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.

North America

Late last month, President Donald Trump officially nominated Kevin Warsh to serve as the next Chairman of the Federal Reserve. If confirmed by the Senate, Warsh will succeed the current chair, Jerome Powell, whose four-year term at the head of the central bank is set to expire on May 15th. Warsh, 55, is a former lawyer and investment banker who previously served as a member of the Federal Reserve Board of Governors from 2006 to 2011. Historically viewed as an “inflation hawk” who favored higher interest rates, Warsh has more recently advocated for rate cuts and expressed criticism of the Fed’s current “backward-looking” data dependency. While the nomination has received praise from Republican leaders like Senate Banking Committee Chair Tim Scott, it faces significant hurdles. Ranking Member Elizabeth Warren and other Democrats have raised concerns about Warsh’s independence, questioning whether he passed a “loyalty test” to the President. Additionally, Republican Senator Thom Tillis has vowed to block all Federal Reserve nominees, including Warsh, until a Department of Justice investigation into Jerome Powell regarding Fed building renovations is resolved. Although Treasury Secretary Scott Bessent indicated that confirmation hearings are expected to proceed, a definitive timeline has not yet been established.
The Trump administration has announced the repeal of the 2009 “endangerment finding,” a landmark scientific determination that greenhouse gas emissions threaten public health and welfare, effectively dismantling the legal foundation for federal climate regulations under the Clean Air Act. The move eliminates vehicle emissions standards for model years 2012 to 2027 and marks the most sweeping rollback of US climate policy to date, aligning with a broader strategy to expand fossil fuel production, curb clean energy initiatives, and reduce regulatory costs. Officials argue the repeal could save taxpayers roughly $1.3 trillion and ease pressure on industries such as autos and energy, while critics warn it clashes with overwhelming scientific consensus and could trigger years of legal battles. Environmental groups say the decision risks higher long-term costs through intensified extreme weather and insurance impacts, while legal experts caution that removing EPA oversight may open the door to increased litigation. The policy shift also complicates future climate action, as any subsequent administration would likely need to reinstate the finding before regulating emissions again.
Federal immigration enforcement in the Minneapolis–St. Paul area has shifted significantly following the Trump administration’s announcement that Operation Metro Surge is being wound down, with more than 1,000 federal immigration agents already withdrawn from Minnesota and several hundred more expected to depart in the coming days. Although a small remaining force will stay temporarily to close out investigations—particularly those related to fraud and recent protest incidents—officials say the large-scale surge that once deployed nearly 3,000 officers is receding. The drawdown comes after months of intensified enforcement marked by thousands of arrests, persistent community resistance, and widespread trauma following the deaths of Renee Good and nurse Alex Pretti, both killed during federal operations by ICE agents. Community networks that monitored agent movements, delivered aid to immigrant families, and organized protests remain active, even as local leaders report deep economic and social fallout from the surge, including more than $200 million in estimated financial impact to Minneapolis businesses. Overall, the winding down of one of the nation’s largest immigration enforcement campaigns has underscored the region’s profound polarization and the enduring impact of months of heightened federal activity.
