Geopolitical Concerns
Donald Trump’s assault on Europe
The Economist
Trump’s Ukraine Deal Is Looking Great So Far, For the Kremlin
Marc Champion, Bloomberg
Donald Trump opens the door to Vladimir Putin’s grandest ambitions
Max Seddon and Christopher Miller, The Financial Times
China ‘pleased’ by Trump-Putin call after reportedly proposing summit
James Hand-Cukierman, Nikkei
Ulrike Malmendier, Thilo Kroeger, and Christopher Zuber, Project Syndicate
Geopolitical tensions are escalating as Donald Trump’s administration shifts its foreign policy priorities, pivoting away from the previous administration’s commitments to Ukraine and Europe. Trump is actively engaging with Russia, while signaling a potential reduction in commitment to Ukraine and Europe. China has expressed that they are “pleased” with the communication between Trump and Putin, after reports that China proposed a summit between the two leaders, emphasizing dialogue as the “only viable way out” of the Ukraine war,. This shift is occurring against the backdrop of the three-year anniversary of Russia’s invasion of Ukraine on February 24. Defense Secretary Pete Hegseth has stated that returning to Ukraine’s pre-2014 borders is unrealistic and that the United States does not believe that NATO membership for Ukraine is a realistic outcome of a negotiated settlement. These developments have sparked concerns among European allies, who fear that the U.S. will strike an unfavorable deal with Putin to end the war, potentially at their expense. The US has since engaged in preliminary talks with Russia in Saudi Arabia.
The potential ramifications of Trump’s policies are far-reaching, impacting the security and economic stability of Europe, Russia, and Ukraine. Trump’s administration is asking Ukraine to hand over rights to what they say are $500 billion of critical minerals as payment for all the aid America has given in the past. Meanwhile, Russia seeks a new security architecture that would give them influence in Europe. Germany faces its own internal challenges, including an aging population, a tight labor market, and declining productivity growth. European leaders fear a new partition of Europe into Western and Russian spheres of influence, with Russia potentially reviving demands that NATO abandon its central and eastern European members by rolling back its troops to the borders that prevailed in 1997. Europe is attempting to come to terms with the possibility that the U.S. may no longer be its primary security guarantor, while the U.S. shifts its focus towards China. Several meetings are expected to occur in the coming weeks, including a meeting of European leaders in Paris on February 17, to address Europe’s role in peacekeeping and rearmament.
Geoeconomics
The mounting risks to US exceptionalism
Mohamed El-Erian, The Financial Times
The World’s Most Important Market Sends a Warning
Matthew A. Winkler, Bloomberg
Wall Street Talk of Revaluing US Gold Is Drawing Attention — and Skepticism
Jack Ryan, Yvonne Yue Li, and Saleha Mohsin, Bloomberg
Chinese cars are taking over the global south
The Economist
The notion of “American exceptionalism” faces growing risk amid policy changes that heighten business uncertainty. These uncertainties may erode confidence in price and financial market stability, potentially aligning the U.S. with the sluggish economies of China and Europe. Contributing factors include tariffs that drive up costs for U.S. companies and restrict market access, immigration policies that affect labor supply, and public sector reforms that may threaten financial security. At the same time, businesses contend with a departure from harmonized global regulations, particularly in areas like sustainability and diversity. The U.S. market is flashing concerns about faster inflation: the two-year breakeven rate—reflecting traders’ inflation expectations over the next 24 months—has surpassed January’s Consumer Price Index (CPI) increase, a pattern last seen in October 2020 when Donald Trump revealed he and the First Lady tested positive for Covid-19. Meanwhile, 10-year breakeven rates have reached their highest level since March 2023, and 30-year breakeven rates are at a peak not seen since November 2023. A University of Michigan survey further shows Americans anticipate a 3.3% inflation rate over the next five to ten years—the highest since June 2008. These inflation signals coincide with unprecedented turbulence during Trump’s second administration, marked by constitutional challenges, treaty threats, and tariff escalations.
