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by ian bremmer
Less than a month into Donald Trump’s second term, talks to end the Ukraine war have finally begun. For the first time since Russia’s full-scale invasion in 2022, American and Russian officials sat down in Riyadh yesterday to negotiate not just the fate of Ukraine but the future of Europe … without Ukraine or Europe at the table. It’s no wonder the Kremlin left the four-and-a-half-hour meeting with a spring in its step.
Before negotiations had even started, Team Trump handed Vladimir Putin several of his core demands without securing a concession in return. The US ruled out NATO membership for Ukraine, rejected the possibility of deploying US peacekeeping forces, and acknowledged Russia’s territorial gains as the baseline for negotiations. Further, the talks excluded Ukrainian President Volodymyr Zelensky and European allies, signaling that the fate of Ukraine and Europe will be decided by Washington and Moscow.
After Tuesday’s meeting, President Trump went as far as reiterating Moscow’s call for elections in Ukraine, reportedly as a pre-condition for a final agreement, and blamed the Ukrainians for starting the war. The Kremlin’s media machine hasn’t been this happy since the early days of the 2022 invasion, when they briefly thought Kyiv would fall without a fight.
It’s hard to articulate how extraordinary the events of the past week have been. The fact that in the 21st century, Russians and Americans are negotiating Ukrainian elections and European security without either party in the room is unprecedented since the days of the Cold War.
Despite Zelensky’s and European leaders’ best efforts to get on Trump’s good side, the US is no longer a reliable or a good-faith partner. If Vice President JD Vance’s speech at the Munich Security Conference denouncing European democracy did not make that clear enough, Treasury Secretary Scott Bessent’s attempt to shake down Zelensky for 50% of Ukraine’s present and future mineral wealth revenues – not in exchange for future US support but as payment for past military aid disbursed during the Biden administration – should have. These terms amounted to a higher share of Ukrainian GDP than the reparations imposed on Germany by the Versailles Treaty.
Whether or not you’re a fan of President Zelensky, you should be able to agree that the US trying to force an election in a foreign democracy during wartime – when it can’t possibly be held safely and securely – against most Ukrainians’ wishes (including much of Zelensky’s opposition) and in violation of the Ukrainian constitution is unacceptable. Doing this not to advance American interests but to further the imperialist agenda of a war criminal like Putin is a stain on the United States and its role in the world.
Ukrainians now recognize there is a growing risk that Trump will strike a ceasefire deal with Putin on terms they cannot accept. But they still have agency: At the end of the day, no ceasefire will hold if Ukrainians refuse to stop fighting, and they will only lay down arms if they receive real security guarantees that Russia won’t be able to seize more territory in the future. Yet Trump has already said that the US will not be on the hook for deploying peacekeeping troops, leaving Ukraine to rely on Europe for post-war security (not to mention reconstruction).
Here’s the rub: Most Europeans will only agree to deploy peacekeeping forces to Ukraine if the US credibly commits to provide a military backstop (not necessarily troops but yes logistics, intelligence, and air support) in the event of a Russian attack, and the Trump administration is reluctant to offer that. Yet without a tripwire along the lines of Article 5 (i.e., not contingent on Europe’s political and economic alignment with the Trump agenda), a European security guarantee would be too weak to effectively deter Russia from using a ceasefire to rearm and trying to take more Ukrainian land in the future.
Kyiv is working furiously with European leaders to craft a plan they can present to Trump before he meets with Putin. They all recognize that if they don’t move fast, the US and Russia will cut a deal on their future over their heads. But Europe’s haplessness was on full display at an emergency meeting convened by French President Emmanuel Macron in Paris on Monday. UK Prime Minister Keir Starmer pledged to send troops to Ukraine – but only with US backing, which isn’t coming. Germany’s lame-duck Chancellor Olaf Scholz dismissed the idea of peacekeepers as “premature.” Poland, despite being on the front lines, refused to commit troops, citing its own security needs. The Baltics and Nordics would be willing to commit some troops, as would the French, but nowhere near enough – or fast enough. Europe’s inability to act decisively underscores a deeper problem: Without American leadership, the continent is paralyzed.
For Ukrainians, the stakes could not be higher. They may soon be forced to choose between accepting a loss of territory without US-backed security guarantees for the future and continuing to fight without American support – both of which would all but ensure an even bigger Russian win down the line. The irony is that Putin’s original theory of victory always hinged on undermining support for Ukraine and dividing the transatlantic alliance. After three years of failure on the battlefield, Trump’s return to the White House may finally deliver exactly what the Kremlin wanted all along.
Putin isn’t just seeking a deal on Ukraine – he wants an overhaul of the European security order. Not only has he made it clear that he won’t accept any Western boots on the ground in Ukraine (even as peacekeepers), but the broader security demands he made in his 2021 ultimatum are back on the table, including the removal of NATO troops from Eastern Europe and former Warsaw Pact countries. And Trump, who sees Europe as less ally than supplicant, seems open to delivering.
If Trump agrees to withdraw US troops and missile defenses from the Baltics, as he and his advisors have hinted in the past, frontline states would be left exposed to an emboldened Russia that has shown no qualms about using military force to achieve its expansionist goals. Just like a European security guarantee for Ukraine would be fairly useless without a US backstop, Europe would be ill-equipped to deter Russian aggression if America pulled out of NATO.
Europeans are taking the challenge seriously, but the continent’s defense spending has lagged for decades, and its military capabilities are fragmented and underfunded. Even if a politically divided Europe were to ramp up its collective security investments overnight, it would take years to build the kind of deterrence that NATO provides under American leadership – years that Europe does not have. After over a decade of complacency, it may be much too late for them to get their act together.
