Geopolitical Concerns
Facing a Moment of Crisis, Europe Rewrites Its Economic Playbook
Peter Rashish, World Politics Review
Turkey Is Now a Full-Blown Autocracy
Gonul Tol, Foreign Affairs
Why Did Israel Restart the War in Gaza?
John Haltiwanger, Foreign Policy
Andrei Soldatov and Irina Borogan, Foreign Affairs
In a whirlwind of geopolitical shifts, Europe’s economic policies are undergoing a dramatic transformation. In early March, European Commission President Ursula von der Leyen unveiled the €800 billion “ReArm Europe” plan, suspending EU fiscal rules to let member states boost defense spending by up to 1.5% of GDP. The plan also includes €150 billion in loans financed through collectivized debt, echoing the COVID-19 response while signaling a broader shift in EU fiscal policy. Meanwhile, in Berlin, CDU leader Friedrich Merz—likely Germany’s next chancellor after February’s elections—proposed exempting defense spending above 1% of GDP from the constitutional “debt brake” and creating a €500 billion infrastructure fund. These initiatives, expected to pass swiftly in the German parliament, mark the rise of a European defense-industrial complex and the end of Germany’s austerity era. At the same time, Turkey veered further into autocracy as opposition frontrunner Ekrem Imamoglu was arrested just days before his party was set to announce its 2025 presidential candidate. His university diploma was revoked, and he was charged with corruption and terrorism—moves reminiscent of Erdogan’s long-standing tactics to sideline rivals, consolidate power, and eliminate electoral threats, echoing Putin’s strategies in Russia.
Meanwhile, the fragile Gaza ceasefire collapsed on March 18, 2025, as Israel launched large-scale airstrikes against Hamas, killing over 400 Palestinians, according to the Gaza Health Ministry. Israeli officials justified the strikes as a response to Hamas’s refusal to release hostages and extend the truce, calling them “preemptive” due to perceived attack preparations. With ceasefire talks stalled since March 1, the renewed fighting has escalated regional tensions, including clashes between Israel and Hezbollah, direct military exchanges with Iran, and the first Houthi missile attack on Israel since January. Riyadh condemned Israel’s actions, threatening U.S.-led normalization efforts with Saudi Arabia. At the same time, NATO, under the shadow of Donald Trump’s second term, has sharpened its focus on Russia’s expanding hybrid warfare. Deputy Assistant Secretary-General James Appathurai warned in January that Russian sabotage—including train derailments, arson, and assassination plots—has targeted 15 countries since the 2022 Ukraine invasion. Moscow has also escalated its use of criminal networks and hostage diplomacy, exemplified by the release of American teacher Marc Fogel ahead of preliminary Ukraine talks in Riyadh. With Trump’s administration signaling a shift away from prioritizing Russia in U.S. intelligence, European officials fear an emboldened Kremlin, expanding its covert operations and attempting to blame Ukraine for its own attacks.
Geoeconomics
Can the dollar remain king of currencies?
Berry Elchengreen, The Financial Times
Fed Projections See an Economy Dramatically Reset by Trump’s Election
Nick Timiraos, Wall Street Journal
Banks That Saw $3,000 Gold Coming Are Staying Bullish for Now
Yvonne Yue Li, Mark Burton, and Jack Ryan, Bloomberg
Trade War Explodes Across World at Pace Not Seen in Decades
Jason Douglas and Tom Fairless, Wall Street Journal
Following Donald Trump’s return to office, the global economic landscape has shifted significantly, casting doubt on the future of the U.S. dollar as the world’s dominant currency. The dollar’s supremacy has historically been supported by structural factors such as the U.S. share of global GDP, the strength of its financial markets, and the contributions of figures like Paul Warburg and Harry Dexter White. Its position was further reinforced through trade, alliances, and institutions like the Bretton Woods System, the Marshall Plan, and GATT. However, the new administration’s protectionist trade policies, widespread tariffs, and skepticism toward international institutions are raising concerns about this long-standing order. Rising U.S. debt, potentially exacerbated by further tax cuts, and any threats to Federal Reserve independence could further erode foreign confidence in the dollar. Additionally, the frequent use of U.S. sanctions in recent decades has incentivized countries to seek alternatives, accelerating discussions on reducing reliance on the dollar for international transactions.
