CROSSROADS: North America, Europe, China, India & Japan

Here is a summary of the most important events that unfolded over the last month in North America, 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.

Top News This Month

The U.S. and Israel entered into war with Iran beginning on February 28th with coordinated strikes on Iran’s nuclear facilities, military assets, and senior leadership—including the killing of Supreme Leader Ali Khamenei.

The U.S. government is in the process of developing a massive refund system for approximately $166 billion in tariffs following the Supreme Court’s decision against Trump’s use of the IEEPA, while trade investigations into major trading partners have been launched as the administration rebuilds its tariff strategy.

European leaders are increasingly reconsidering nuclear power as energy security concerns intensify amid global instability, with the partial closure of the Strait of Hormuz and disruptions to LNG flows having driven European natural gas prices significantly higher.

The United States and China have resumed high-level economic and trade talks in Paris, though a highly anticipated Trump-Xi summit has been postponed amidst the ongoing Iran conflict.

North America

The U.S. and Israel entered into war with Iran beginning on February 28th with coordinated U.S.–Israeli strikes on Iran’s nuclear facilities, military assets, and senior leadership—including the killing of Supreme Leader Ali Khamenei—which marked a dramatic escalation after diplomatic efforts collapsed. As the war has progressed, frustration has been mounting over shifting operational objectives, swelling costs, and growing strains on U.S. and allied stockpiles. Iran responded with extensive missile and drone attacks on Israel, U.S. bases, and Gulf states, mobilizing its regional network and targeting energy infrastructure and major shipping routes, including disruptions to the Strait of Hormuz, a conduit for roughly one‑fifth of global oil supply. Although Iran’s initial strike capacity has diminished due to major battlefield losses, the war’s expansion into Lebanon, Iraq, and other fronts has amplified concerns about a drawn‑out conflict with no clear exit, as well as the risk that Iran may increasingly rely on asymmetric retaliation outside traditional rules of engagement. Continued exchanges have caused civilian casualties and widespread infrastructure damage, while global markets reel from energy disruptions and inflationary pressure. Nearly a month in, the situation remains volatile, with diplomatic signals deeply mixed, operational costs rising, and fears growing that the conflict could harden into a prolonged regional confrontation reshaping Middle Eastern dynamics.
The U.S. Senate has twice rejected war powers resolutions aimed at restricting President Donald Trump’s military campaign against Iran, voting 47–53 and in largely party-line decisions that effectively preserve executive authority as the conflict escalates. The measures, introduced by Democratic senators seeking to require congressional authorization for continued hostilities, were defeated with only limited cross-party defections, underscoring deep divisions in Washington over constitutional war powers. The votes followed U.S. and Israeli strikes that killed Iran’s supreme leader and triggered retaliatory attacks, including the deaths of American service members, raising the stakes of the debate over oversight and escalation. Supporters of the resolutions argue that Congress has been sidelined despite what they characterize as a full-scale war, while opponents contend that restricting the president would undermine operational flexibility during an active conflict. With additional legislative efforts expected and no clear timeline for the war’s duration, the outcome signals that U.S. military operations in Iran are likely to continue under broad executive discretion despite ongoing political pressure for greater oversight.
As of this month, the U.S. government is in the process of developing a massive refund system for approximately $166 billion in tariffs following a February 20th Supreme Court ruling that declared certain duties under the International Emergency Economic Powers Act (IEEPA) illegal. U.S. Customs and Border Protection (CBP) is building an automated portal called the Consolidated Administration and Processing of Entries (CAPE). CBP estimates it may be ready for use by late April 2026. Refunds are primarily owed to Importers of Record who directly paid the duties on over 53 million individual shipments. While thousands of companies like FedEx and Costco have filed individual lawsuits, the U.S. Court of International Trade is pushing for this streamlined administrative process to avoid millions of working hours. Delays in processing are estimated to cost taxpayers roughly $700 million per month in accruing interest on the overpaid amounts. While companies are being urged to pass refunds to consumers as price cuts or bonuses, they are generally not legally obligated to do so unless dictated by private contracts. At the same time, the U.S. has launched a sweeping wave of Section 301 trade investigations targeting more than a dozen of its major trading partners—including China, Mexico, the European Union, Japan, India, South Korea, Taiwan, Vietnam, and others—citing alleged unfair trade practices and excess manufacturing capacity. These probes are intended to rebuild tariff mechanisms struck down by the Supreme Court and could lead to a new round of duties once the investigations conclude.
