CROSSROADS: US, Canada, Europe, China, India & Japan

At the Intersection of Geopolitics and Geoeconomics

Here is a summary of the most important events that unfolded over the last month in the United States, Canada, Europe, India, China, and Japan and which may affect economic, financial, and geopolitical issues in the months ahead. Tomorrow, we will be publishing our Crossroads Part II which covers the MENA, Latin America, Asia (ex. China/India/Japan), and Sub-Saharan Africa regions.

United States & Canada

The U.S. Court of Appeals for the Federal Circuit in Washington granted the Trump administration an extension allowing tariffs on China, Canada, and Mexico to remain in effect during the appeals process, following a lower court ruling in May that deemed the tariffs illegal. The tariffs, a core part of President Trump’s economic agenda, were imposed under the International Emergency Economic Powers Act (IEEPA), a 1970s law never before used to levy tariffs, and aimed at reshaping the global trade order and boosting U.S. manufacturing. The legal battle stems from lawsuits filed in April by small businesses and states who argued the tariffs caused financial harm and overstepped presidential authority; the Court of International Trade had agreed and ordered the tariffs halted. Trump administration officials argue that lifting the tariffs now would undermine ongoing global trade talks, especially with China, while critics, including the Liberty Justice Center, insist the tariffs remain clearly unlawful.
As of June 13^th, Senate GOP hardliners—including Sens. Ron Johnson (WI), Mike Lee (UT), and Rick Scott (FL)—have notably softened their tone toward the sweeping “Big Beautiful Bill,” signaling potential support following targeted outreach from President Trump, Vice President JD Vance, and White House officials like Kevin Hassett. Just weeks ago, Johnson condemned the bill’s spending levels, but after one-on-one talks with Trump and follow-up meetings, he acknowledged a more “hopeful tone” and openness to negotiation on deficit reduction, including future reconciliation bills. Efforts to sway the holdouts have included promises of pet provisions—like Lee’s REINS Act—and discussions of a “forcing mechanism” to return to pre-pandemic (2019) spending, all while GOP leadership works to keep total defections under three, with Vance as the potential tie-breaker. Senators like John Hoeven, John Kennedy, and Mike Rounds now expect the three fiscal hawks to ultimately vote yes, despite lingering concerns, reflecting both internal pressure and the bill’s centrality to Trump’s legislative agenda.
On June 14th, “No Kings” protests swept across the United States, with millions demonstrating in cities like Los Angeles, New York, and Philadelphia against President Donald Trump’s immigration raids, use of force, and perceived authoritarianism. In Los Angeles, where protests against ICE operations broke out earlier this month, tensions escalated as clashes broke out near the Federal Building, where National Guard troops and U.S. Marines had been deployed—despite opposition from Governor Gavin Newsom. The No Kings protests coincided with Trump’s birthday and the 250th anniversary of the U.S. Army, marked by a rare military parade in Washington, D.C., featuring tanks and marching soldiers. Despite the unrest, a CBS/YouGov poll showed 54% approval for Trump’s immigration policies, highlighting the deep national divide over presidential power and border enforcement.
On June 9^th, Canadian Prime Minister Mark Carney announced that Canada will raise its defense spending to meet NATO’s 2% of GDP target by the end of the current fiscal year (March 2026), accelerating a timeline previously set for 2032 under former PM Justin Trudeau. The military investment—covering vehicles, drones, Arctic sensors, and aid to Ukraine—comes amid ongoing negotiations with the U.S. over a new economic and security framework, and as Carney prepares to host the G7 summit in Alberta (June 15–17) and attend the NATO summit in The Hague (June 24–25). The move is also aimed at placating President Trump, who has criticized Canada’s low defense spending and its limited role in Arctic security through NORAD, and it signals interest in joining Trump’s proposed Golden Dome missile defense system. Carney emphasized Canada’s need to reduce dependence on the U.S. while also seeking to deepen ties with Europe’s rearmament efforts, framing the initiative as a broader effort to bolster national sovereignty and industrial capacity.
Market Implications: U.S. markets over the past month have shown a complex dynamic, calming somewhat from earlier volatility, but still warranting caution due to a mix of economic signals and persistent policy uncertainties. While Q1 earnings proved robust, providing a foundational tailwind, the omnipresent discussion of tariffs on nearly all S&P 500 earnings calls highlights the pervasive concern over corporate profitability and supply chain disruptions. The Federal Reserve’s decision to hold interest rates steady last month, citing tariff-related risks, suggests that investors shouldn’t anticipate an immediate boost from rate cuts, potentially capping equity market upside. Furthermore, the “Big Beautiful Bill”, promising significant tax cuts alongside increased spending, introduces a fiscal loosening that, while potentially supportive for some sectors, raises concerns about rising national debt and its implications for bond yields. The combination of mixed economic data (Q1 GDP contraction vs. steady job growth), a cautious Fed, an unpredictable trade landscape, and substantial fiscal expansion points to continued market volatility and sector divergence in the near term.