Europeans suddenly find themselves fighting a two-front war – facing both Russian security threats and American anti-European hostility. When the US defense secretary declares that “stark strategic realities prevent the United States from being primarily focused on European security,” that’s diplomatic speak for “you’re on your own.” But the problem goes beyond the US no longer being a reliable partner in the fight against Russia or even a last-ditch security guarantor. The transatlantic alliance itself is in trouble when the US vice president says the biggest threat to Europe comes “from within” and his Euroskeptic Trump administration is actively threatening to interfere in European democracies, undermine the European economy, weaken European unity, and even – in the case of Greenland – violate European sovereignty.
Eighty years after the leaders of the US, UK, and Soviet Union carved up post-war Europe into spheres of influence at Yalta, Trump and Putin are poised to do the same. The Russians would see their European territorial ambitions codified, the Americans would secure their own interests, and each side would divide the Arctic – leaving the rest of the world to fend for itself. This is not just a betrayal of Ukraine and Europe – it is the unraveling of the world order America built after World War II.
As we warned in Eurasia Group’s Top Risk for 2025, we are witnessing a return to the law of the jungle, a G-Zero world where might makes right. I’d love to say “I told you so,” but this is one place I wish had been wrong.
- Trump feuds with Zelensky, cozies up to Putin ›
- Putin trolls Europe about "the master" Trump ›
- Trump-Putin summit in the works ›
- Did Trump actually talk to Putin? ›
- Defending Ukraine and Europe without the US - GZERO Media ›
- Trump's Ukraine peace plan confuses Europe leaders - GZERO Media ›
- Why the US-Ukraine minerals deal changed - GZERO Media ›
Germany’s Friedrich Merz in front of poker table.
Italy’s Fratelli d’Italia, Poland’s Law and Justice, and Germany’s Alternative for Germany (AfD) parties have so far remained outside the bloc, but the European Conservatives and Reformists group, which includes Italy’s Prime Minister Giorgia Meloni, published a letter last month warning Europe’s center-right establishment to work more closely with the Patriots to obstruct left-wing migration, green, and other “woke” policies. Part of the goal, argued the letter’s authors, is to build durable new ties with US President Donald Trump.
This is the backdrop for a clever political maneuver from Friedrich Merz, leader of the traditional center-right Christian Democrats (CDU/CSU) and the prohibitive favorite to become Germany’s next chancellor following a general election on Feb. 23. Merz has wrestled for weeks with the question of how to peel voter support away from the anti-immigrant AfD — without appearing to cooperate with a party that many Germans consider openly fascist.
During a late January parliamentary vote on toughening Germany’s asylum and refugee policy, Merz’s CDU accepted support from the AfD for a tougher border approach without publicly seeking it. For the first time in the country’s postwar history, a non-binding motion passed the Bundestag with the help of the far right, shattering a decades-old taboo. In response, the AfD’s many critics among political officials, the media, and the public turned the rhetoric up to 11. Merz stood accused of tearing down the political firewall that separates Germany’s center right from the far right and throwing open the “gates of Hell.” Protests, some of them violent, erupted across the country. The measure was narrowly defeated.
Then came the political jiu-jitsu from Merz. The political veteran refused to apologize. He argued that he had not sought support from the AfD and that the political firewall that continues to leave the nativist party in the isolation ward remains fully intact, vowing to never form a coalition with it. But, argued Merz, the new immigration restrictions were the correct policy for Germany. They remain the right policy, even when supported by the wrong people.
Next came a polling surprise. Not only did this dust-up fail to damage Merz’s pre-election popularity ratings, but the display of political backbone strengthened his party’s position in pre-election polling. We shouldn’t be surprised. Merz is widely viewed as a capable technocrat but not an exciting politician. His move on migrant policy, and the willingness to take hits for perceived cooperation with the AfD, is seen as a major political gamble on the eve of an election he’s already favored to win.
By both defying political consensus and then reaffirming that direct cooperation with the AfD remains out of bounds, Merz has presented himself as a more forceful leader than current Chancellor Olaf Scholz. By breaking the taboo on tougher migration and asylum rules, he has also boosted the credibility of political arguments that equivocation on these policies by Scholz and his government has done more to boost the AfD than Merz’s party has done or will do.
Migration has been the primary fuel for the AfD’s surge over the past decade as the number of asylum-seekers has overwhelmed a German system designed for much smaller numbers of people. The CDU/CSU can now feel vindicated in their migration policy strategy and can open more space for tougher policies backed by centrist parties, robbing the AfD of its go-to campaign topic. In fact, it was Christian Lindner — leader of the pro-business Free Democrats and the man whose dismissal as finance minister in November collapsed Scholz’s coalition government — who made the argument most forcefully: “Democracy must deliver so that people don’t look for an alternative to democracy.”
If the CDU/CSU wins on Feb. 23 and Merz becomes the next chancellor, highly likely outcomes, he may have scored a political win that other center-right parties in Europe have consistently missed. In France and Britain, traditional conservatives have taken a migration beating. Following last July’s second-round parliamentary elections in France, Le Pen’s populist-nationalist National Rally won more than 37% of votes to just 5.4% for the traditional center-right Les Republicans. In the UK, the Conservative Party, which held power for 14 years before losing to Labour late last year, finished third place (!) in a poll published last week. Nigel Farage’s UK Reform Party, the most hardline anti-immigration choice on offer, has pushed past Labour to take the lead, though within the poll’s margin of error.
