North America
- Since taking office on January 20th, US President Donald Trump has issued over 50 executive orders, more than any president since Harry Truman in his first 100 days. These executive actions cover a wide range of topics, including environmental deregulation, immigration crackdowns, the elimination of diversity, equity, and inclusion (DEI) programs, and the withdrawal from the Paris Climate Accord. Trump has also revoked 91 of Biden’s executive orders, many on DEI initiatives and environmental policies, to reestablish his own agenda from his first term. These actions have triggered legal challenges and raised significant concerns about the limits of executive power, with multiple orders already blocked by US District Courts.
- This month, the Trump administration carried out mass firings across federal agencies, affecting thousands of probationary employees without seeking Congressional approval. Key agencies impacted included the Centers for Disease Control and Prevention (CDC), Department of Homeland Security (DHS), and National Nuclear Security Administration (NNSA), with over 3,000 employees cut from the US Forest Service alone. The administration, supported by Elon Musk’s Department of Government Efficiency (DOGE), aims to slash up to 10% of the federal workforce as part of efforts to streamline the government. The terminations sparked protests, lawsuits, and bipartisan concerns about national security, service delivery, and executive overreach.
- President Donald Trump’s recent call with Vladimir Putin marked a swift end to the US’s three-year effort to isolate Russia, signaling a potential shift in Ukraine peace talks and US foreign policy. Trump labeled Ukraine’s NATO membership “impractical” and indicated Kyiv could face significant compromises, while US Defense Secretary Pete Hegseth emphasized NATO’s limited role in any peace process. The call also covered a broad agenda, including global energy markets and artificial intelligence, reflecting Moscow’s long-sought recognition as a global power on par with the US European leaders reacted with shock to the sudden policy reversal, while Moscow celebrated what it saw as a diplomatic victory.
- On February 1st, President Trump imposed tariffs of 25% on imports from Canada and Mexico (before temporarily removing them) and 10% on imports from China, aimed at addressing drug trafficking and fentanyl smuggling concerns. The tariffs could reduce US imports by 15%, increase consumer prices, and disrupt industries like automotive, energy, and food, potentially adding up to $3,000 to the price of cars and raising Midwest gas prices by 50 cents per gallon. Canada and Mexico, where trade makes up 70% of GDP, face significant economic losses, with Mexico’s GDP potentially shrinking by 16% and Canada’s energy sector hit hard due to its reliance on US markets. Retaliatory tariffs could follow, as seen in past trade conflicts, threatening US exports of auto parts, oil, and electronics, especially in states like Texas, Ohio, and Maine.
- On February 13th, a federal judge ordered the Trump administration to temporarily lift its freeze on USAID funding, citing financial devastation to contractors, suppliers, and nonprofits relying on aid payments. The ruling followed lawsuits by the Aids Vaccine Advocacy Coalition and Global Health Council, challenging the administration’s dismantling of US foreign assistance programs. The judge criticized the administration, including Secretary of State Marco Rubio and aide Elon Musk, for lacking justification for the aid suspension and noted the absence of a waiver system to keep aid flowing. A separate ruling temporarily blocked a Trump order to reduce USAID staff, after safety concerns arose from incidents in Congo.
- Market Implications: Trump’s executive orders prioritize deregulation, tax cuts, and energy independence, which may boost business confidence in sectors like fossil fuels, defense, and financial services. However, these policy shifts might introduce regulatory unpredictability, affecting long-term investment strategies. Changes to the federal workforce could save costs but might reduce consumer spending in regions with many federal workers, impacting real estate, retail, and services. Trump’s call with Putin for Ukraine peace talks could stabilize energy markets and ease inflation if successful, but the uncertainty surrounding negotiations may keep investors cautious. His tariff threats pose risks to US markets by disrupting supply chains and increasing costs, potentially harming exporters in agriculture and technology due to retaliatory measures. Overall, while some optimism might be in the air, caution is recommended and discernment is needed as to which sectors are promising in the face of rising risks.
Europe
- The Munich Security Conference (MSC) was marked by key geopolitical shifts. Ukrainian President Volodymyr Zelensky met with US Vice President JD Vance. Still, Ukraine and European leaders were excluded from upcoming US-Russia peace talks to be held in Saudi Arabia to end the war in Ukraine. The US pressured NATO’s European members to increase their defense spending from the current 2% of GDP minimum, while Europe has already surpassed the US in total aid to Ukraine (€132bn vs. €114bn). Vice President Vance’s critical speech on European policies and President Trump’s plan to impose a 25% tariff on steel and aluminum imports further underscored deepening transatlantic divisions that marked the conference.
- At the Paris AI summit, French President Emmanuel Macron promoted France and Europe as leaders in AI, emphasizing France’s reliance on nuclear energy to counter the US and UK’s energy policies. The summit, held at the Grand Palais, featured key leaders like European Commission President Ursula von der Leyen and tech industry figures, though the US and UK expressed dissatisfaction with the draft communique’s wording around “sustainable and inclusive AI.” Macron underscored Europe’s opportunity to accelerate its AI strategy, while AI experts and organizations, such as the Ada Lovelace Institute, criticized the draft for downplaying safety risks. UNI Global Union’s Christy Hoffman warned of AI-driven inequality without worker involvement, framing it as a threat to democracy.
- European countries, led by Britain and France, are quietly planning a troop deployment to Ukraine to secure any future peace settlement with Russia, amid growing concerns over shifting US priorities. Discussions began in early 2024, with momentum growing after US President Donald Trump signaled openness to a deal with Putin, sidelining NATO membership for Ukraine. Ukraine insists on a force of at least 100,000 troops with air support, while US Defense Secretary Pete Hegseth emphasized a non-NATO mission to avoid provoking Russia. Despite European efforts, officials agree that US support is crucial for any credible security guarantees for Ukraine.
