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Diplomacy
Sharm El Sheikh Summit for Peace: Agreement to End the War in Gaza, 13 October 2025. Photo by Roman Ismayilov. President.az, CC BY 4.0 <https://creativecommons.org/licenses/by/4.0>, via Wikimedia Commons

Gaza Peace Plan: End of war, or A beginning of occupation?

by Muhammad Abdullah

On 29 September 2025, President Trump held a press conference along with his counterpart, Prime Minister of Israel, Benjamin Netanyahu, and issued 20 Points detailed peace plan for the war-torn Gaza, though he claims that the plan was backed by prominent Muslim states, including Saudi Arabia, Turkey, Qatar, Pakistan and some other’s. By and large these Muslim states also welcomed the Plan, most importantly Palestinian political body which is Palestinian Liberation Organization also called the plan an opportunity to end the war on Gaza. Some significant points of the peace plan. Gaza will be a deradicalized terror-free zone that does not pose a threat to its neighbors. Gaza will be redeveloped for the benefit of the people of Gaza, who have suffered more than enough. If both sides agree to this proposal, the war will immediately end. Israeli forces will withdraw to the agreed upon line to prepare for a hostage release. During this time, all military operations, including aerial and artillery bombardment, will be suspended, and battle lines will remain frozen until conditions are met for the complete staged withdrawal. Within 72 hours of Israel publicly accepting this agreement, all hostages, alive and deceased, will be returned. (Gjevori, 2025)Role of ArabsSince the start of Trump’s tenure  and the new American administration Arabs were making efforts to stop the long running Gaza War, they propose alternatives to Trump’s Gaza Rivera plan and so on. (Jazeera, 2025) Now, when eventually Gaza Peace Plan announced by Trump, they (Arabs ) not only endorsed the Plan but also Nations like Qatar, Egypt and Türkiye take part in negotiations with Hamas and Israel, along with envoy to Middle East Steve Witkoff, and finally brought some relief for Gazans like (ceasefire and immediate supplies of aid) which is very crucial for the starving people Gaza. (Irish, 2025)Proposed Governance ModelGaza would be governed by technocrats, apolitical Palestinian committee responsible for day-to-day public services and municipal functions in Palestine. The committee would be composed of qualified Palestinian and International experts. They will be overseen by a body called the Board of Peace. There would be a temporary International Stabilization Force (ISF). To oversee security in Gaza during transition. (Walsh, 2025)Parties response to the plan.Hamas, which is the military body of Gaza has also issued a response to Trump’s Plan, in which they accepted the demands like hostage release, and to hand over the administration of Gaza to independent Technocrats, but they clearly stated that they want to negotiate over some points through mediators.PLO which is Political body of Palestine, welcomed the ceasefire but they are opposed to hand over Gaza’s governance to foreign actors, as Nasser al- Qudwa, a prominent Palestinian and Nephew of Yasser Arafat, has warned against foreign governance of Gaza post-Hamas, (Newspaper, 2025) stressing that leadership must be rooted locally rather than imposed from abroad. The statement highlights the potential opposition and undermines the credibility of the plan.The Israeli Prime Minister called the plan as their victory and fulfillment of their objectives, as they want to decommission Hamas, they will achieve this once the plan is implemented. The tunnels which were in Gaza and which caused Israel unbearable damage, especially in early days of war. (Bronner l., 2025) They are also going to get rid of them by Hamas exclusion and their deradicalization and development of infrastructure by independent actors. The most favorable point for Israel is Trump's statement that “if Hamas does not accept the plan then you [Netanyahu] are allowed to finish the job in Gaza and destroy Hamas completely”. (Griner, 2025) Which I think is a very provocative statement and can cause more bloodshed of innocent civilians. which may end up in complete occupation of the Strip.  