Has Merz changed the political rules on how Europe’s center-right handles the always emotive topic of immigration? Time will tell. If so, Merz’s bold political gamble might be remembered as a game-changer well beyond Germany.
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Trump and Xi on opposite sides of a fence.
The first weeks of Donald Trump’s second term have been marked by a sense of optimism about the president’s ability to get a deal with China. And frankly, I understand where it’s coming from.
From Colombia’s overnight capitulation on deportation flights and Panama’s canal cave-in to Canada and Mexico’s (admittedly token) border concessions, Trump has been on a foreign policy roll. Even Denmark – a rock-solid NATO ally – is doing its best impression of the “This is fine” meme despite Trump’s renewed Greenland threats.
This should not surprise any regular readers of this newsletter. I explained exactly why the president was bound to rack up a significant number of early wins over two months ago.
It’s easy to see how people might see these wins and conclude that Trump can bend anything and anyone to his will – including, perhaps, China. Add in the cordial vibes between the two sides lately – Trump praising Xi Jinping at Davos, delaying the TikTok ban, and imposing lower tariffs against China than US allies; Chinese VP Han Zheng attending the inauguration and talking up “huge common interests” – and you’ve got what looks like signs of a potential breakthrough.
But this optimism fundamentally misunderstands both the limits of Trump’s approach (which I also laid out three weeks ago) and the nature of US-China relations. Let me explain why I think we’re headed for a breakdown in the world’s most important geopolitical relationship.
The art of no deal
First things first: Xi prefers a stable relationship with the US, especially while he deals with serious economic challenges, growing social stability concerns, and an underperforming military. For his part, Trump is not interested in causing a stock market crash at home and would like a “grand bargain” he can sell as a win. Preparations for a summit between the two leaders this year are accordingly ongoing.
But even though Xi and Trump both want a deal, there’s no room for a viable compromise. The gap between what the Trump administration wants and what Beijing is prepared to offer is too wide to bridge.
For China, the goodies on the table are transactional: more agricultural and energy purchases, better treatment for US companies in China, increased Chinese investment in America, a TikTok compromise, and maybe even help brokering a ceasefire in Ukraine. Beijing would also demand concessions in return, especially the rollback of US tech restrictions.
While Trump may be personally enticed by such a deal, it is a nonstarter for the trade and security hawks in his cabinet and the Republican Party. These people don’t see China as a country to accommodate – they see it as a strategic competitor that needs to be contained while America still has the advantage. They want nothing less than structural reforms to China’s economy, complete technological decoupling, and an end to China’s military modernization. That’s obviously not something Xi can negotiate away without essentially giving up China’s core national ambitions, no matter how hard Trump pushes.
Could Trump override his team’s opposition? On lots of issues, absolutely … but on China, I’m not counting on it. And neither are the Chinese. Their goal at this point is to buy time – stringing Trump along as long as they can and playing into his desire to get a deal to keep his hawkish advisers in check, reducing the risk of a near-term breakdown while China’s economy stabilizes.
Red lines
But this strategy will not last forever. The Trump administration’s actions in a number of policy areas – from trade to tech restrictions to Taiwan policy – are sure to inflame tensions. The cumulative impact of these spoilers will sooner or later cause the bilateral relationship to break down.
Just yesterday, Trump followed through with implementing 10% across-the-board tariffs on Chinese imports. Unlike the tariff threats on Canada and Mexico, this is not a negotiating ploy – it’s the opening salvo in a trade war that will only intensify in the coming months. And unlike the last trade war, this time China is ready to respond despite being economically weaker.
Beijing hit back with counter-tariffs on American energy and manufacturing, slapped export controls on critical minerals, and launched an antitrust investigation into Google. All things considered, this was a relatively measured response, calibrated to show strength while maintaining space for negotiations and keeping powder dry for bigger fights ahead. Come April 1, when the Trump administration’s trade policy investigations wrap up, we’re likely to see major new tariffs and tech restrictions – and more aggressive Chinese retaliation.
But the real breaking point may come not from tariffs – or from escalating tech restrictions or a cross-strait crisis – but from US actions targeting the legitimacy of the Chinese Communist Party. Events in 2020, when relations broke down during the COVID-19 pandemic, convinced China’s leaders that Washington is irredeemably bent on containing China’s rise and – ultimately – unseating the CCP regime. Trump’s appointment of vocal China hawks like Secretary of State Marco Rubio and National Security Adviser Mike Waltz has reinforced that conviction.
CIA Director John Ratcliffe’s first move in office was to flip the agency’s position on COVID-19’s origins to support the lab leak theory, something Beijing is particularly sensitive about and has identified as a bright red line. Sen. Tom Cotton praised the move as key to making China “pay for unleashing a plague.” A few days later, a US appeals court allowed a lawsuit lodged by the state of Missouri against the CCP – not China the country but the Party itself – for $25 billion in pandemic-related damages to proceed. Long overdue intelligence reports on CCP leaders’ assets could be another flashpoint.
Should any of these efforts lead to the seizure of CCP-linked assets in America, China will hit back and hit back hard – potentially seizing American assets in China and causing a breakdown in the relationship before a first meeting between Trump and Xi can even take place.
No guardrails
The most geopolitically important relationship in the world is fundamentally adversarial and devoid of trust. The only reason why it was comparatively stable in 2024 was that the Biden administration expended serious effort to develop and maintain 25 high-level bilateral channels across the cabinet.