- Germany’s early election on February 23rd saw the conservative CDU/CSU alliance leading in the polls with 32%, followed by the far-right AfD at 21% and the SPD trailing at 14%, down from their 2021 victory at 25.7%. Chancellor Olaf Scholz remains hopeful for re-election, but only 17% of voters support another SPD-led coalition, with 35% favoring a CDU/CSU-led government. Friedrich Merz, the CDU/CSU’s top candidate, is the most favored for chancellor at 34%, ahead of Scholz at 26% and the Green Party’s Robert Habeck at 25%. Coalition options remain uncertain, with CDU/CSU partnerships with SPD or Greens possible but a coalition with AfD categorically ruled out.
- Market Implications: The Munich Security Conference exacerbated geopolitical uncertainty. One thing became clear: the European defense sector will experience an upswing. Simultaneously, the Paris AI Summit highlights Europe’s ambition to lead in AI regulation and innovation, which may affect investor confidence in European tech firms. The prospect of European troop deployments to Ukraine introduces heightened geopolitical risk, likely impacting energy security, currency stability, and sovereign debt markets. The EU’s preparation for a tariff war with the US signals potential disruptions in transatlantic trade, affecting key European industries like automotive and aerospace and potentially weakening exports and economic growth. Overall, European markets are cheaper than US markets and have been experiencing better returns since the beginning of the year.
China & India
- US President Donald Trump and Indian Prime Minister Narendra Modi announced plans to deepen the US-India Major Defense Partnership through expanded military cooperation and the potential sale of F-35 stealth jets. India aims to diversify its defense suppliers, reducing its dependency on Russia, which still accounts for 60% of Indian defense equipment, despite challenges in obtaining parts and upgrades. The collaboration reflects growing geostrategic concerns over China’s expanding influence in the Indo-Pacific and aligns with India’s participation in the Quad alliance. While the deal offers long-term benefits for India’s defense modernization and US-India trade relations, experts emphasize it will take years for new systems to be fully implemented.
- China announced retaliatory trade measures in response to a 10% increase in US tariffs on Chinese goods, which included a 15% tariff on US coal and liquefied natural gas and a 10% tariff on crude oil, cars, and agricultural machinery, effective February 10. China’s Ministry of Commerce imposed export controls on critical minerals like tungsten and indium, requiring licenses to export-related products to safeguard national security. Additionally, two US companies were added to China’s Unreliable Entities List, facing potential trade restrictions, and an antimonopoly investigation was launched into Google. China’s Customs Tariff Commission stated these actions were in response to US violations of WTO rules, and China plans to formally challenge the US tariffs at the World Trade Organization.
- Foreign direct investment (FDI) in China has plummeted 99% over the past three years, with 2024 net inflows falling to $4.5 billion—the lowest level in 33 years—due to economic slowdown and national security concerns. Companies like IBM, Microsoft, and Bridgestone scaled back operations, citing stricter government control over data and internet restrictions. Industries facing overcapacity, such as steel and chemicals, saw key players like Nippon Steel and Sumitomo Chemical exit joint ventures, while automakers like General Motors and Honda reduced staff and production. Only 16% of Japanese companies plan to increase investment in 2025, and the trend could worsen with US-China trade tensions under President Trump’s administration.
- DeepSeek’s recent AI advancements, particularly its efficiency gains and benchmark performance, have sparked debate amid US export controls targeting high-end chips. Although DeepSeek leveraged Nvidia’s H800 chips to bypass October 2022 restrictions, its founder Liang Wenfeng highlighted significant compute disadvantages under the current embargo. The company’s progress also stems from access to extensive compute clusters and cloud services, despite challenges in scaling operations due to export restrictions. While DeepSeek’s openness about its methods contrasts with the secrecy of Western AI firms, the impact of export controls on China’s AI ecosystem —especially for large-scale deployment — remains a key factor shaping its future development.
- The Chinese animated film Ne Zha 2 was released during the Chinese Lunar New Year holiday, quickly becoming China’s highest-grossing movie of all time with nearly $1.3 billion in earnings to date. The film is the first non-Hollywood production to surpass the $1 billion mark in a single market and helped push China’s box office earnings to $1.3 billion during the eight-day holiday period. Directed by Jiaozi (Yang Yu), the film blends traditional Chinese aesthetics with modern animation, resonating with national pride and a growing Chinese cultural identity. Ne Zha 2 is now set for a limited US release and is projected to earn nearly $2 billion in China alone.
- Market Implications: The growing defense partnership between Trump and Modi indicates stronger US-India strategic ties, likely benefiting Indian defense firms and increasing FDI in India’s military-industrial complex. This partnership could also stimulate growth in India’s technology and manufacturing sectors, reinforcing its position as a rising economic power. On the other hand, China’s decision to impose retaliatory tariffs on the US may strain trade relations further, impacting supply chains and investor confidence. Despite these challenges, China’s advancement in AI, led by companies like DeepSeek, could attract fresh investment in its tech sector, potentially balancing out some of the economic headwinds. Some diversification into Asian markets might be warranted.
Suggested Reading
Will Europe return to Putin’s gas?
The Economist
Trump Is Changing the World Order With Unprecedented Speed
Aaron Zitner, Scott Patterson, and Eliza Collins, Wall Street Journal
Xi Jinping shows how he will return American fire
The Economist
Key takeaways from Donald Trump’s meeting with India’s Narendra Modi
Al Jazeera