On March 9th, the AI company Anthropic filed two lawsuits against the U.S. Department of War and other federal agencies. This legal action follows the Pentagon’s decision to designate Anthropic as a “supply chain security risk.” The conflict stems from a breakdown in negotiations over a $200 million defense contract. Anthropic refused to remove “guardrails” on its Claude AI model that prevent it from being used for autonomous military operations or potential mass surveillance of U.S. citizens. Department of War Secretary Pete Hegseth and other officials insisted the military must have “all lawful uses” of the technology without private-sector restrictions. After the refusal, the Pentagon applied the “supply chain risk” label, an action typically reserved for foreign companies like Huawei, effectively banning the company from defense work and ordering federal agencies to phase out its technology. In its filings in California and Washington, D.C., Anthropic argues the designation is an “unlawful campaign of retaliation” for the company’s protected speech and refusal to waive safety standards. The suit alleges violations of First Amendment rights and due process, as well as claiming that the Pentagon exceeded its statutory authority, as the specific “supply chain risk” laws were not intended for domestic firms. At the same time, OpenAI is moving in the opposite direction, expanding its role in U.S. government and defense systems through a partnership with Amazon Web Services that enables deployment of its AI models across federal infrastructure, including classified environments.
Several violent incidents in the United States and Canada involving suspected extremist motives prompted major law enforcement responses this month as the FBI undertakes new investigations. In Michigan, authorities say a man drove a truck into Temple Israel in West Bloomfield and opened fire before being killed during a confrontation with synagogue security. The FBI is investigating this as a targeted act of violence against the Jewish community; one security guard was injured but no congregants were harmed. Separately in Virginia, a former Army National Guard member previously imprisoned for attempting to aid the Islamic State carried out a shooting at Old Dominion University. He killed one person and wounded two others before being subdued and killed by ROTC students who intervened within minutes. Federal officials are treating the campus attack as terrorism. In New York, an attempted bombing outside Mayor Zohran Mamdani’s residence is also being investigated as ISIS-inspired terrorism after two suspects allegedly used improvised explosive devices during a protest, highlighting growing concerns over youth radicalization and extremist content. Authorities say the attack, which caused no fatalities due to rapid police response, reflects a broader pattern of politically and ideologically driven violence in a heightened domestic security environment. Lastly, a drive-by shooting targeting the US Consulate in Toronto is being investigated as a national security incident after two suspects fired shots at the building.
President Trump announced that he will deploy ICE agents to U.S. airports as the Department of Homeland Security shutdown stretches into its sixth week, a move intended to pressure Democrats in the ongoing funding standoff. Democrats have repeatedly blocked efforts to fund DHS without adding new accountability measures for immigration enforcement, while Republicans have rejected attempts to separately fund TSA and other airport‑related agencies. The shutdown has already created long airport lines and strained TSA staffing, prompting Trump to direct ICE to “get ready” to assist with security and immigration enforcement at airports starting yesterday.
Market Implications: Year‑to‑date gains in U.S. markets have largely evaporated amid the Iran war, with European and global positions hit hardest due to heightened energy sensitivity and renewed inflation pressures. These price effects risk keeping interest rates higher for longer, further weakening risk appetite and amplifying volatility across asset classes. Expectations for recession have risen, and mounting recession fears are beginning to weigh negatively on forward earnings forecasts. Precious metals are experiencing broad liquidation as investors raise cash, institutional and central‑bank buying pauses, and elevated rates and a stronger dollar weigh on non‑yielding assets. However, gold and silver still have the potential to gain significantly over the next few years as long‑term fundamentals stay intact. New U.S. trade probes and forced‑labor reviews keep tariff risks elevated just as businesses await clarity on a substantial backlog of duty refunds, adding further uncertainty for retail, autos, industrials, and transportation. In contrast, this environment continues to favor domestically focused manufacturers, reshoring beneficiaries, and logistics firms with stronger pricing power. Heightened security incidents and federal shifts in AI procurement support defense, cybersecurity, and national‑security–aligned technology companies, while broader U.S. policy flexibility toward Iran maintains an energy and defense risk premium. Markets are likely to remain uneven, with relative strength in defense, energy, reshoring, and national‑security–linked tech, while import‑heavy, fuel‑sensitive, and rate‑exposed sectors face persistent headwinds.