But the Trump team has no interest in putting in that kind of painstaking diplomatic work for a relationship they view as fundamentally adversarial. Without those guardrails, there will be few management and communication mechanisms to prevent even minor provocations from spiraling into a major crisis.
Many people want to believe that Trump will somehow overcome this reality and bully Beijing into a deal. The problem is that his strongman tactics only work against much weaker countries. When he threatens Colombia and Panama with tariffs, they have no choice but to capitulate – their economies would collapse otherwise. But punching down is easy. China is an entirely different ball game: It has the size and leverage to punch back against the US in ways that other countries cannot. And punch back it will.
Though neither Trump nor Xi wants a costly confrontation in 2025, the US and China are headed for trouble. Both countries will pay a price as their economies decouple, and the breakdown will ripple worldwide, increasing costs for consumers and businesses everywhere. Most countries have zero interest in picking sides in a new cold war. But key US allies and trading partners – Japan, South Korea, Mexico, the EU – are increasingly going to have a hard time navigating that, especially on security-related issues.
The breakdown in relations will deepen bilateral suspicion and mistrust, increasing the risk of unintended escalation. It’s going to get worse before it gets better.
Trump between Sudan civil war leaders.
The last couple of years have seen no shortage of bloodshed. But while most of the world’s attention has been focused on the wars in the Middle East and Ukraine, the most devastating conflict of our time has been unfolding in Sudan. There, a power struggle between two rival military leaders has turned into a catastrophic civil war. It is fast becoming one of the worst humanitarian crises of the modern era and threatens to destabilize an entire region.
Efforts to end the fighting have failed. But in one of fate’s stranger twists, Donald Trump may turn out to be Sudan’s best hope for peace. Let me explain why.
Sudan’s current turmoil traces back to the 2019 revolution that ousted long-time dictator Omar al-Bashir, which led to a fragile power-sharing government between civilians and the military. The uneasy bargain collapsed in 2021 when a military coup commanded by General Abdel Fattah al-Burhan, head of the Sudanese Armed Forces, dissolved the transitional government. The coup was supported by the Rapid Support Forces, a powerful Arab paramilitary led by Lt. Gen. Mohamed Hamdan Dagalo (aka Hemedti). The RSF descended from the Janjaweed, the ethnic militias that – along with Sudan’s military – were responsible for the horrific Darfur genocide two decades ago.
Despite starting as allies, Burhan and Hemedti clashed over the RSF’s integration into the army and control of the country’s gold-rich territory. The SAF and the RSF have been at open war since April 2023, with both sides credibly accused of committing atrocities – each sponsored by outside actors looking to advance their own geopolitical and economic interests.
The SAF has been primarily armed by Egypt and Iran, while the RSF gets most of its financial and military support from the United Arab Emirates. Russia initially backed the RSF via the Wagner Group but now arms the SAF. Turkey and Qatar have reportedly been abetting the SAF as well. The conflict is not only a fight between Sudanese for control of the country but also a proxy battleground for regional influence, natural resources like gold and farmland, and strategic Red Sea access, with foreign meddling undermining efforts to achieve a ceasefire, prolonging the civil war, and exacerbating its humanitarian consequences.
The fighting has already killed an estimated 150,000 people, forced over 11 million Sudanese – roughly a quarter of the country's population – to flee their homes (three million of whom have been pushed into neighboring countries), and put 25 million at risk of acute hunger, threatening to create the worst famine since China’s Great Leap Forward.
But Sudan’s civil war isn’t just a humanitarian disaster – it’s a geopolitical powder keg. Sudan’s descent into failed-state status would destabilize the Horn of Africa, create a haven for terrorist groups and rogue states, flood Europe with refugees, and disrupt Red Sea shipping at a time when it’s already under attack by the Houthis in Yemen.
Yet despite the humanitarian and geopolitical stakes, the global response has been pretty much crickets. We are, after all, in a growing G-Zero vacuum of leadership. The United Nations system has little power in a divided world. Europe tends to ignore problems until they reach its shores. Saudi Arabia has positioned itself as a neutral mediator but has had little success.
And where has the world’s policeman, the United States, been? Consumed with the wars in Ukraine and the Middle East. Setting up a generational battle with China. Fighting inflation and each other, of course. As for Sudan … well, when’s the last time you heard of a campus protest over the carnage taking place in Western Darfur?
Competing priorities, lack of political pressure, and excess caution help explain why the Biden administration was reluctant to take sides in a conflict with no clear “good guys” and limited leverage to effect change, especially given Washington’s reliance on both Emirati and Egyptian support on Gaza. The US did try to broker ceasefire talks, but the effort collapsed last August after the SAF decided not to show.
It was only two weeks before the end of its term that the Biden administration took the more decisive step of formally accusing the RSF of committing genocide against non-Arab ethnic minorities in western Darfur. The genocide designation was accompanied by sanctions on Hemedti and seven UAE-based companies funding his militia. A few days later, the departing administration also sanctioned SAF chief Burhan, accusing his forces of war crimes including indiscriminate bombing of civilians and using chemical weapons against the RSF. But it was too little, too late to alter the conflict’s trajectory.
Nearly two years in, the fighting is only intensifying. The SAF has recently gained momentum and retaken parts of the capital Khartoum and surrounding areas, while the RSF is making a final push to take the besieged city of El Fasher, the army’s last urban stronghold in Darfur. With both sides convinced they can win militarily and foreign patrons flooding the country with arms, there appears to be no end in sight to the conflict.