Europe

In early June, Ukraine launched its largest long-range drone attack of the war, striking four Russian military airbases and damaging or destroying at least 13 aircraft, including Tu-95 and Tu-22M3 strategic bombers. The operation, dubbed “Spider’s Web,” involved 117 drones smuggled over 18 months and hidden in mobile wooden cabins mounted on trucks. President Volodymyr Zelensky praised the SBU intelligence agency for the $7 billion operation, which targeted bases in Irkutsk, Murmansk, Ryazan, and Ivanovo. Russia confirmed attacks in five regions, labeling them “terrorist acts,” while denying serious damage. The strikes coincided with renewed peace talks in Istanbul and followed a massive Russian drone and missile assault on Ukraine, which injured civilians and killed 12 Ukrainian soldiers. Ukrainian General Mykhailo Drapatyi resigned in response to the troop deaths.
European Commission President Ursula von der Leyen unveiled the European Union’s 18th sanctions package against Russia on June 10th, aiming to escalate economic pressure amid stalled peace talks with Ukraine. The proposed measures include banning transactions with Nord Stream pipelines, lowering the oil price cap from $60 to $45 per barrel, and blacklisting 77 additional ships from Russia’s “shadow fleet” used to evade energy sanctions. The package also targets Russian banks and builds on previous efforts that have sanctioned over 300 vessels. The new price cap will be discussed at the upcoming G7 summit in Canada. Von der Leyen emphasized that strength is the only language Russia understands and called for a genuine cease-fire. E.U. diplomat Kaja Kallas and Polish deputy E.U. affairs minister Ignacy Niemczycki supported the measures, which they said are weakening Russia’s war capabilities despite Moscow’s attempts to adapt through military spending and new markets like China.
Centrist Bucharest mayor Nicușor Dan defeated far-right candidate George Simion in Romania’s presidential runoff with 54% of the vote on May 18^th amid the country’s highest turnout in 25 years (65%). Dan, a Sorbonne-trained mathematician and former anti-corruption activist, became Romania’s first independent president, defeating Simion, a Trump-aligned nationalist whose strong May 4^th first-round showing had raised fears of a far-right shift. The election followed a year of political turmoil, including a nullified 2024 vote due to Russian interference concerns and the resignation of Prime Minister Marcel Ciolacu. The Romanian result was seen as a major pro-EU victory in a polarized Europe. In Poland, Warsaw mayor Rafał Trzaskowski, an ally of Prime Minister Donald Tusk, led the first presidential round with 31.4% and will face Karol Nawrocki (29.5%) of the nationalist Law & Justice party in a June 1^st runoff. In Portugal, Prime Minister Luís Montenegro’s center-right coalition won a snap election, but the far-right Chega party surged, potentially becoming the second-largest bloc.
A leaked eight-page memo from Russia’s FSB—verified by six Western intelligence agencies and likely written in late 2023 or early 2024—reveals that Moscow secretly views China as a strategic adversary despite President Vladimir Putin’s public claims of a “no-limits” partnership with Xi Jinping. The document, produced by the FSB’s 7th Service (D.K.R.O.), outlines a covert counterintelligence program called “Entente-4,” launched on February 21, 2022—just three days before Russia invaded Ukraine—to monitor and disrupt Chinese espionage targeting Russian officials, scientists, and journalists. China, the memo says, has sent defense officials and intelligence-linked researchers into Russia to gather battlefield data, especially regarding drones and Western weapons, and to recruit disaffected Russian specialists, including those from the discontinued ekranoplan program. Beijing has also proposed supply chains to evade sanctions and drawn on Wagner Group tactics for its military and private operations in Asia, Africa, and Latin America. The FSB expresses concern over China’s territorial ambitions in Russia’s Far East—highlighted by Chinese maps using ancient names for Russian cities—and its growing influence in Central Asia and the Arctic. Still, the memo instructs agents to avoid provocations or public references to China as a threat, reflecting a tense but essential relationship that fuels Russia’s war economy through Chinese imports of oil, semiconductors, and military components.
Market Implications: European markets continue to outperform U.S. markets with significant gains in aerospace-defense, energy-secure utilities, and global dollar earners. On the energy front, banning any Nord Stream transactions and proposing a tighter $45 oil cap revives winter-gas anxiety, but LNG infrastructure and renewables have attracted investment flows. In Poland, with liberal President Trzaskowski only narrowly ahead and anti-establishment forces surging, Polish equities were a bit rattled this month. The European Central Bank (ECB) cut rates again this month, delivering an 8th consecutive cut amid falling inflation. The euro moderately strengthened against the U.S. dollar this month as the dollar hit three-year lows last week. We expect Eurozone markets to continue performing well.

