Europe’s moves towards South America (Mercosur) and especially with India with the signing of the colossal trade agreement are a response that Trump did not expect. So are the visits of European leaders to China and their meetings with President Xi. So are the European warnings to sell American bonds – Europe has American bonds worth 1.6 trillion dollars -, which means that if it decides to sell even part of them, it will cause a seismic tremor in the US. In the same direction is the visit of the Canadian Prime Minister to China where he met with Xi and told him roughly that China is currently considered a more reliable partner for Canada than the US. Canada has huge reserves of oil and minerals that China needs and this is overturning US policies.
The European agreement with India and the agreements that are expected to be concluded with China offer a way out for European economies, but at the same time they prevent the exclusion of China that Trump seeks. Instead of isolating China, the US is isolated and the traditional allies of the US, Europe and Canada, in order to protect themselves from American aggression, are concluding agreements that until now they have avoided so as not to annoy the US. Now it seems that this is no longer the case, since the US has torn up the agreements, and Europe has been freed to move as it sees fit.
With his attack on all of the US allies, Trump seems to be suffering what he did not expect. Throwing them into the arms of his real opponents, China and possibly the day after tomorrow, Russia – if and as long as the tension in Ukraine decreases.
Of course, this does not mean that relations will reach extremes. Perhaps Trump will soften his stance towards Europe and seek other deals, on more equal terms, in terms of cooperation instead of imposition, as he has been doing until now.
The domestic political instability in U.S.
Unfortunately, however, geopolitical instability is not limited to the economic level. Instability is pervasive in everything and everywhere. From the interior of the US, which is experiencing incredible social tension due to interventions in public administration and Justice, the behavior of ICE towards immigrants and American citizens, the restriction of expression and action by universities, the media, etc., to the Middle East, which is preparing for a new, greater conflagration than in the past. What will happen in Iran is still unknown, but the concentration of large American military forces in the region and the rhetoric of the Iranian government, whose officials declare that they are ready with their finger on the trigger to respond to the US, do not bode well at all. Iran may be an extreme theocratic regime, but no one knows what will succeed it if we assume that an American intervention will overthrow it. In such a case, there is a scenario where Iran could enter a spiral of endless civil war and trigger explosions in many countries in the Middle East and Asia.
The Markets
Doubt and anxiety prevail worldwide and this also affects the markets. Gold and other precious metals are constantly breaking new records in their values because they are considered safe havens in times of major crises. The dollar is declining and seems to be losing its glory as a reserve currency. Trump is in a constant and extreme dispute with FED Chairman Powell over the dollar’s interest rates, while the huge American debt, a large part of which was in the hands of friends, is a problem since friendships have now entered a crisis.
The Geopolitics and the markets
Even the possibility of a war in Europe with Russia, which seemed a few years ago and still seems unthinkable today, cannot be ruled out, when European leaders persistently sound the alarm and when the EU approves such increases in defense spending.
And of course, no one knows what the market reactions will be to any of these developments. That is, what will happen to international markets, to the prices of stocks, bonds, metals and commodities, to international trade and to the values of currencies, if consensual solutions for mutual benefit are not found on all fronts.
And while there are currently hopes of a new balance in relations between the US and Europe, after the European reactions, we are far from achieving a new global balance and the elimination of risks of all kinds, military and economic.