Enter Donald Trump. In contrast to Joe Biden, the 47th president of the United States has unique relationships with and leverage over the key regional players fueling Sudan’s conflict, and a transactional style that works particularly well in that part of the world.
Remember the Abraham Accords, the most durable and significant foreign policy accomplishment of Trump’s first term? In his final months in office, Trump got Sudan to normalize relations with Israel in exchange for removing the country from the list of state sponsors of terrorism. It was hallmark Trumpian statecraft: Sudan got sanctions relief, diplomatic recognition, and access to international financing; Trump got another Arab state to recognize the Jewish state.
More importantly, Trump has exceptionally close relationships with the Arab strongmen fueling Sudan’s war. He made the first foreign trip of his first term to Saudi Arabia and will likely do so again this time, and he maintains particularly warm ties with the Saudi and Emirati autocrats. Trump also called Egyptian President Abdel Fattah el-Sissi his "favorite dictator" and has shielded Cairo from an across-the-board halt to US military aid. His rapport with the key players, coupled with his transactional, non-ideological diplomatic style, positions Trump to succeed where former president Biden failed.
That’s not to say that brokering peace in Sudan would be easy. Trump would need to be willing to use carrots – such as investment incentives or sanctions relief – and sticks – the threat of tariffs, sanctions, and curtailed arms sales and aid flows – to convince Abu Dhabi to halt its support for the RSF, persuade Cairo, Doha, and Ankara to stop backing the SAF, and get two warlords who view compromise as existential surrender to negotiate a power-sharing agreement. Not a cakewalk.
But if anyone could pull it off, it’s Donald Trump. His willingness to wield US power unapologetically — and his indifference to democratic norms — resonate in a region accustomed to strongman politics. The key lies in giving each player something they value more than continued fighting – or threatening something they fear more than walking away from the fight. By offering Sudan’s generals and their patrons credible incentives to de-escalate, Trump could lay the groundwork for a lasting peace.
I know what you're thinking – Sudan’s humanitarian crisis doesn’t rank high on the US president’s “America First” priority list. Why would Trump bother getting involved?
There’s an argument to be made. Sudan’s collapse would directly threaten his Middle East priorities: Regional destabilization could empower Iran, undermine US-allied Gulf states, and create security and terrorism risks Trump campaigned to avoid. Addressing the crisis therefore arguably aligns with his “America First” agenda. Sudan’s implosion would also undermine his landmark Abraham Accords, which his administration is set on expanding further.
But more importantly, success would burnish Trump’s legacy as a peacemaker and advance his broader Middle East agenda. Who knows – perhaps it’d even be enough to earn him that coveted Nobel Peace Prize.
Whether Trump will prioritize Sudan remains uncertain. But in a world starved of leadership, he may be the country’s last hope.
Trump on a rubix cube on top of a dollar.
If you listen to Wall Street and corporate America, Donald Trump’s second term will usher in a new golden age for the US economy. After all, what’s not to love about the return of a business-friendly president advised by a cabinet of self-made billionaires all promising deregulation and tax cuts?
Markets and CEOs have reasons to cheer. Trump inherits a strong US economy from former President Joe Biden. Output is running above pre-pandemic trends, far outperforming other major economies. Unemployment is hovering around 4%, inflation is slowly heading back to the Fed’s 2% target, and interest rates are coming down from their peak. It’s no wonder stocks are partying like it's 1995. But two of Trump’s core campaign promises are set to spoil the party.
First, there’s his plan to jack up tariffs (aka “the greatest thing ever invented”) to correct “unfair practices,” reduce America’s trade deficit, and extract concessions from other countries. While the president didn’t slap any new tariffs on “day one,” as some feared, he did launch investigations that will provide legal cover for significant tariff hikes sooner rather than later.
China will be the primary target as Trump imposes 50-60% levies on some goods and roughly doubles the average tariff rate on all Chinese imports by year’s end, aiming to force a deal from Beijing. But though China’s economy is in shambles and President Xi Jinping would much prefer to avoid a trade war with the US, he’s unlikely to offer concessions generous enough to satisfy Trump and the hawks in his cabinet. Combined with other US moves the Chinese will see as hostile, tariffs will cause Beijing to retaliate and the US-China relationship to break down, hurting American consumers and businesses through higher prices for imported goods and inputs.
Of course, China’s not the only trading partner in “tariff man’s” crosshairs. Trump’s offhand threats on Monday to impose 25% tariffs on Mexico and Canada by Feb. 1 may be bluster, but they confirm his determination to target any country he believes is taking America for a ride. That could include having a large bilateral trade surplus with the US, enabling Chinese circumvention of US tariffs, “free riding” off US protection, “over-taxing” US companies, and anything else Trump sees as adversarial to US interests.
Some countries will cave to Trump’s demands. Mexican President Claudia Sheinbaum, for instance, will likely offer up enough concessions to avoid 25% tariffs. But others will lack the policy and political space to placate Trump. Some, like Canada, will feel compelled to hit back with their own measures, raising the risk of an escalatory cycle and a broader trade war that could tip the US – and the world – into recession.
Even if we avoid that worst-case scenario (as is likely), Trump’s initial tariffs will still disrupt supply chains, distort trade flows, and raise costs for US businesses and consumers – with lower-income Americans taking the biggest hit. And here’s the kicker: Not only will tariffs fail to “enrich our citizens” – Trump’s purported goal – they also won’t meaningfully reduce America’s overall trade deficit or bring back manufacturing jobs.