In response to these shifts, the Federal Reserve’s March 2025 projections outlined a drastically different economic outlook than previously expected. While officials had anticipated gradual rate cuts to achieve a soft landing, Trump’s tariff plans fueled inflation, weakened investment, and dampened sentiment and growth. Fed Chair Jerome Powell cited an “exogenous source” of inflation, noting that pre-tariff conditions pointed to 2.5% inflation, 2% growth, and 4% unemployment. However, new forecasts now signal weaker growth, higher unemployment, and rising inflation, raising fears of mild stagflation, though not at 1970s levels. Despite this, most Fed officials initially projected two rate cuts for 2025, though growing uncertainty suggests fewer cuts may occur. This turmoil, reminiscent of the 2019 U.S.-China tariffs and the 2021 “transitory” inflation debate, has further fueled demand for gold. With global trade barriers rising at an unprecedented pace—echoing the 1930s protectionist spiral—banks such as Bank of America, Citigroup, and Macquarie have grown increasingly bullish on gold. Macquarie raised its price target to $3,500 an ounce, citing sustained central bank purchases, strong Chinese demand, and gold’s haven appeal. As a result, gold prices surged past $3,000 an ounce in mid-March 2025, reflecting investor anxiety over the economic fallout of escalating trade conflicts and evolving U.S. policy. Meanwhile, global trade restrictions among G20 nations have surged to 4,650 as of March 1, marking a 75% increase since 2016, with U.S. import tariffs potentially rising to 18%—the highest in 90 years—if all proposed measures are implemented. The escalating trade war, marked by U.S. tariffs of 25% on steel and aluminum and retaliatory actions from China, the EU, and Canada, is projected to slow global economic growth to 2.4% in 2025 from 2.9% in 2024, heightening concerns over inflation, investment, and diplomatic tensions.
Global Junctions
Nvidia unveils new Blackwell chip that makes DeepSeek faster and cheaper
Yifan Yu, Nikkei Asia
Rana Foroohar, Nikkei Asia
The Coming Global Health Crisis
Thomas J. Bollyky and Yanzhong Huang, Foreign Affairs
At Nvidia’s GPU Technology Conference on March 18, CEO Jensen Huang unveiled the Blackwell Ultra GPU and the GB300 chipset, designed to enhance AI inference efficiency, particularly for reasoning AI models like DeepSeek’s R1. Nvidia also introduced Dynamo, an open-source AI inference software aimed at reducing costs and improving performance. Looking ahead, the company teased its upcoming Vera CPU and Rubin GPU, set for release in 2026, and hinted at a next-generation Feynman chip expected in 2028. However, Nvidia’s stock dipped 3% following the announcement, reflecting increased competition from DeepSeek’s cost-efficient AI model. These developments highlight the rapid evolution of AI hardware and the challenges even industry leaders face in maintaining their dominance.
Meanwhile, the Trump administration is preparing an executive order to revitalize U.S. shipbuilding, marking the most ambitious industrial strategy in the sector since World War II. The plan aims to counter China’s maritime dominance and secure Arctic trade routes, emphasizing icebreaker construction as a key priority. The U.S., with only 185 commercial ships compared to China’s 5,500, is seeking alliances with Japan, South Korea, Finland, and Canada to rebuild its maritime strength. At the same time, concerns are growing over the United States’ retreat from global health leadership. The impact of declining U.S. health aid, which has supported life-saving initiatives like PEPFAR and Gavi, leaves millions at risk. While China has selectively increased its involvement in countries like Nepal and Bangladesh, it has hesitated to replace the U.S. role in multilateral health organizations, leaving critical global health efforts at risk.
Global Trajectories
Why Billionaire Li Ka-shing’s Panama Ports Deal Infuriates China
Filipe Pacheco and Shirley Zhao, Bloomberg
A New ‘China Shock’ Is Destroying Jobs Around the World
Katia Dmitrieva, Philip Heijmans, and Prima Wirayani, Bloomberg
Ignore the Boom in Oil That Isn’t Oil at Your Peril
Javier Blas, Bloomberg
Over the past month, global markets have been reshaped by a combination of geopolitical tensions and significant shifts in trade and energy sectors. Hong Kong billionaire Li Ka-shing’s $19 billion sale of his Panama Canal port assets to a BlackRock-led consortium has intensified U.S.-China tensions. While the deal, set to close by April 2, strengthens Li’s financial position, increasing his fortune to $30.5 billion, it also undermines China’s strategic hold over the canal, which Beijing had hoped to use as leverage in its negotiations with the U.S. The deal is a blow to China’s global influence, though the regulatory scrutiny it faces could potentially slow its completion. Meanwhile, the textile industry in Surakarta, Indonesia, has been hit hard by “China Shock 2.0,” with cheap Chinese imports leading to widespread factory closures and massive job losses. This phenomenon, reminiscent of the U.S. job losses due to Chinese imports from 1999 to 2011, has spurred governments in emerging markets like Mexico, Vietnam, and India to impose tariffs, while China continues expanding its global trade dominance.
In the energy sector, the global petroleum market has seen a dramatic shift in recent decades. Crude oil now makes up just 74% of the total petroleum output, down from nearly 90% in the late 1990s, as biofuels, natural gas liquids (NGLs), and condensates have surged in production. The U.S. shale revolution has been a key driver, with NGL output rising by nearly 300% since 2008, making the U.S. the fourth-largest oil producer when including NGLs separately. OPEC, particularly Saudi Arabia, is exploiting production loopholes by developing liquid-rich gas fields like Jafurah, which is expected to add nearly 1 million barrels per day by 2030, bypassing output limits. This shift is driving a new wave in global oil demand, with petrochemical products like ethane, propane, and butane now leading consumption growth. These changes signal that the future of the global petroleum market will depend on a broader range of oil liquids, beyond just traditional crude.