Europe

The United States and several Middle Eastern partners are increasingly turning to Ukraine for support in countering Iranian drone attacks, reflecting Kyiv’s emergence as a leader in low-cost, battle-tested air defense systems and underscoring how lessons from the war in Europe are being exported to other theaters. This growing security cooperation comes as the broader Middle East conflict reshapes global economic dynamics, with Washington easing enforcement of sanctions on Russian oil exports and allowing greater flows to markets such as India and China, contributing to a sharp rise in demand for Russian crude. Combined with disruptions in the Strait of Hormuz and surging energy prices, these shifts have generated a substantial financial windfall for Moscow—estimated at up to $150 million per day and potentially several billion dollars over the course of the month—reversing earlier budgetary pressures and strengthening Russia’s fiscal position. The surge in global oil prices triggered by the Iran conflict has significantly bolstered Russia’s strategic leverage, providing Moscow with a critical revenue windfall that has helped stabilize its war budget and reinforced its geopolitical position at a moment when Western sanctions had left it economically strained. Together, these developments highlight the interconnected nature of current conflicts, where U.S. strategic priorities, energy markets, and wartime innovation are increasingly influencing one another across regions and, in cases like these, contradicting themselves.
European leaders are increasingly reconsidering nuclear power as energy security concerns intensify amid global instability and volatile fossil fuel markets. The partial closure of the Strait of Hormuz and disruptions to LNG flows have driven European natural gas prices significantly higher, with the TTF benchmark jumping from roughly €32/MWh in late February to above €50/MWh by mid‑March, exposing once again the continent’s vulnerability to external shocks and its heavy reliance on imported fossil fuels. These energy pressures are spilling over into broader cost structures—including food production, fertilizer, and transport—magnifying inflation risks across the euro area. The renewed energy‑price surge has already prompted warnings that Europe could face another war‑driven inflation episode, with elevated gas and oil costs feeding directly into headline inflation and raising market expectations that the ECB may need to respond with rate hikes in the next 2–4 months. European Commission President, Ursula von der Leyen, recently described Europe’s long decline in nuclear energy generation from roughly 30 percent of electricity in 1990 to about 15 percent today as a strategic mistake. She argued that reliance on imported oil and gas has left the continent vulnerable to external shocks such as the current Middle East crisis. At a nuclear energy summit in Paris, von der Leyen called for a renewed push into next-generation nuclear technology, including small modular reactors by the early 2030s, supported by new EU financing and regulatory reforms to attract private investment. While countries such as France strongly support expanding nuclear power to ensure stable, low-carbon electricity and industrial competitiveness, the issue remains politically contested across Europe as some governments continue to favor renewable energy while others view nuclear as essential to long-term energy independence.
Europe is looking eastward—to Asia and especially China—as geopolitical pressure from the U.S. intensifies under Donald Trump’s renewed tariff threats and disruptive energy‑market policies. European leaders have stepped up high‑level visits to Beijing, seeking to hedge political and economic risks as U.S.–EU relations become more unpredictable. According to Bloomberg, officials across major EU capitals now view China as a comparatively more stable counterpart, with Germany’s recent delegation underscoring both Europe’s recognition of China’s technological strength and the limits of Europe’s own regulatory environment. This shift marks a broader reassessment: the EU increasingly doubts the feasibility of fully “de‑risking” from China and sees strategic engagement, rather than confrontation, as the more pragmatic path.
Canada is accelerating its strategic pivot toward Arctic security and deeper cooperation with Nordic and European partners, as Prime Minister Mark Carney’s visit to Norway highlighted a broader effort to strengthen defense readiness, economic ties, and technological collaboration in response to a more volatile global environment. Through participation in NATO’s Arctic exercises and new agreements with Norway and fellow Nordic countries—Denmark, Finland, Iceland, Norway, and Sweden—Canada is expanding cooperation in areas including defense, critical minerals, energy, AI, and supply chains, while also positioning itself to attract greater foreign investment and integrate more closely into transatlantic security frameworks. The visit underscores Ottawa’s growing focus on the High North as a key domain of geopolitical competition, as well as its parallel push to modernize defense capabilities, deepen industrial partnerships, and reinforce its role within NATO and emerging European security initiatives.
Romania and Ukraine are deepening their strategic partnership through an agreement to jointly produce Ukrainian-developed defense systems, particularly drones, on Romanian territory, marking a shift from traditional military assistance toward integrated co-production within Europe’s defense industrial base. The initiative leverages Ukraine’s battlefield-tested technological expertise alongside Romania’s NATO infrastructure, industrial capacity, and access to EU funding mechanisms such as SAFE, reinforcing the alliance’s eastern flank amid continued Russian pressure, including drone incursions near Romanian borders. The partnership also extends into energy and economic integration, with discussions on transporting U.S. liquefied natural gas through Romania, expanding Black Sea energy cooperation, and strengthening regional electricity and gas networks to reduce reliance on Russian supplies. Alongside increased U.S. military deployments in Romania, including aerial refueling and communications systems, Bucharest is positioning itself as a critical security and logistical hub for Ukraine—both during the war and in any future reconstruction—signaling its evolution from a frontline supporter to a central actor in shaping the Black Sea region’s security and economic architecture.
Market Implications: Geopolitics continues to shape European markets. The U.S. temporary waiver on stranded Russian oil tempers the near‑term crude spike but offers Europe only partial relief and continues to fuel Russia’s war machine. Cyclical sectors may see brief rallies, but defensives—especially energy and defense—remain better supported. Europe’s rearmament theme strengthens further through increased Canada‑Nordics military cooperation and new EU–Ukraine drone production initiatives. Meanwhile, Von der Leyen’s pro‑nuclear shift provides a clearer medium‑term tailwind for utilities, grids, and nuclear‑linked industrials by improving energy stability and reducing import dependence. A prolonged war is likely to continue weighing more heavily on European markets than on the U.S., as has been the case since the conflict erupted, reinforcing persistent risk‑off sentiment across the region. However, the negative impact on the euro has been less severe than initially expected, which helps soften the energy‑price shock and provides a modest cushioning for import costs. Overall, a risk‑off attitude is likely to prevail for as long as the war continues.