Then there’s immigration, the second key plank of the president’s agenda. Trump wasted no time showing he means business, on Monday declaring a “national emergency” at the southern border, announcing immediate deportation raids, reinstating his "Remain in Mexico" policy, and designating drug cartels as foreign terrorist organizations. His unexpected (and probably illegal) order to deny birthright citizenship to the children of noncitizens signals just how far he’s willing to go to deliver on this campaign promise. While we won’t see the 15 million deportations Trump threatened on the campaign trail (there may not even be that many undocumented immigrants in the US), with committed immigration hawks like Stephen Miller and Tom Homan running the show, the administration could remove up to 1 million people this year and perhaps 5 million over his term.
That’s a problem for the economy because the labor market is operating at full employment. Removing millions of existing workers (who are also consumers and taxpayers) while curtailing immigration will shrink the US workforce, driving up wages, business costs, and consumer prices, reducing the economy’s productive capacity, and widening the deficit.
The combined effect of Trump’s trade and immigration policies will be slower growth and higher inflation. And the two pro-growth policies that investors and business leaders are banking on – deregulation and tax cuts – won’t deliver enough juice to offset the damage.
Yes, the financial sector, Silicon Valley, the crypto industry, and fossil-fuel producers will benefit from lighter regulation. But the macro impact will be limited: The US economy is already among the most loosely regulated in the developed world, and Trump already picked much of the low-hanging fruit in his first term. Domestic energy production reached record highs during the Biden administration, and low oil prices will discourage much additional output and investment this year.
As for tax cuts, Republicans will make permanent Trump’s 2017 cuts for corporations and the wealthy at a cost of over $4.5 trillion over 10 years. But with the fiscal deficit already at 6.5% of GDP and only a razor-thin House majority, Trump won’t be able to slash taxes much (or any) further without offsetting spending cuts. Even if Elon Musk’s now-official Department of Government Efficiency (whose constitutionality is already being challenged in court) manages to find some cost savings and efficiencies in the federal budget, meaningful spending cuts will be hard to come by – especially as entitlements remain untouchable and Trump boosts defense spending.
The result? Trump’s promises to lower the corporate income tax rate to 15% and eliminate taxes on tips, Social Security, and overtime pay are likely to go unmet. Yet deficits and debt-to-GDP will grow faster over the next four years, putting upward pressure on America’s long-term borrowing costs.
All this – higher inflationary pressures from tariffs and deportations, bigger deficits – will force the Fed to keep interest rates higher for longer to fight inflation, raising your mortgage payments, strengthening the dollar, and further dampening growth. Cue angry tweets from Trump demanding rate cuts, which will spook markets and lead Jerome Powell to double down on demonstrating the Fed’s independence.
Many business leaders and investors are shrugging off these risks, remembering how well the economy performed in Trump’s first term and believing the president will back down or be constrained from following through on his most disruptive campaign promises.
But the starting conditions are very different than in 2017. Corporate valuations are much higher. Government debt has exploded since the pandemic, and deficits are structurally higher. Inflation is still above target, and interest rates remain elevated. The downside risks are significantly greater. More importantly, Trump 2.0 is not Trump 1.0. Not only does the president have unified government and an iron grip on his party, but he’s also consolidating executive power and assembling a more personally loyal team ready to implement rather than block his agenda.
To be sure, many of his tariff threats will prove to be bluster. Logistical and political roadblocks will limit the scale of deportations. Lobbying from CEOs and advisers like Musk might temper his most disruptive impulses. And a large enough market selloff or $15 eggs before the midterms could convince him to soften a long-held position.
But make no mistake: Trump will follow through on his agenda to a greater extent and with a steeper cost than most seem to realize. And the constant guessing game about what the president might do next will itself weigh on trade, investment, and growth.
Over time, this structural uncertainty and policy volatility – combined with the cronyism and pay-for-play that will flourish during Trump’s transactional presidency – risks eroding the foundations that have made America the world’s premier economy.
Trump in front of a map on fire.
In a G-Zero world, where no one country or group of countries is willing and able to provide global leadership, the law of the jungle prevails. And the law of the jungle says the apex predator gets to do whatever he can get away with, while others either get on board or become lunchmeat.
President-elect Donald Trump, just days away from taking over the world’s largest economy and most powerful military, spent the past week showing exactly what that will mean in practice. His threats to use economic and military coercion to take control of Greenland, Canada, and the Panama Canal are outlandish, but they send a clear message to the world: In Trump’s second term, it's his way or the highway.
Trump's worldview represents a decisive rejection of America’s postwar commitment to global collective security, free trade, and democracy promotion in favor of transactionalism. The United States is increasingly adopting a rather Chinese approach to international relations: bilateral deal-making with little regard for common values, the rule of law, multilateralism, or the global public good. With the idea being that the world’s most powerful country will play that game more effectively than Beijing. It’s called “America First” for a reason.
Does this mean Trump actually intends to buy Greenland, make Canada the 51st state, and seize the Panama Canal? No (… probably). Trump didn’t believe Mexico would pay for his border wall in his first term, but the threat helped pressure the Mexican government to devote more resources to curbing migration flows, which Trump then claimed as a win. The playbook this time will be no different (because Trump himself hasn’t changed): make outrageous, unrealistic demands of weaker foreign leaders to extract concessions – both from the targeted countries in question and from others looking to avoid coming into Trump’s crosshairs in the first place.
