Here are the biggest issues to watch around the globe over the coming month:

Europe: Responding to Russia

The use of a nerve agent, known as Novichok, in an attempt to murder former KGB agent Sergei Skripal in Salisbury, England, resulted in Prime Minister Theresa May accusing the Russian government of committing “an indiscriminate and reckless act against the United Kingdom” by using “an illegal chemical weapon that we know Russia possesses.” The Prime Minister said this amounts to an “unlawful use of force by the Russian state against the United Kingdom.” Russia denied that allegation but provided no credible alternative. Despite the evidence, the response from the UK and its allies has been relatively tame. The UK government has so far expelled 23 Russian diplomats (who were unidentified intelligence officers), and the US, the EU, Canada, and Ukraine have also ordered the expulsion of several diplomats in a show of unity with the UK. The UK could use a variety of economic tools, including sanctions. However, a more aggressive measure would see Prime Minister May target Russian money in London. The coming weeks may see the Prime Minister expand the list of Russian businesses and people that British businesses are banned from doing business with. The prime minister could also start freezing assets of Russians in London who have ties to the Kremlin. She will have to weigh the geopolitical and geoeconomic risks of such a response, as it could have serious implications for British businesses, including major oil companies.

The U.S.: Rexit and Other Shakeups

Rex Tillerson, formerly Secretary of State, was relieved of his position and replaced by former CIA Director, Mike Pompeo. Though Tillerson had no significant accomplishments during his tenure as Secretary, he was relatively moderate in comparison to the president, particularly over the Iran nuclear agreement. Towards the end of his tenure, Tillerson was unaware of major developments, including the president’s desire to meet with North Korean leader Kim Jong-un. Tillerson’s departure could see a tougher stance on Iran and the potential unravelling of global trade. His nominated replacement, Mike Pompeo, a former Congressman and most recently CIA Director, is seen as a Trump loyalist. Pompeo is known for his tough stance on Iran, labeling it a “pernicious empire that is expanding its power and influence across the Middle East.” More surprisingly, National Security Advisor H.R. McMaster was last week replaced by John Bolton. Bolton has been an advocate for direct confrontation with Iran and North Korea, and his appointment could see a more aggressive U.S. foreign policy. McMaster was one of the more experienced members of the Trump Administration.

Challenges to Global Trade

On March 22, President Trump announced tariffs of $60bn on Chinese trade, potentially leading to a trade dispute between the world’s largest economies. Stock markets immediately took a hit, but partially recovered as of yesterday, with signs that the U.S. and China were willing to negotiate over tariffs. A Wall Street Journal report stated that the U.S. had asked China to reduce tariffs on U.S. autos and allow greater access for U.S. firms in the Chinese financial sector. These points of negotiation could limit a trade war for the moment; however, according to a Bank of America Merrill Lynch survey, 30% of fund managers see a trade war as the main market risk. The threat of an unraveling of global trading structures paired with a flattening yield curve, a widening gap between the Libor rate and the swap rate, and the relatively high valuation of the American stock market are all causes for some concern.

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