The world in four years
Having set out Trump's aims and strengths, we now explore his weaknesses and the challenges he faces.
President Donald Trump has set his administration major objectives. Below, we will list those and explain the troubles he faces as he tries to achieve them.
Remake the American economy to focus on more manufacturing output and reduce reliance on China in key industries and better compete with China on technology. This is the purpose for which tariffs and trade war with China were introduced, and why Trump is seeking to deregulate, cut government waste and spending, and lower taxes.
Make deals with Iran and Russia to separate the China-Russia-Iran axis, which can dominate the Eurasian landmass and become an unbeatable geopolitical challenge.
Consolidate over North America to improve America’s own geopolitical position.
Exit the conflict with Russia in Ukraine, by allying with Russia against Europe and China.
Impose America’s will on Europe, through economic and defence pressure or even by supporting regime change, to force it to offer better trade terms and enhance defence spending.
Expel the Palestinians from Gaza to allow a permanent peace between the Israelis and the Palestinians. This may require remaking the entire Middle East.
Re-open shipping in the Red Sea by striking the Houthis until a deal is possible.
Commercial Implications
Trade and manufacturing: with lower energy prices, less regulation, and lower taxes, and less government spending, the private sector should improve significantly. Even with tariffs and less trade.
China: The trade war against China shows no sign of abating, and there is a wide range of potential outcomes.
One scenario is that America and China would reach a trade agreement, reminiscent of the agreements in the 1980s with Japan.
Another is that China and America decouple in ever greater depth. The question then becomes whether the two countries clash as an indirect consequence of a Chinese invasion of Taiwan, or if they reach a spheres of influence arrangement. If the latter, the question becomes which states side with China. South Korea, Vietnam, Malaysia, Indonesia, and Latin America are the key countries to watch.
The most critical part of the China policy is success in making a deal with Russia over Ukraine.
Russia: From an American perspective, it is unimportant where the Russia-Ukrainian border sits, so long as Russia is separated from China. The issue is that Putin knows this, and therefore feels minimal pressure to make concessions. As for Zelensky, he believes that abandoning Ukraine would be detrimental to America’s role in Europe, and knows that his own position depends on the war continuing. Therefore he is also unwilling to make concessions. The results, therefore, may include the Americans withdrawing from NATO. Alternatively, if the Americans double down on Ukraine eventually, this would cement the China-Russia alliance, making China much stronger.
North America: With the Canadians electing a liberal government that will double down on DEI, excess regulation, net zero (albeit apparently without carbon taxes), and more, the divide between America and Canada will deepen. Trump is willing to entertain the possibility of invading Canada, but his cabinet and the Pentagon, so far, are not. We see American Canadian relations worsening, even if there is a temporary deal on trade. Eventually, the Americans will have to give up, or decide the issue by force. However, making deals with Europe, Japan, and others would place Canada in a much harder position.
Europe: European leaders show no sign of waking up to reality. They are fully wedded to open door migration, Net Zero, the war in Ukraine (despite their depleted arsenals and weakened industrial capacity), DEI, and more. They are incapable of seeing the importance of balancing trade with the US. The key indicators are:
Italy, Portugal, Ireland, Britain, or other mid-tier players start making separate deals with the US, suggesting that the European position is fraying and there is no internal unity.
Japan, South Korea, or other major non-European countries make deals with the Americans, breaking the wall of resistance on Trump’s trade policies.
There is political change in France, due to elections, or Germany, due to the SDP-CDU coalition collapsing, or Britain, due to unrest. Governments friendlier to Trump would emerge, weakening Europe.
A major financial crisis strikes, requiring the Federal Reserve to bailout the ECB. Trump would use that leverage to impose his will in other arenas.
NATO and alliances: Trump is trying to link the American’s dominance in defence to concessions on trade. However, Trump’s style, and the fact that the elites in the West are deeply wedded to the tenets of the woke heresy, means that the elites have unified against him. He will need to either exploit a major economic crisis, by tying Federal Reserve bailouts to defence and economic concessions, or find a way to splinter these elites, by co-opting some of them, to achieve his aims. Alternatively, he can simply leave NATO, and let the chips fall where they may.
Israel and Gaza: After 18 months of war, Israel is still fighting in the northern Gaza towns of Beit Hanoun and Beit Lahia. The Israelis seem unable to finish Hamas, and the Arabs still reject any deportation of Palestinians. This is unlikely to change. The key risk, from Trump’s perspective, is that Israeli ground troops would lose the will to fight, or that internal Israel instability would result in a new government that gives up on these objectives, resulting in Trump’s failure. As Turkey consolidates its control over Syria, the risks to Israel’s existence would grow significantly in the 10-20 year outlook.
Iran deal: Iran’s leadership is divided over a deal. The hardliners realise that they lost against Israel, and that making a deal with the Americans now would make the Islamic revolutionary regime pointless: why is there a revolutionary regime if Iran lost against Israel and reconciled with the US? The other complicating factor is the Americans’ own divisions, between pro-Israel hawks and foreign policy realists. The former will not accept a deal that is not humiliating to Iran. The latter may calculate, in our view, correctly, that the Islamic regime is on its last legs, and that facilitating change, rather than escalating in a manner that unifies the elite, is the safer bet.
Yemen and the Red Sea: American air defence capability in the Red Sea is being depleted, and the Houthi are still shooting down American drones, indicating continuing air defence capability. When the Red Sea crisis started, we said that an air campaign would not suffice. After seeing Israel’s performance against Hezbollah, we said that, if the Americans have the same intelligence on the Houthi that Israel had on Hezbollah, their task would be much simpler and would become achievable. So far, there is no evidence of the same kind of intelligence penetration. We note that Russia is most likely backing the Houthi, in a bid to retaliate against America’s role in Ukraine. Therefore, unless the Iranians and the Russians abandon the Houthi, the US will be stuck bombing Yemen indefinitely, or until a new agreement between Saudi Arabia, the Houthi, and the US is made.