China, India, & Japan

Despite a handshake agreement and President Trump’s announcement of 55% U.S. tariffs on Chinese goods—with China agreeing to a 10% tariff on U.S. imports—Beijing continues to link rare earth exports to Washington’s ongoing curbs on advanced AI chip sales to China. At the U.S.-China trade meeting in London, negotiators failed to resolve the national security dispute over China’s refusal to lift export restrictions on military-use rare earth magnets, including samarium, critical for U.S. weapons systems. U.S. officials are now considering a 90-day extension of current tariffs beyond the August 10th Geneva deadline (previously agreed to with China to reach a more permanent trade deal) to allow time for legal maneuvering under Section 301, in case Trump loses his tariff authority challenge in U.S. court. While China offered limited concessions—such as fast-tracked six-month export licenses for non-military U.S. firms—the broader impasse highlights China’s dominance in rare earth refining and its strategic leverage over the U.S., according to experts.
Economic data released in June shows the Chinese economy continues demonstrating weakness, reflecting ongoing challenges from U.S. tariffs and a sluggish property sector. Factory output growth slowed to a six-month low while industrial production rose by 5.8% year-on-year in May, missing expectations. In contrast, retail sales jumped 6.4%, the fastest pace in 17 months, buoyed by holiday spending and government-backed consumer incentives. While the unexpectedly strong retail sales gave the economy some relief, deflationary forces persist, and the property market slump has shown signs of deepening. While the recent data positions China to meet its 5% annual growth target, economists warn the momentum may not last as temporary consumption drivers fade, home prices continue to fall, and job market stress persists. Despite recent stimulus measures, including interest rate cuts and infrastructure funding, analysts expect further policy easing will be needed in the second half of the year to sustain growth.
China extended its anti-dumping investigation into European Union pork imports by six months to December 16^th, citing the case’s complexity amid broader trade tensions with the U.S. The probe, originally launched in June 2024 in response to EU tariffs on Chinese electric vehicles, targets major pork exporters like Germany, Spain, and France, and is seen as a strategic gesture to maintain strong ties with the EU. Chinese Commerce Minister Wang Wentao recently met EU trade officials in France, discussing EV tariffs, rare-earth exports, and market access, while also expanding Spanish pork exporter approvals. The move coincided with parallel U.S.-China trade talks in London.
The European Union approved a trilateral joint venture between BAE Systems (UK), Japan Aircraft Industrial Enhancement Co., and Leonardo (Italy) to lead the Global Combat Air Programme (GCAP), aimed at developing a sixth-generation fighter jet. Each company will hold a 33.3% stake, with the venture headquartered in the U.K. and initially led by an Italian CEO. The GCAP aircraft will serve the defense needs of Japan, the U.K., and Italy, with future export potential, and was recently showcased at the DSEI Japan event in Chiba on May 21st. This move highlights Japan’s deepening defense-industrial cooperation with Europe amid parallel efforts by France, Germany, and Spain to develop a competing fighter platform. Japan and the EU are holding security cooperation talks in Canada this week as both sides seek to reduce their dependence on the U.S.
