the start of the month, while yields on 10-year Treasury bonds rose by 0.3 percentage points. This combination—falling dollar and rising yields—was widely seen as a sign that investors were growing uneasy about the U.S. economic outlook, with some drawing comparisons to the UK’s post-mini-budget market meltdown in 2022. The sell-off in Treasurys appeared to stem from multiple concerns: rising inflation pressures fueled by President Trump’s tariffs, the potential unwinding of complex hedge fund “basis trades” in the bond market, and underwhelming demand in recent Treasury auctions. Additionally, many market observers cited growing discomfort with the unpredictability of U.S. economic policy under Trump, whose sudden tariff announcements were seen as undermining confidence in the country’s economic stewardship. On April 11, New York Fed President John Williams forecasted inflation between 3.5% and 4% for the year, while a University of Michigan survey showed consumers expected inflation to reach 6.7%—the highest reading since 1981.
The turbulence in the Treasury market was made worse by a sharp decline in market liquidity, which made it harder for investors to buy or sell U.S. government bonds without moving prices substantially. By April 11, 2025, measures of market depth—used to gauge how well the market can handle large trades—had reportedly fallen to about 20% of their usual levels. This fragility meant that even modest trades could cause major swings in yields. The situation has reminded some analysts of sterling’s crisis in 1925, when Winston Churchill, as Chancellor of the Exchequer, returned the British pound to the gold standard at its pre-war level. Although this restored London’s status as a global financial hub, it also weakened British exports and required high interest rates to maintain the pound’s strength, ultimately straining the broader economy. In the past week, economic historian Barry Eichengreen argued that the U.S. could learn from sterling’s past: to maintain the dollar’s global status, America must protect financial stability, resist overusing tariffs—which disrupt the trade relationships that underpin dollar demand—and uphold strong alliances. However, as critics have warned, the U.S. appears to be veering in the opposite direction: courting instability, escalating tariffs, and straining ties with global partners.
Global Junctions
Graham McAleer, Law & Liberty
The Shifting Geopolitics of AI
Ravi Agrawal, Foreign Policy
Health Is Wealth in a Geriatric World
Hippolyte Fofack, Project Syndicate
Fault lines of power are shifting from physical borders to digital domains and demographic frontiers. In his 2024 book World Builders, Bruno Maçães argues that modern empires are forged through control over AI and microchip networks—not military conquests. He traces this “system war” mentality to moments like Donald Trump’s 2018 chip tariffs and Xi Jinping’s 2016 push for cyber sovereignty. Ravi Agrawal’s April 8 interview with Goldman Sachs’s Jared Cohen echoes these themes, highlighting AI’s dependence on vulnerable global supply chains—from semiconductors and rare minerals to the 750,000 miles of undersea cables that transmit $10 trillion daily. The U.S. imported $1.4 trillion in embedded-chip goods in 2024 alone, yet is hamstrung by tariffs and power-hungry, underprepared data centers. Meanwhile, China refines 92% of the world’s critical minerals, giving it vast strategic leverage in the AI race.
On the demographic front, Hippolyte Fofack’s April 11 analysis in Foreign Policy warns of a different kind of disruption: global aging. With the elderly set to outnumber children under five by 2050—especially in low- and middle-income countries where their numbers will grow 140% between 2006 and 2030—rising healthcare costs and a shrinking labor force could jeopardize economic stability. The Saudi-backed Hevolution Foundation is stepping in with a $1 billion annual pledge for anti-aging research, showcasing innovations like senolytic drugs and rapamycin at the 2023 Global Healthspan Summit. As states race to dominate digital space and slow biological decline, this week’s developments reveal a world reordering itself not just through geopolitics, but through the strategic mastery of code, cables, and chromosomes.
Global Trajectories
Valery Perry, Project Syndicate
How India’s middle-class debt crisis is threatening growth
Chris Kay and Krishn Kaushik, The Financial Times
The Forever War in Gaza: Leaders on Both Sides—and in America—Have Little Incentive to End It
Amos Harel, Foreign Affairs
In the Middle East, Israel’s renewed offensive in Gaza—reignited in March by Prime Minister Netanyahu—has intensified the region’s humanitarian crisis while stalling diplomatic progress. With over 400 Palestinian deaths reported since March 18 and no resolution in sight, Netanyahu faces mounting domestic and international pressure. His dual goals—destroying Hamas and securing hostage releases—are proving incompatible, especially as U.S. President Trump offers continued support and far-right Israeli coalition partners call for Gaza’s reoccupation. Meanwhile, civic unrest and a brewing corruption scandal further complicate Netanyahu’s political calculus. Elsewhere, in India, a surge in middle-class borrowing threatens Prime Minister Modi’s development agenda. Driven by post-pandemic aspirations and easy access to credit, household debt has soared, prompting tighter regulation by the Reserve Bank. While some investors remain optimistic, rising delinquencies and inequality suggest the risks of a debt-fueled economic model may be only beginning to surface.
Across the Atlantic, the Western Balkans are emerging as a strategic bellwether for Europe’s future. As Valery Perry writes, the region’s vast deposits of critical raw materials like lithium have sparked a scramble by European firms—often with little regard for environmental or governance standards. Meanwhile, Russia and China expand their influence through ideological and infrastructural incursions, respectively, with Moscow promoting a “Serbian world” and Beijing investing through the Belt and Road Initiative. The EU, prioritizing stability over liberal values, risks entrenching autocratic regimes by outsourcing migration management to the Balkans. Yet, amid this geopolitical chessboard, popular resistance persists—signaling that democratic ambitions in the region are far from extinguished. Together, these stories underscore the fault lines between democratic values and realpolitik in an increasingly multipolar world.