What makes this time different is Trump’s far stronger hand at home and abroad. Not only does he have a mandate, control of Congress and the Republican Party, and a 6-3 Supreme Court, but he will also have a more ideologically aligned and loyal administration. His personalistic leadership style and consolidation of power – what we call Rule of Don in our 2025 Top Risks report – mean US domestic and foreign policy will increasingly depend on the decisions of one man and his inner circle, precisely what the Founding Fathers sought to prevent through constitutional checks and balances.
Meanwhile, the United States is comparatively more powerful today relative to 2017 vis-à-vis its adversaries – with China experiencing its worst economic crisis in decades, Russia in serious decline, and Iran having lost its proxy empire – as well as its allies, most of which have weak and unpopular leadership.
The combination of Trump’s consolidated power at home, America’s greater might abroad, and the president-elect’s willingness to wield that power unilaterally for transactional gain means the incoming administration will rack up significant early wins. With the world more dangerous than ever, few governments or corporations want to risk becoming the apex predator’s next prey.
We’re already seeing these dynamics play out domestically, where major companies are falling in line to avoid running afoul of the incoming administration. Mark Zuckerberg’s dramatic shift on Meta’s content moderation reflects a broader recognition that resistance is futile – better to align with Trump and his advisor-in-chief Elon Musk than to fight them. And if you think Meta, Apple, and the like are humiliating themselves at Mar-a-Lago, that’s nothing compared to the lengths that foreign governments will go to stay off Trump's radar or avoid his wrath.
Mexico’s new president, Claudia Sheinbaum, will do everything possible to fix a bilateral relationship that Trump believes is broken. It will take more and longer than she wants, but I think she’ll get there. The European Union, despite likely trade tensions and possibly tit-for-tat tariffs, will probably reach a deal that satisfies Trump and ultimately bolsters Europe’s “strategic autonomy.” NATO members won’t increase defense spending to a whopping 5% of GDP as Trump recently demanded (the US itself spends around 3.4% of GDP), but most will continue to boost their military expenditures.
Even seemingly absurd threats, such as a military takeover of the Panama Canal, will likely force real concessions like limits on Chinese investments, reduced transit fees, or enhanced cooperation on migration across the Darien Gap. And while Trump will neither purchase nor invade Greenland, his shenanigans have brought the issue of the territory’s independence from NATO ally Denmark to the fore, putting Copenhagen in a bind and raising the prospect of increased US access to the resource-rich and strategically vital Arctic island.
But Trump’s transactional approach won’t work everywhere, and in some cases, it will backfire. China isn’t prepared to offer meaningful enough concessions to achieve a grand bargain, especially amid an absence of communication and management channels. Early tariff hikes and mounting US provocations (at least as perceived by Beijing) in the coming months are likely to cause a breakdown in US-China relations this year.
Indeed, while many countries will seek to accommodate Trump to avoid confrontation, others will see no choice but to dig in. This includes one of America’s oldest allies and its largest trading partner, Canada. Trump’s annexation rhetoric and threats of 25% tariffs have touched a nerve north of the border, pushing politicians across the Canadian political spectrum to prepare aggressive responses ahead of the Liberal Party’s internal leadership race and the country’s general elections. Neither the ruling Liberals nor the opposition Conservatives can afford to appear weak in the face of US bullying. Trump’s tactics are fueling Canadian nationalism, reducing room for compromise, and making harder-line retaliation that hurts America’s interests more likely – the opposite of his presumed objectives.
The United Kingdom’s current predicament offers a telling example of the dilemmas facing many US allies. British officials are holding crisis meetings to determine how to respond to the incessant direct attacks from Elon Musk, who is now actively intervening in the domestic politics of US allies (including not just the UK but also Germany and the EU itself) with what we can assume is at least the tacit consent of President-elect Trump. They worry that pushing back against the world’s wealthiest individual could trigger retaliation from Trump himself, with whom Prime Minister Keir Starmer wants a good working relationship. But doing nothing is not an option when Musk’s invectives are believed to have jeopardized the personal safety of British cabinet members. There’s also a concern that passivity would embolden both Musk and Trump to push even harder for advantage.
This gets at a broader challenge: Even as it yields short-term wins, the president-elect’s coercive diplomacy will reflect and reinforce the broader breakdown of international order I described last week. The US remains the world’s most powerful nation by far. But rather than providing global public goods like collective security and free trade, it's using that power to extract concessions for itself through bilateral pressure. Trump’s defenders say that his unpredictability is a feature, not a bug, and that keeping friends and foes guessing is how he gets things done. But the uncertainty it creates poses enormous risks for governments and businesses trying to survive in the jungle.
This is the essence of the G-Zero world: Not just an absence of global leadership, but the deliberate dismantling of the systems and norms that have guided international relations for decades by its erstwhile lynchpin. Trump isn’t the cause – he’s its leading symptom and beneficiary. But his return to power will accelerate the trend toward a more dangerous, crisis-prone international system. The apex predator may rack up some impressive kills, but the jungle will grow deadlier and more savage for everyone – including, eventually, for the United States, too.
If we encountered our planet as an alien species today, what would we see?
An expanding population of eight billion people experiencing unprecedented growth after tens of thousands of years of stagnation. Staggering opportunities afforded by new technologies, especially the human capital and industrial breakthroughs that AI is about to unlock for millions (and soon billions) that otherwise would have no such access.
Even looking at the geopolitical headlines, we can work up some optimism about the year ahead. Three years after Russia invaded Ukraine and attempted to overthrow its leadership, negotiations (and even a possible ceasefire) appear close. So, too, in the Middle East, after more than a year of fighting in Gaza and beyond, there’s less stomach or purpose for expanding the violence. And in the United States, a hotly contested presidential election led to an undisputed winner with a clear mandate, and almost nobody claimed it was unfree, unfair, or stolen.
