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. Later this week, we will be publishing our Crossroads Part II, which covers the MENA, Latin America, Asia (ex. China/India/Japan), and Sub-Saharan Africa regions.

North America

What appeared only days ago to be a tentative de-escalation in the U.S. and Israeli conflict with Iran has once again given way to renewed uncertainty and confrontation. As of this week, the Strait of Hormuz is closed again to most commercial traffic due to a standoff between Iran and the United States. Just last week, officials announced that the Strait had been reopened, sending energy markets lower and stock markets higher amid optimism over progress in negotiations. The situation has fluctuated rapidly over the last 48 hours, with both nations imposing their own versions of a blockade. On Saturday, April 18, Iran’s Islamic Revolutionary Guard Corps (IRGC) declared the strait closed to all vessels until the U.S. lifts its naval blockade of Iranian ports. Iran has warned that any ship approaching the waterway will be considered an “enemy” and targeted. President Donald Trump has maintained a U.S. naval blockade specifically on ships departing from or docking at Iranian ports. Tensions spiked on Sunday after the U.S. Navy fired on and seized an Iranian-flagged cargo ship, the Touska, which allegedly tried to bypass the blockade in the Gulf of Oman. Since Saturday, multiple vessels have come under fire. Oil prices jumped about 7% on Sunday, with Brent crude rising toward $97 a barrel. A tenuous 10-day ceasefire is currently in effect but is set to expire on Wednesday, April 22nd. While Pakistan is attempting to mediate a second round of direct talks, Iran has signaled it may pull out following the seizure of its cargo ship.
Earlier this month, the White House released President Donald Trump’s fiscal year 2027 budget proposal, which includes a record $1.5 trillion request for defense spending. This represents a nearly 44% increase over the previous year’s $901 billion funding level and is the largest year-over-year boost for defense since the Korean War when adjusted for inflation. The $1.5 trillion total is divided into two primary categories: a $1.15 trillion base discretionary budget for the Department of War, and $350 billion as additional mandatory resources requested through the budget reconciliation process. The administration describes the request as a “paradigm-shifting investment” to build a “Dream Military.” Major proposed allocations include $17.5 billion for the development of the “Golden Dome” national missile defense system, as well as funding for 85 F-35 fighter jets, nearly double the previous year’s request, and a proposed military pay raise of 5% to 7%. Economists and congressional watch groups have warned that this increase could add $5-6 trillion to the national debt over the next decade. To fund this military expansion, the White House proposed a 10% cut to non-defense spending, totaling roughly $73 billion; these cuts target agencies managing climate, housing, education, and health programs.
This month, the Trump administration issued two Section 232 proclamations affecting pharmaceuticals and metals, introducing high baseline tariffs to encourage U.S. manufacturing and reduce foreign dependence. Tariffs on branded pharmaceuticals and active ingredients will begin July 31, 2026 for 17 major drugmakers and September 29, 2026 for others; generics are exempt pending a 2027 review. Companies can cut rates to 20% by onshoring production or to 0% through 2029 by also accepting “Most Favored Nation” pricing, with lower fixed rates for key allies and exemptions for certain critical drugs. At the same time, steel, aluminum, and copper tariffs were revised to apply to full U.S. sales value, maintaining a 50% standard rate while adding targeted exemptions, temporary relief for grid equipment, reduced rates for U.S.-sourced metals, and a continued 200% tariff on Russian aluminum.
Yesterday, U.S. Customs and Border Protection launched an online refund system that allows businesses to reclaim tariffs the Supreme Court ruled were unlawfully imposed by President Donald Trump under emergency powers. Importers and customs brokers can begin filing refund claims through CBP’s new electronic portal, with refunds expected to be issued within 60 to 90 days after approval, though the process will roll out in phases and initially cover only recent or unfinalized tariff payments. More than 330,000 importers paid roughly $166 billion in affected tariffs, but only about $127 billion is currently eligible in the first phase, and documentation errors or system congestion could slow payouts. Refunds will go directly to the businesses that paid the tariffs, and while companies are not required to pass funds back to consumers, some logistics firms such as FedEx have said they intend to refund customers once reimbursements are received.