The House voted 219 to 211 to revoke President Trump’s tariffs on Canadian imports, with six Republicans joining nearly all Democrats, signaling growing unease over the economic and political costs of the levies. This comes ahead of the midterm elections, where affordability remains a central talking point in US politics. The tariffs were imposed under the 1977 International Emergency Economic Powers Act, with the administration citing fentanyl flows as a national emergency justification, even though a federal appeals court previously ruled the statute does not authorize tariffs. While the resolution now moves to the Senate and benefits from fast-track procedures that prevent a filibuster, Trump is almost certain to veto it. Congress lacks the two-thirds majority needed to override this veto. This conflict highlights rising bipartisan concern about affordability and trade policy ahead of the elections, but also demonstrates that, despite visible Republican defections, most lawmakers remain unwilling to directly challenge presidential authority when the practical outcome is unlikely to change.
The US government is currently executing a multifaceted “Critical Minerals Plan” to break reliance on foreign supply chains, particularly China. Launched earlier this month, the Forum on Resource Geostrategic Engagement (FORGE) aims to create a “preferential trade bloc” for critical minerals among more than 50 allied nations. The plan establishes reference prices for minerals at various production stages to act as a floor, preventing competitors from dumping cheap minerals to undercut Western mining. These floors are maintained through tariffs that adjust to uphold pricing integrity within the bloc. Initial action plans have been signed with Mexico, the European Union, and Japan to coordinate these trade policies. Also announced this month, Project Vault is a $12 billion strategic stockpile initiative for critical minerals like lithium, cobalt, and rare earths. It combines a $10 billion loan from the US Export-Import Bank (EXIM) with $2 billion in private sector financing. Its objective is to ensure US manufacturers have a 60-day emergency supply to buffer against global market volatility or adversarial export curbs. Included in this reserve is the US Geological Survey’s expanded list of critical minerals, now up to 60 items in late 2025, adding 10 new minerals such as Boron, Copper, Lead, Metallurgical Coal, Phosphate, Potash, Rhenium, Silicon, Silver, and Uranium.
Market Implications: The US market is likely to stay a bit choppy in the near term. Recent swings in tech stocks—especially software companies—show that investors are rethinking how much they want to pay for the big names, partly because some worry that new AI tools could shake up existing business models. Tech giants have seen noticeable pullbacks, and even broad tech ETFs have been hit hard, suggesting investors may be shifting toward cheaper options or companies that directly benefit from AI’s productivity gains. As expensive tech names wobble, investors are rotating into sectors and regions that trade at lower valuations, including more traditional industries and even non‑US markets. At the same time, precious metals like gold and silver have been unusually volatile, moving sharply alongside broader market uncertainty. This is happening while other parts of the economy show mixed signals, such as layoffs and slower job growth, which can keep markets on edge. Markets may bounce around as people reassess tech valuations, react to ongoing economic softness, and navigate big policy shifts like tariffs, environmental rollbacks, and changes at the Fed.