There is discussion around revaluing U.S. gold stockpiles, driven by comments from Treasury Secretary Scott Bessent about monetizing assets and creating a sovereign wealth fund. Revaluing gold to current market prices could net $750 billion, according to Bloomberg. The U.S. government holds 8,133 metric tons of gold. As of February 2025, the official price of $42 an ounce contrasts sharply with market prices approaching $3,000 an ounce. Stephen Miran, Trump’s nominee to lead the White House Council of Economic Advisors, has suggested selling the gold to strengthen undervalued currencies and create an income stream. While revaluation requires congressional approval and is technically doable, selling gold reserves could negatively affect gold prices. Meanwhile, Chinese carmakers are expanding in the global south, with exports reaching 4.7 million vehicles last year. Most of these exports are internal combustion engine (ICE) vehicles. Chinese brands now account for around three-fifths of sales in China. Overcapacity in China has led to a price war, prompting firms to seek opportunities abroad. Despite facing tariffs in the EU and the U.S., Chinese firms are focusing on South-East Asia, the Middle East, Latin America, and Africa. By 2030, Chinese firms are expected to manufacture 2.5 million cars abroad.
Global Junctions
Forget DeepSeek. Large language models are getting cheaper still
The Economist
The Editorial Board, The Financial Times
PS Editors, Project Syndicate
Project Syndicate
The landscape of artificial intelligence is undergoing rapid transformation with significant geopolitical and economic implications. Large language models (LLMs) are becoming more affordable, challenging the dominance of established AI labs. DeepSeek, a Chinese firm, gained attention for reducing the cost of training a frontier model from $61.6 million (the cost of Meta’s Llama 3.1) to $6 million. Researchers at Stanford University and the University of Washington further pushed the boundaries by training their s1 LLM for just $6, using a fine-tuning approach on the pre-existing Qwen2.5 LLM produced by Alibaba. This was accomplished by using a smaller amount of high-quality data, demonstrating that increased computing power and data are not the only paths to improved performance. These advancements signal a new era where cheaper AI models could democratize access to this technology, potentially boosting the competitiveness of regions like Europe.
This technological shift coincides with a new AI arms race, primarily between the U.S. and China, with Europe striving to carve out its role. The U.S., under Vice-President JD Vance, is adopting a more aggressive approach, removing AI guardrails to accelerate development, while China invests heavily in overcoming microchip restrictions and challenging U.S. hegemony. Some European executives view DeepSeek and France’s Mistral as evidence that cheaper, open-source models could benefit the continent. Daniel Gros suggests that Europe could benefit from DeepSeek’s cheaper AI by facilitating its adoption across European industries. However, Europe faces obstacles, including a shortage of capital for rapidly building out start-ups. The developments highlight the critical importance of AI as a geopolitical tool and the varying strategies nations are adopting to secure their positions in this rapidly evolving field.
Global Trajectories
Health Is a Cornerstone of Global Security
Vanessa Kerry, Foreign Policy
The tragedy of the Democratic Republic of Congo
Lawrence Freedman, New Statesman
China’s Property Crisis Enters a Dangerous New Phase
Bloomberg
Global security is increasingly recognized as being intertwined with health, as poor health can weaken communities, undermine economies, exacerbate inequalities, and fuel political unrest. This perspective comes at a time when the world is grappling with issues such as migration, climate change, economic instability, and disinformation, all of which are interconnected and stretched to their limits. Vanessa Kerry, co-founder and CEO of Seed Global Health, argues for a fundamental shift in how we view health, emphasizing that it should be centered in global and national agendas. Her argument comes in the wake of significant global challenges, including a sweeping foreign aid freeze from the U.S. and political upheaval in Canada, France, and Germany. These issues highlight the necessity for both private and public sectors to invest in health as an engine of economic growth and to integrate health-focused metrics across sectors.
Meanwhile, the Democratic Republic of Congo (DRC) is facing a complex web of challenges stemming from its vast natural resources, estimated at $24 trillion, which have paradoxically led to a “resource curse” of authoritarian regimes, civil wars, and foreign interference. Despite its potential wealth, a fifth of the DRC’s population relies on aid to survive, with the eastern city of Goma being taken over by rebels backed by Rwanda. Adding to these global economic concerns is China’s property crisis, which is entering a dangerous new phase that is marked by unprecedented intervention from authorities, such as the late January 2025 move in Shenzhen to take operational control of China Vanke Co.. The crisis, characterized by a $160 billion pile of distressed debt, is worsening despite multiple rounds of stimulus from the Chinese government. The crisis is starting to affect Hong Kong, as Chinese homebuyers and tourists pull back.