In an unprecedented political shift, Prime Minister Mark Carney’s Liberal Party secured a parliamentary majority on April 13th. This transition from a minority to a majority government occurred through a combination of three key byelection wins, two in Ontario and one in Quebec, and a series of opposition floor-crossings rather than a general election. Prior to these byelections, five opposition MPs (four Conservatives and one New Democrat) defected to join the Liberal caucus. Most recently, longtime Conservative MP Marilyn Gladu crossed the floor, leaving the Liberals just one seat shy of a majority before the Monday votes. The Liberals now hold 174 of the 343 seats in the House of Commons, surpassing the 172-seat threshold required for a majority. This new majority allows Carney to pass legislation and budgets without needing support from opposition parties like the NDP or Bloc Québécois. Key priorities for the “Canada Strong” agenda include reducing Canada’s economic reliance on the United States and managing trade tensions as well as addressing housing and general cost-of-living concerns. The majority mandate suggests Carney could remain in power until late 2029 without calling a new election.
Market Implications: U.S. markets remain in a higher-volatility environment, with the key macro risk being Iran-related disruption to the Strait of Hormuz, embedding a geopolitical premium into oil, shipping, and insurance markets that benefits North American energy producers but weighs on airlines, transportation, and consumer discretionary stocks. Despite this uncertainty, renewed optimism around technology and AI has helped stabilize sentiment, supported by upward revisions to forward earnings estimates that, by definition, reduce forward P/E ratios and point to a more reasonably valued equity market. Markets nearly rebounded last week, recouping earlier losses on optimism around Iran war negotiations, but uncertainty has returned following developments over the weekend. The bond market continues to sustain elevated rates as persistent price pressures and refinancing needs keep upward pressure on yields. A sharply higher 2027 U.S. defense budget request provides strong fiscal support for aerospace, defense manufacturing, shipbuilding, and cybersecurity, even as it rekindles concerns over long-term deficits. New U.S. tariffs on metals and pharmaceuticals are increasing sector dispersion, which is positive for domestic producers and onshoring plays, but negative for industrial consumers, hospitals, and drug distributors. Markets are likely to stay choppy, but government spending tied to defense, energy, and infrastructure should keep those areas supported.

Europe

The 2026 Hungarian parliamentary election, held April 12th, produced a major political upset with the opposition Tisza Party, led by Péter Magyar, winning a landslide victory, defeating longtime prime minister Viktor Orbán and ending his 16-year rule. Tisza did as well as to win a two-thirds (constitutional) majority, meaning it can amend Hungary’s constitution and pass major reforms without needing other parties. It marks the end of Orbán’s long dominance and a significant setback for right-wing populist politics in Europe. Magyar campaigned on anti-corruption, pro-EU policies, and restoring democratic institutions like judicial independence and media freedom. The result could shift Hungary back toward closer alignment with the European Union and away from its pro-Russia stance. Viktor Orbán’s defeat was the result of several convergent trends in Hungarian politics, such as economic and cost-of-living pressures, a unified opposition, foreign policy backlash, and opposition’s heavy use of social media and grassroots political mobilization. Additionally, the electoral defeat of the incumbent prime minister is expected to unblock a €90 billion EU aid package for Ukraine previously stalled by Orbán.
NATO Secretary-General Mark Rutte visited the White House on Wednesday, April 8th, for a critical meeting with President Donald Trump aimed at easing escalating tensions between the U.S. and the alliance. The meeting was a bid to address President Trump’s recent sharp criticisms of NATO and his repeated threats to withdraw the U.S. from the 32-member alliance. Discussions focused heavily on the war in Iran and Russia’s ongoing war against Ukraine. The visit occurred just hours after a ceasefire in the Iran war was announced. White House Press Secretary Karoline Leavitt quoted the president as calling NATO a “failed” alliance during the Iran conflict, asserting that member nations did not sufficiently back U.S. military efforts. In addition to President Trump, Rutte met with Secretary of State Marco Rubio and Secretary of War Pete Hegseth to discuss transatlantic security dynamics. Following the White House visit, Rutte spoke at the Ronald Reagan Presidential Foundation Institute on April 9th and attended the Bilderberg Meeting from April 10–12. Mark Rutte, often described as a “Trump whisperer” for his ability to manage the president’s temperament, remains at the center of efforts to maintain U.S. commitment to NATO as the administration reexamines its international relationships.