Europe

Russia recently launched one of its largest strikes against Ukraine, firing 219 drones and 24 ballistic missiles in a single night, targeting Kyiv, Kharkiv, and Odesa. Continuous strikes on energy grids have left approximately 2,600 residential buildings in Kyiv without heating during a severe winter freeze with temperatures reaching -20°C. Russian forces maintain the initiative but advance at an exceptionally slow pace of 15 to 70 meters per day in prominent sectors like Pokrovsk and Chasiv Yar. Ukraine has successfully hit targets deep within Russia, including a missile plant in Tambov and a massive ammunition depot in Volgograd, using long-range “Flamingo” missiles. Following a request from Ukraine, SpaceX has reportedly disconnected Starlink terminals used by Russian forces, significantly hampering their frontline communications and drone operations. Combined military casualties are reportedly approaching 2 million since the beginning of the war in February 2022. A new round of trilateral peace talks involving the US, Russia, and Ukraine is expected to take place in Geneva this week, following previous “constructive” but inconclusive sessions in Abu Dhabi. The Trump administration has reportedly set a June deadline for reaching a peace deal. Meanwhile, Russia’s economy, described by some analysts as having entered a “death zone” in which it is consuming its own future capacity to survive, appears to be slowly sinking under the weight of mounting structural strain, raising the prospect that Moscow may soon be searching for an economic life‑jacket even as it tries to project strength on the battlefield.
In January, the United States and NATO reached a “framework of a future deal” regarding Greenland, which served as a strategic compromise to de-escalate a major diplomatic crisis. This agreement followed weeks of tension after President Trump’s overtures towards the Arctic island sparked panic among NATO partners. Both Danish and Greenlandic officials maintained that sovereignty remains a “red line” and is non-negotiable; the current framework holds that Greenland will remain a Danish territory. Reports suggest the deal may be modeled after the British Sovereign Base Areas in Cyprus, granting the US sovereign control over limited and specific tracts of land, such as the existing Pituffik Space Base, which facilitates the installation of components for the US Golden Dome missile defense system in the Arctic. It will also modernize the 1951 Defense of Greenland Agreement to grant the US total access for security purposes to counter Russian and Chinese influence. In exchange for the framework, President Trump rescinded the threatened tariffs on Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland. Additionally, NATO Secretary-General Mark Rutte proposed a new permanent mission called “Arctic Sentry,” likely modeled after Baltic Sentry, to increase surveillance and security cooperation across the High North.
The New START arms control treaty, which limited the nuclear arsenals of the United States and Russia, expired this month. The New START treaty was signed in 2011 by American President Barack Obama and Russian President Vladimir Putin, originally with a timeline of 10 years, which was then extended another 5 years under President Biden. Russia had previously suspended its participation in the New START treaty in 2023. Russian Foreign Minister Sergey Lavrov stated that Russia would continue to respect the limitations enshrined in the treaty so long as the US did as well. Former President Obama said on social media that the end of the treaty “would pointlessly wipe out decades of diplomacy, and could spark another arms race that makes the world less safe.” While President Trump and President Putin have both verbally expressed interest in extending the treaty, neither has taken substantive steps towards its renewal. In late 2024, Russia updated its nuclear doctrine to lower the threshold for using nuclear weapons, moving away from a strictly defensive stance for more strategic ambiguity. That coincided with the 1,000th day of the war in Ukraine and followed the US decision to allow Ukraine to use long-range ATACMS missiles for strikes deep inside Russian territory.
In the 2026 Portuguese presidential election, António José Seguro of the center-left Socialist Party (PS) secured a landslide victory, becoming the country’s next head of state. The election was notable for being only the second time in Portuguese history since the 1974 Carnation Revolution that a presidential race went to a second round. Seguro received 66.83% of the vote, positioning himself as a “modern and moderate” leader committed to defending democratic values. Meanwhile, André Ventura, the leader of the far-right Chega party, received 33.17%. Despite his loss, this was a record-breaking performance for a far-right candidate in Portugal. After the first round, Seguro received backing from several prominent conservative figures who sought to prevent a victory for the populist Ventura. Instrumental to the results of the election was the formation of a “firewall” against the far-right, where several conservative and centrist figures endorsed Seguro, despite his socialist background, to prevent a Ventura victory.
This month, German Chancellor Friedrich Merz pledged to relax military export restrictions for Gulf nations, specifically Saudi Arabia, Qatar, and the United Arab Emirates. This move aims to strengthen regional security cooperation and secure energy ties, moving away from previous years of strict hesitance. After a temporary suspension in August 2025 due to civilian casualties in Gaza, Germany lifted restrictions on military exports to Israel on November 24, 2025. The decision was based on a “stabilized” ceasefire and the facilitation of large-scale humanitarian aid. Germany has increasingly moved toward approving exports by default for multinational projects (like the Eurofighter or A400M) where German components are minimal, to avoid vetoing sales by partners like the UK or France. Germany remains the world’s fifth-largest arms exporter, with approvals reaching nearly 99% of applications in 2024, totaling approximately €13 billion. This follows a larger ongoing policy shift, as the war in Ukraine and the need for energy security have pushed Berlin to prioritize “realistic” defense policies over its traditional post-war restraint.
Market Implications: Europe’s February market mood is being shaped more by geopolitics than by economic fundamentals, with Ukraine‑Russia peace talks scheduled but risk levels staying high due to ongoing military posturing by France and the UK. A new €90 billion loan package to Ukraine from the EU adds funding support for defense‑related investment, though it slightly pressures longer‑term euro‑area interest rates. Meanwhile, renewed US–Denmark friction over Greenland adds another layer of geopolitical noise for Nordic markets. Overall, European markets may stay volatile but tilted toward defense, infrastructure, and value‑oriented sectors as investors navigate geopolitical tension and adjust to the region’s expanding fiscal and security commitments.