China, India & Japan

The United States and China have resumed high-level economic and trade talks in Paris even as underlying tensions persist. The discussions, led by U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, focused on expanding trade in sectors such as energy, agriculture, and aviation, as well as exploring mechanisms to manage investment and ease restrictions on critical minerals. Although both sides described the talks as constructive, they continue to unfold against a backdrop of unresolved tariff disputes, ongoing U.S. trade investigations, and broader strategic competition. The negotiations are also being shaped by the escalating Iran conflict, particularly disruptions to the Strait of Hormuz that threaten global energy flows and heighten the importance of U.S.-China coordination. However, the highly anticipated meeting between Trump and Xi has now been pushed back: the Trump administration has told foreign officials that no new dates for a Trump‑Xi meeting will be set until the active phase of the Iran war ends, delaying what had been planned as a late‑March meeting. Trump publicly stated the summit would be delayed by “a month or so,” later suggesting it may not occur until after May, further underscoring how wartime conditions are interrupting diplomatic timelines.
The United States is deepening economic and strategic ties with key Asia‑Pacific allies through a wave of large‑scale energy and resource agreements aimed at reducing dependence on geopolitical rivals, particularly China. At a recent Indo‑Pacific Energy Security Forum in Tokyo, regional partners committed roughly $57 billion in deals with U.S. companies, while a parallel U.S.–Japan summit outlined up to $73 billion in additional Japanese investment in American energy infrastructure—including small modular nuclear reactors and natural‑gas generation facilities—designed to support both domestic supply and surging power demand from data centers. Beyond energy, the two countries launched a coordinated action plan to secure critical‑minerals and rare‑earth supply chains, seeking alternatives to Chinese dominance through joint investments, new pricing mechanisms, and expanded recycling and extraction efforts, including deep‑sea mineral development near Minamitorishima Island. On March 19th, President Trump and Prime Minister Takaichi further formalized these efforts by announcing major new initiatives to expand supply‑chain security, deepen R&D cooperation on strategic materials important for semiconductors, EVs, and defense industries, and strengthen overall energy resilience. Together, these initiatives reflect a broader effort to align economic policy with strategic competition—reinforcing allied energy security, supply‑chain resilience, and long‑term industrial cooperation within a shifting geopolitical landscape.
Tensions in the Taiwan Strait remain elevated as the United States and China balance military signaling with diplomatic engagement, highlighting the fragile nature of their relationship. A U.S. Navy P-8A reconnaissance aircraft transited the strait in what Washington described as a routine operation upholding freedom of navigation, prompting Chinese forces to monitor and respond while reiterating sovereignty claims over the waterway. At the same time, China resumed sending military aircraft into Taiwan’s air defense identification zone after a brief lull that analysts suggest may have been intended to ease tensions before upcoming talks, even as some flights crossed the unofficial median line dividing the strait. The developments underscore a familiar pattern of calibrated escalation, with Beijing continuing pressure tactics against Taiwan while avoiding major provocation, and the United States maintaining visible support for Taiwan’s security—all against the backdrop of ongoing disputes over trade, technology, and arms sales that continue to define U.S.-China competition.
Asia is cementing its lead in next‑generation technologies, from electric vehicles to semiconductors, as companies like China’s BYD and Vietnam’s VinFast rapidly scale across Southeast Asia while the region simultaneously becomes a critical battleground in the global chip supply chain. BYD and VinFast are reshaping the EV landscape through aggressive pricing, ecosystem investments, and fast‑growing market shares, challenging long‑dominant Japanese automakers and showcasing Asia’s innovation momentum. Meanwhile, surging global demand for AI computing is triggering acute shortages of Intel and AMD CPUs, extending wait times and driving prices sharply higher, underscoring Asia’s central role in advanced manufacturing as well as its vulnerabilities. Together, these developments highlight how Asia is both powering—and being strained by—the global shift toward electrification, AI infrastructure, and cutting‑edge semiconductor technologies, positioning the region at the core of the world’s next industrial era.