The Russia-Ukraine war has seen a significant escalation following the failure of a brief Easter truce. Tensions have spiked with the largest aerial assault in months and a major political shift in Europe affecting aid. Russia launched a massive wave of nearly 700 drones and 19 ballistic missiles overnight on April 16th. At least 17–18 people were killed and approximately 100 injured. Strikes heavily hit Kyiv, Odesa, and Dnipro, targeting energy infrastructure and residential areas. Kyiv launched its own drone strikes on Russian energy hubs, including a major oil refinery in Tuapse along the Black Sea. Analysts note a significant shift toward high-intensity, low-cost drone warfare over the traditional trench battles seen thus far. Ukraine has introduced new drone assault units that integrate unmanned ground and aerial systems with infantry. Reportedly, Ukrainian commanders claim to have regained control of roughly 50 sq km of territory in March. In addition to the likely influx of aid from the EU following the ouster of Putin ally Viktor Orbán, the United Kingdom pledged its largest-ever shipment of drones and transferred approximately $1 billion in frozen Russian assets to Ukraine. Also, the Netherlands announced nearly $300 million for drone production, and NATO Secretary General Mark Rutte pledged $60 billion in military aid for 2026. Meanwhile, the planned U.S.-brokered peace talks in Abu Dhabi have stalled, partly due to global attention shifting toward the conflict with Iran in the Middle East.
Ukraine and Germany signed a landmark €4 billion ($4.7 billion) defense cooperation agreement last week, elevating their relationship to a strategic partnership. The deal focuses on joint drone production, air defense, and a first-of-its-kind exchange of real-time battlefield data to enhance military AI. The agreement, signed by Ukrainian President Volodymyr Zelenskyy and German Chancellor Friedrich Merz in Berlin, includes a bilateral drone initiative. This would plan for the joint production of advanced “battle-tested” drones. Initial production would add 5,000 mid-strike drones to the Ukrainian Defense Forces. Germany reaffirmed its commitment to securing a “comprehensive, just and lasting peace” through the Coalition of the Willing. Germany agreed to help facilitate the return of Ukrainian men of military age to assist with troop shortfalls. Chancellor Merz reiterated support for Ukraine’s EU membership, though noted it would not happen “anytime soon.” Additionally, Ukraine recently established historic 10-year defense and energy partnerships with major Gulf countries, specifically Saudi Arabia, Qatar, and the United Arab Emirates (UAE). These deals, finalized in late March, represent a strategic “drone diplomacy” where Ukraine trades its battlefield-proven expertise for critical resources.
Bulgaria’s eighth parliamentary election in five years has ended with a landslide victory for former president Rumen Radev, whose Progressive Bulgaria party won roughly 44.7% of the vote, securing an outright majority in parliament. The result paves the way for Radev to become prime minister and could bring an end to years of political instability marked by fragile coalitions and repeated elections. Radev campaigned on an anti-corruption platform, positioning himself as an outsider determined to dismantle what he calls Bulgaria’s “oligarchic governance model.” While many voters hope the result will deliver stability, his victory has raised questions within the EU and NATO about Bulgaria’s future foreign policy, particularly given his opposition to military aid for Ukraine and calls for renewed ties with Russia.
British Prime Minister Keir Starmer is fighting for his political survival after revelations that Lord Peter Mandelson was appointed UK ambassador to the US despite failing security vetting, a failure Starmer says he was not told about. Starmer is expected to tell Parliament he was unaware of the adverse vetting outcome and place blame on former Foreign Office head Sir Olly Robbins, who was sacked and is due to testify that civil servants, rather than ministers, were legally responsible for vetting and that mitigations were put in place. The scandal has deepened divisions within Labour, prompted opposition calls for Starmer to resign, and heightened internal concern that heavy losses in May’s elections could trigger a leadership challenge. On May 7th, voters across England, Scotland and Wales will take part in a major set of elections covering Scottish Parliament and Welsh Senedd elections, as well as around 5,000 local council seats and six mayoral races in England. The results are widely seen as a crucial test of Prime Minister Keir Starmer’s leadership, with Labour defending many seats and vulnerable to losses.