China, India & Japan

On February 2nd, the United States and India brokered an Interim Trade Agreement. This deal follows high trade tensions after President Trump imposed reciprocal tariffs on Indian goods. Key to the agreement was the US slashing its effective tariff rate on Indian goods from as high as 50% down to approximately 18%, including removing a 25% punitive duty for India’s purchase of Russian oil; in exchange, India agreed to halt its importation of Russian crude. India expressed an “intention” to purchase over $500 billion in US goods over the next five years, primarily in the energy, aviation, and tech sectors. Additionally, India agreed to reduce or eliminate tariffs on various US industrial and agricultural products, which has angered Indian farmers. Major Indian trade unions and farmers’ groups in India staged a nationwide strike, protesting that India’s recent trade deals would flood the country with cheap foreign goods and threaten farmers’ livelihoods. India has also recently concluded trade agreements with the European Union and New Zealand. Conversely, the Indian stock market responded positively, with major gains for export-oriented sectors like textiles and pharmaceuticals.
In the snap general election held on February 8th, Prime Minister Sanae Takaichi led the Liberal Democratic Party (LDP) to a historic landslide victory, securing a two-thirds supermajority in the House of Representatives. The LDP achieved the highest seat count for a single party in Japan’s postwar history. With 352 combined seats, the LDP-Ishin coalition holds more than the 310 required for a two-thirds supermajority. This allows the government to override the House of Councilors, the upper house, on most legislation and move forward with constitutional amendments. The newly formed Centrist Reform Alliance (CRA), a merger of the Constitutional Democratic Party and Komeito, suffered a “brutal defeat,” losing over two-thirds of its pre-election seats. Co-leaders Yoshihiko Noda and Tetsuo Saito signaled intentions to resign following the results. Takaichi has a clear mandate to pursue a conservative agenda, including tax cuts (specifically a temporary suspension of the consumption tax on food), increased defense spending, and stricter immigration controls. Following the news of political stability, the Nikkei 225 surged to record highs, briefly rising above 57,000.
Since the beginning of the year, China’s political and administrative landscape is undergoing a major shakeup, marked by high-level military purges and the launch of the 15th Five-Year Plan. The most impactful “shakeup” of 2026 involves the decimation of the Central Military Commission (CMC), the body overseeing China’s armed forces, with five of its six members besides President Xi removed. On Saturday, the Ministry of Defense announced an investigation into General Zhang Youxia, Xi’s second-in-command in the CMC as senior vice-chairman, for suspected “serious violations of discipline and law.” Additionally, General Liu Zhenli, the chief of staff of the CMC’s Joint Staff Department, was also the subject of an anti-corruption probe, leaving only one uniformed member on the CMC. This coincides with China launching its 15th Five Year Plan. Priorities include reducing civil servant positions by 5% increasing domestic consumer spending. Further, the National Financial Regulatory Administration (NFRA) has assumed its duties to regulate Chinese commercial banks and insurance companies. This new body replaces the China Banking and Insurance Regulatory Commission, as well as taking over some duties from the People’s Bank of China, the country’s central bank.
Japan has recently achieved a major milestone in deep-sea mining, successfully completing a world-first test to extract rare earth-rich mud from depths of 6,000 meters (nearly 20,000 feet). The mission, led by the Japan Agency for Marine-Earth Science and Technology (JAMSTEC) using the drilling vessel Chikyu, focused on waters near the remote island of Minamitorishima. The agency successfully pumped up sediment containing rare earth elements from the abyssal floor, proving the technical feasibility of mining at such extreme depths. The project aims to reduce Japan’s heavy reliance on China, which currently supplies 60–70% of Japan’s rare earths. The area around Minamitorishima is estimated to hold over 16 million tons of rare earth oxides, potentially the world’s third-largest reserve. However, skeptics argue that the energy and logistics required for mining at 6,000 meters make it significantly more expensive than land-based mining, likely requiring permanent government subsidies. Further, marine scientists and conservation groups warn of “irreversible harm” to deep-sea ecosystems, claiming noise pollution and sediment plumes could affect marine life.
Market Implications: In India, newly reduced US tariffs and long‑term energy and tech purchase plans support exports and the currency, though political tensions around agriculture may cause volatility in consumer and agri‑related stocks. Japan’s new political leadership has boosted equities even as bonds sold off, while its deep‑sea rare‑earth discovery adds long‑term strategic value to supply chains. In China, leadership changes point to a more security‑focused economic model, keeping pressure on tech and dual‑use industries despite modest demand support. Overall, the region’s markets may stay uneven but lean constructive, with policy tailwinds benefiting India’s exporters, Japan’s capex and tech ecosystem, and selective China sectors—while elevated geopolitical risk keeps investors selective and valuation‑sensitive.

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