But take a closer look, and we've got big problems.
The United States and China, the two most powerful countries in the world by a wide margin, assertively reject responsibility for the rest of the planet. They cast an eye at enemies first and foremost within their own borders and worry increasingly about threats to their stability. Both are informed by political and economic value systems focused on the short term, despite the increasingly obvious reality that they’re not working for most of their people – especially the increasingly disillusioned youth.
A “community of nations” is today the stuff of fairy tales, with governance that isn’t meeting the needs of citizens. Our challenges – from climate change to technological disruption to security threats – are increasingly global. They demand far stronger international cooperation than is thought desirable or would be feasible with the institutions that exist today. And the political actors most essential to strengthening global institutions are moving in the other direction.
We are heading back to the law of the jungle – where the strong do what they can and the weak suffer what they must. This is the G-Zero world I’ve been warning about for over a decade now – an era when no one power or group of powers is both willing and able to drive a global agenda and maintain international order.
This leadership deficit will reach critical mass and grow critically dangerous in 2025, creating a recipe for endemic geopolitical instability. The risk of a generational world crisis, even a new global war, is higher than at any point in our lifetimes. That’s why the G-Zero winning tops Eurasia Group’s 2025 Top Risks report.
The central problem facing the global order is that core international institutions – the United Nations Security Council, the International Monetary Fund, the World Bank, and so on – no longer reflect the underlying balance of global power. This is a geopolitical recession, a “bust cycle” in international relations that can be traced back to three fundamental causes.
First, the West failed to integrate Russia into the US-led global order after the Soviet Union's collapse, breeding deep resentment and antagonism. We can argue about who’s to blame, but the consequences are undeniable: Now a former great power in severe decline, Russia has transformed from a potential partner into the world’s most dangerous rogue state, bent on destabilizing the US-led order and forging military-strategic partnerships with other chaos actors like North Korea and Iran.
Second, China was brought into the international order – crucially as a member of the World Trade Organization – on the presumption that global economic integration would encourage its leaders to liberalize their political system and become responsible global stakeholders as defined by the West. Instead, China grew far more powerful but no more democratic or supportive of the rule of law. Deepening tensions, and even confrontation, between China and the West, are the result.
Third, and perhaps most consequentially, tens of millions of citizens in advanced democracies concluded that the globalist values their leaders and elites had been promoting no longer worked in their favor. Rising inequality, demographic shifts, and technological disruption have eroded trust in democratic institutions and reduced these nations’ capacity for global leadership. President-elect Donald Trump has both fed and profited from this anti-globalist, anti-establishment surge.
There are three ways out of a geopolitical recession: reform existing institutions, build new ones better aligned with current power realities, or destroy the old system and impose new rules through force. While all three are happening to some extent, in 2025 the focus will be overwhelmingly on the third.
The United States is the only nation powerful enough to lead – in fact, it’s in many ways more powerful than ever, at least compared to its allies and adversaries. But it is no longer willing to serve as world sheriff, architect of free trade, and promoter of common values. Trump’s return to power with a politically consolidated, solidly unilateralist administration will definitively accelerate America’s retreat from global leadership. But though Trump is the principal symptom and political beneficiary of the geopolitical recession, he’s not the cause. That’s why we didn’t make Trump our number one risk this year.
Just as the US embraces a transactional, “America First” unilateralism, its traditional allies face unprecedented political weakness. Canada’s government has just collapsed. So has Germany’s, where populist parties are likely to make gains in the upcoming federal elections. France is in the throes of a protracted political crisis. The UK is led by an unpopular new government still finding its feet. Japan’s ruling party has lost its majority, with new Prime Minister Shigeru Ishiba unlikely to last long. South Korea’s political system is in disarray. Rather than stepping into the leadership void, these nations are focused on playing geopolitical defense – keeping their heads down and hoping to avoid becoming targets of disruption.
Meanwhile, the Global South, despite growing economic heft, lacks both the cohesion and capability to lead. India, the strongest and most plausible global leader among developing nations, remains a lower-income country, focused on building bridges mainly in support of its national interests. Gulf states like Saudi Arabia and the UAE, despite their growing ambitions, lack the standing to drive global reforms.
For its part, China – the second most powerful country on Earth and only viable US challenger – couldn’t lead even if it wanted to. Not only does it lack the legitimacy and “soft power” needed to attract a stable following, but its ongoing economic woes, combined with President Xi Jinping’s prioritization of national security and political control, leave Beijing too preoccupied with domestic challenges.
In short, with no one willing and able to lead, what’s left is ever greater geopolitical instability, disruption, and conflict. Power vacuums will expand, global governance will languish, and rogue actors will proliferate. The world will grow more divided and more combustible. The most vulnerable will pay the biggest price.
We’re entering a uniquely dangerous period of world history on par with the 1930s and the early Cold War. This doesn’t mean we’re headed toward World War III or even a US-China cold war, though both scenarios become more likely in a G-Zero world. The more immediate danger is the unraveling of the world’s security and economic architecture leaving many spaces – both countries and crucial domains like cyberspace, outer space, and the deep seas – ungoverned and under-governed, wide open for rogue actors to increasingly operate with impunity.
The G-Zero winning isn't just Eurasia Group’s top risk this year – it's the force multiplier that makes every other global challenge more dangerous and harder to solve. The tail risk of something truly catastrophic will grow fatter every day.