As of this month, the United States is in active negotiations with Denmark to expand its military footprint in Greenland by gaining access to three additional sites. This push follows a period of heightened diplomatic tension earlier this year after President Trump suggested a possible annexation of the island. The U.S. is seeking to reactivate access to Kangerlussuaq (formerly Sondrestrom) and Narsarsuaq, both of which house significant airstrips previously used by the American military. A third potential site involves a deep-water port near the existing Pituffik Space Base. General Gregory M. Guillot, head of U.S. Northern Command, stated the military aims to establish new airfields and ports to support special operations forces, Navy vessels, and fighter jets as a “first line of defense” against Arctic threats. Negotiations are being conducted under the existing 1951 Defense Agreement, which allows for U.S. military presence in designated defense areas but has traditionally required coordination with Danish authorities. Denmark and Greenland have firmly rejected any arrangement that would grant the U.S. sovereign control over these bases, insisting that any expansion must respect Danish and Greenlandic sovereignty. This military expansion is seen by some as a compromise that satisfies U.S. security interests while falling short of President Trump’s earlier stated goal of purchasing the territory.
Market Implications: European markets are balancing declining political risk in Central Europe against rising continent‑wide security concerns. Hungary’s election ended Viktor Orbán’s long rule, reviving hopes for improved governance, tighter credit spreads, a stronger forint, and the release of frozen EU funds—supportive for banks, utilities, and domestic cyclicals, albeit with near‑term execution risk. At the same time, ongoing fighting in Ukraine, stalled diplomacy, and uncertainty over long‑term U.S. security commitments are keeping a firm bid under defense and energy assets across Europe. New defense partnerships and funding packages, particularly involving Germany, Ukraine, and Arctic security, are reinforcing industrial demand in defense-related supply chains. Defense, security, energy, and strategic infrastructure remain clear outperformers as geopolitical risk stays elevated, while parts of Central and Eastern Europe may see upside if political transitions translate into real capital inflows. However, persistent geopolitical tension and questions around Europe’s long‑term security architecture are likely to keep volatility high and valuations capped outside these favored sectors.

China, India & Japan

Cheng Li-wun, the chairperson of Taiwan’s main opposition party, the Kuomintang (KMT), met with Chinese President Xi Jinping in Beijing on April 10th, marking the first time a sitting KMT chairperson has met with the leader of the Chinese Communist Party (CCP) in nearly a decade. Cheng described the six-day trip as a “peace mission” aimed at reducing cross-strait tensions and boosting ties. During the summit, Xi expressed confidence in eventual “reunification” and emphasized that “external interference” cannot stop the historical trend of Taiwan and China coming together. The visit follows Cheng’s election as KMT chairwoman in late 2025. It occurred shortly before the 47th anniversary of the Taiwan Relations Act and amid ongoing friction between Beijing and Taiwan’s ruling Democratic Progressive Party (DPP). Beyond Beijing, Cheng visited Nanjing and Shanghai as part of a larger delegation.
Japan has taken a historic step by approving the export of lethal weapons for the first time since World War II, marking a decisive break from its postwar pacifist stance and signaling a broader normalization of its defense posture. This policy shift coincides with Japan’s deployment, as of March 31, of its first domestically developed long‑range “standoff” missiles, including upgraded Type 12 surface‑to‑ship missiles and Type 25 hypersonic weapons, at Camp Kengun in Kumamoto. With an estimated range of roughly 1,000 km, these systems provide Japan with the ability to strike targets in China’s coastal regions and North Korea from its southern islands, representing a clear move toward enhanced counterstrike capability. The initial deployment on Kyushu places these assets near the East China Sea, with plans to expand later this year to additional sites such as Camp Ebino and eventually to equip naval destroyers with U.S.‑made Tomahawk missiles. These developments are intended to narrow the military capability gap with China and strengthen deterrence at a time when Japan–China relations have become increasingly strained due to tensions over Taiwan, disputed activity in the East China Sea, and Beijing’s expanding regional military presence. Chinese state media has criticized both the missile deployment and Japan’s weapons‑export policy shift as destabilizing and inconsistent with Japan’s historical commitments, while the United States has endorsed the moves through technology transfers and testing support as part of a broader allied security framework.