On June 4^th, shares of Toyota Industries plunged up to 13% after reports emerged of a 4.7 trillion yen ($33 billion) buyout by Toyota Group to take the company private, including a tender offer of $26 billion at 16,300 yen per share—well below the prior day’s closing price of 18,400 yen. The deal, financed through a mix of equity from Toyota Fudosan, Akio Toyoda, and Toyota Motor, as well as loans from Sumitomo Mitsui, MUFG, and Mizuho, aims to restructure longstanding cross-shareholdings amid regulatory pressure from Japan’s Financial Services Agency. Despite a special committee requesting a higher offer price three times, the final offer remained unchanged, fueling investor disappointment. Analysts like Kei Okamura see this as part of a broader strategic shift within Toyota Group, as it prepares for capital redeployment and navigates global automotive headwinds including new U.S. tariffs.
On June 12^th, an Air India flight, a Boeing 787-8 Dreamliner bound for London, crashed just seconds after takeoff from Ahmedabad’s Sardar Vallabhbhai Patel International Airport. The aircraft, carrying 242 people, including passengers and crew, plummeted into the complex of a medical college, killing 241 on board and 38 on the ground. Miraculously, one passenger survived and is currently recovering. Investigators from India, the U.S., and the United Kingdom are examining possible causes, including engine failure, bird strike, or technical malfunction, as the flight data recorder has been recovered. The government has pledged a thorough investigation, while DNA identification efforts continue for the victims.
The World Bank revised India’s GDP growth forecast for the 2026 fiscal year down to 6.3% from 6.7%, citing weaker exports and slower investment growth amid global policy uncertainties. The projection came alongside a global growth downgrade to 2.3% for 2025, marking the slowest pace since 2008 outside of recessions, though India remains the fastest-growing major economy. The World Bank expects growth to rebound to an average of 6.6% in FY2026-27 and FY2027-28, supported by strong services and export sectors, while inflation is projected to stay contained under normal seasonal conditions. Chief economist Indermit Gill emphasized the need for rebuilding trade relations through tariff reductions and fiscal consolidation, forecasting that halving tariffs could boost global growth by 0.2 percentage points in 2025–26.
Market Implications: The provisional U.S.–China tariff framework steadies export sentiment, lifting tech and shipping shares and pushing the onshore yuan to a 2-month high. However, as reported above, deflationary pressures persist, and recent economic data shows continued weaknesses in the Chinese economy. The Japanese yen has weakened significantly in 2025, which has boosted export competitiveness but also raised import costs, especially for energy and food. However, Japanese equities continue to benefit from foreign inflows, especially into semiconductors and automation, as global investors seek exposure to resilient supply chains. The World Bank’s cut in growth to 6.3 % for India reinforces expectations of further easing from the Reserve Bank of India (RBI). Any durable U.S.–China trade cooperation would soften import-cost headwinds—especially electronics and fertilizer—partially offsetting slower growth. Overall, investors across the region are watching for confirmation that the Washington–Beijing thaw outlasts the summer negotiating calendar.

Top News This Month

United States & Canada

Europe

China, India, & Japan

Suggested Reading

Search

Archives