India has begun easing restrictions on Chinese investment in a targeted effort to revive capital flows and stabilize supply chains, marking its most significant economic recalibration toward Beijing since the 2020 border clashes that froze bilateral ties. The new policy allows expedited approval within 60 days for Chinese investments in key sectors such as electronics, capital goods, and solar manufacturing, while also permitting up to 10% Chinese ownership in Indian firms without prior government clearance—provided majority control remains with Indian entities. The shift comes as years of strict screening measures constrained manufacturing growth, stalled major deals like BYD’s proposed $1 billion investment, and contributed to India’s widening $99 billion trade deficit with China, driven heavily by imports of machinery and components. New Delhi’s decision reflects mounting pressure from industry and global investors to restore access to Chinese capital and technology, particularly as multinational firms pursue “China-plus-one” strategies and as U.S. tariffs and broader geopolitical fragmentation reshape trade patterns. While recent diplomatic steps—such as resumed flights, eased visas, and high-level meetings between Narendra Modi and Xi Jinping—signal a gradual thaw, analysts emphasize that the move represents economic pragmatism rather than a full strategic reset, with persistent border tensions and mutual distrust likely to limit the scale and durability of renewed Chinese investment.
India and Canada are moving to reset relations and deepen economic cooperation after years of diplomatic strain, with both sides targeting a comprehensive free trade agreement by the end of the year and aiming to expand bilateral trade from roughly $9 billion to $50 billion by 2030. The renewed partnership includes a landmark C$2.6 billion uranium supply deal to support India’s ambitious nuclear energy expansion, alongside cooperation in critical minerals, clean energy, technology, and defense, reflecting a broader strategic alignment beyond traditional trade. The rapprochement follows a sharp breakdown in ties in 2023 over allegations of Indian involvement in a Sikh activist’s killing but has since gained momentum under Prime Minister Mark Carney as both countries seek to diversify economic relationships away from the United States amid shifting global trade dynamics. Together, the agreements signal a pragmatic convergence driven by energy needs, supply chain resilience, and geopolitical realignment, positioning the partnership as part of a wider effort by middle powers to reduce reliance on dominant markets and navigate an increasingly fragmented global economy.
Market Implications: Across Asia, investors are applying a higher geopolitical risk premium, and regional markets are feeling a deeper impact from the Middle East conflict than the U.S. due to heavier energy dependence. At the same time, Asia’s rapid leadership in next‑generation technologies—from semiconductors to electric vehicles—is reshaping the region’s long‑term economic trajectory. Countries like China, Vietnam, Taiwan, and South Korea are driving global innovation in EVs, batteries, and advanced chip manufacturing, even as supply‑chain pressures and geopolitical tensions introduce new volatility. In Japan, major U.S.–Japan energy and industrial agreements offer incremental support for trading houses, heavy industry, utilities, and nuclear‑related sectors. China sees some reduction in downside risk after recent economic talks, though upside remains constrained by tech tensions and perpetual Taiwan‑related uncertainty. India stands out as the relative winner, with eased investment curbs and new uranium and nuclear‑cooperation deals strengthening the medium‑term outlook for utilities, capital goods, and domestic capex themes. However, renewed U.S.–China tensions around Taiwan keep a regional risk premium elevated, favoring defensives over high‑beta China/Taiwan exposures.

Top News This Month

North America

Europe

China, India & Japan

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