This month, multiple high-level Indian business delegations visited China, marking the first such visits in over five years. These trips signal a cautious “thaw” in economic relations following the 2020 border standoff. Led by CII President Rajiv Memani, this high-powered delegation visited Shenzhen and Shanghai from April 7–9th. Discussions centered on building resilient supply chains and expanding technology partnerships in line with India’s “Viksit Bharat” vision. Renewable energy (RE), electric vehicles (EV), robotics, advanced sensing, and clean energy. The delegation visited leading enterprises to understand integrated manufacturing ecosystems and innovation-driven electronics production. Additionally, the PHD Chamber of Commerce and Industry (PHDCCI) sent a delegation to Shanghai and Jiangsu province. Hosted by the Consulate General of India in Shanghai, the event included major Chinese firms like Wuxi Technology Development Corporation and global institutions like HSBC. The delegation explored tie-ups in EV charging infrastructure, battery storage solutions, and green hydrogen. Representatives from European business groups also joined to discuss supply chain diversification under the proposed India-EU Free Trade Agreement. Bilateral trade between India and China reached a record high of $155 billion in 2025. Business leaders emphasized that energy shocks from regional conflicts (such as the Iran war) have underscored the need for India to explore renewable technology partnerships with China, which dominates the sector. Observers suggest India is pursuing a pragmatic model, importing Chinese technology to strengthen its own manufacturing rather than purely following Western “de-risking” scripts.
Adani Group is developing what it says will be the world’s largest renewable energy plant in Khavda, Gujarat, aiming to scale capacity from 9 gigawatts today to 30 gigawatts by 2029. The desert-based wind and solar complex, already spanning 538 square kilometers, is designed to supply clean power equivalent to 30 nuclear reactors and serve 17.5 million Indian households. Adani sees the project as central to its long-term growth strategy as India’s electricity demand surges and the government pushes toward net-zero emissions by 2070, despite renewables currently contributing only about 20% of national power. While the group’s earnings remain dominated by infrastructure businesses, Adani is betting that rising demand, energy security concerns, and storage integration will make renewables a key growth engine.
France and Japan recently formalized a cooperation roadmap in April to secure and diversify supply chains for rare earth elements (REE) and critical minerals. This partnership is primarily designed to reduce their heavy reliance on China, which currently controls the vast majority of global refining capacity. A major focus of the agreement is securing raw material supplies for the Caremag rare earth refining project in southern France. The project is backed by the French government and Japanese entities, including the Japan Organization for Metals and Energy Security (JOGMEC) and gas firm Iwatani. Japan aims to source approximately 20% of its future demand for dysprosium and terbium, essential for electric vehicle (EV) magnets and wind turbines, from this French facility. The Caremag facility is scheduled to begin operations in late 2026. The agreement was finalized during French President Emmanuel Macron’s three-day summit in Tokyo with Japanese Prime Minister Sanae Takaichi. Both leaders expressed “serious concerns” over export controls on critical minerals, an apparent reference to China’s increasing restrictions. This bilateral move aligns with broader efforts by “like-minded countries,” including the U.S. and EU, to build supply chain alternatives through joint ventures and stockpiling.
Market Implications: Markets across Asia are cautiously optimistic, but investors are still nervous because of rising geopolitical risks. Over the past 30 days, Japan’s equity market has strongly outperformed, with the Nikkei 225 and TOPIX posting high‑single‑ to low‑double‑digit gains driven by technology strength, yen weakness, and robust earnings momentum. Chinese equities also rebounded, with the Shanghai Composite and CSI 300 rising around high single digits on policy optimism and improving economic data, but performance has been more uneven and sensitive to macro and geopolitical pressures. In China, improved optics from dialogue between Beijing and Taiwan’s opposition have reduced near‑term tail risks but continued military activity and political pressure mean any market relief is likely temporary. India stands out as cleaner and more constructive, with early signs of a pragmatic thaw with China on clean‑tech supply chains and accelerating domestic renewable and infrastructure investment. Japan shows strong strategic positioning as defense upgrades and rare‑earth partnerships support industrial and aerospace sectors, even as broader equities carry a higher security discount. Ongoing tensions in the Middle East are increasing volatility in oil and gas markets, which benefits energy producers but raises costs across much of Asia.

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