Since the day Trump’s plan for Gaza was announced, the Israeli military did not slow down their advancement in the strip, instead they continued with their actions against civilians which reflect their intentions clearly.But for the implementation of the so-called peace plan and to further discuss over its terms both parties take part in negotiations in Egypt. With the mediation of Qatar and Egypt, these negotiations continued for days and then concluded with the statement made by Donald Trump that Israel and Hamas have agreed to his peace plan for Gaza. The Israeli military says that a ceasefire in Palestinian territory took effect on Friday 10th. And that it has begun to withdraw from parts of the Strip as per plan. The first phase of Trump's plan is expected to see the release of all 20 living Israeli hostages in exchange for around 250 Palestinian prisoners and 1,700 detainees from Gaza. Increased amounts of aid will also enter the Strip. (BBC, 2025). On October 13th, Hamas released the 20 living hostages and Israel began to release the Palestinian prisoners. (BBC, 2025) The same day, in Sharm El Shaikh, Egypt, an international peace summit was held, attended by representatives from various nations, - including Canada, France, Germany, Indonesia, Italy, Jordan, Oman, Pakistan, Palestine, Qatar, Saudi Arabia, Turkey, UAE, UK, among others – but notably excluding Hamas and Israel representatives. The summit focused on humanitarian access to Gaza and mechanisms to monitor the proposed ceasefire, aiming to end the two-year war. The outcome was the signing of a joint declaration by Egypt, US, Qatar and Türkiye. Despite these recent developments, the Plan gave the UN only a minimal role, limited to the supply of aid. Although the UN was created to maintain world peace and to resolve conflicts peacefully, when we see the plan, Trump did not assign any role to the peace keeping body, instead he appointed Tony Blair [former British PM, who invaded Iraq in 2003] as head of the Board of peace, which is an international Transitional body whose responsibility is to supervise the apolitical Palestinian committee (responsible for day to day running activities in Gaza). AnalysesThe future of the 20 Points Plan is quite uncertain because it neither has a security guarantee for Palestinian nor any durable provisions about the existence of Palestinian state. The plan calls for an ISF (International stabilization Force) which will be deployed in Gaza immediately for ensuring peace, but the fact is the world does not have a pool of experienced peacekeeping force for this purpose that can handle the situation.  Furthermore, the Israeli PM made it clear that there is no meaningful withdrawal of the IDF from Gaza anytime soon.Moreover, the Plan prohibits Israeli annexation of Gaza, but it does not address the issue of the West Bank. Annexation there is opposed by present and potential Abraham Accord States. But I think soft annexation there would be continued through expansion and establishment of settlement. (weller, 2025)ConclusionWhile the world is admiring Trump’s 20 Points Peace Plan, how can we think of peace anywhere, without an army, and most importantly without recognizing the place as a sovereign State with demarcated borders? Although the Plan has some appealing aspects like immediate ceasefire, entry of aid, development of infrastructure in Gaza and exchange of prisoners, it lacks in terms of security from future Israeli aggression, and it also has no provision about the Palestinian state with borders of before 1967 with East Jerusalem as its Capital. Furthermore, if the plan is implemented Palestinians will be governed by the people of other countries, who will govern them as per the policy devised by the committee, (whose members probably belong to West and other States) not according to the needs and opinion of Palestinians. Which may add more to their misery. So, for a short span of time the Plan may seem like the end of war, but in the long run if more reforms like the recognition of Palestinian statehood and its existence will not be made, then this is just a start of a new occupation. References BBC. (2025, october 9).  BBC: https://www.bbc.com/news/articles/cvgqx7ygq41o.ampBBC. (2025, october 14). BBC: https://www.bbc.com/news/articles/c740jx07vz0oBronner, L. (2025, september 30). Le Monde.  https://www.lemonde.fr/en/international/article/2025/09/30/netanyahu-accepts-trump-s-gaza-peace-plan-under-pressure-but-sets-conditions_6745930_4.html?utmGjevori, E. (2025, sep 29). al jazeera. https://www.aljazeera.com/amp/news/2025/9/29/heres-the-full-text-of-trumps-20-point-plan-to-end-israels-war-on-gazaGriner, A. (2025, oct 3). AL Jazeera. from https://www.aljazeera.com/news/2025/10/3/trump-issues-sunday-deadline-for-hamas-to-accept-gaza-peace-proposal?utm_sourceIrish, J. (2025, october 8). Reuters. from https://www.reuters.com/world/middle-east/europeans-arabs-meet-flesh-out-next-phase-trump-gaza-plan-2025-10-09/?utm_sourceJazeera, A. (2025, feb 21). Al Jazeera. Arab leaders hold a meeting and discuss alternatives to GazaNewspaper, T. T. (2025, october). the times.  https://www.thetimes.com/world/middle-east/article/nasser-al-qudwa-gaza-hamas-palestine-israel-news-vl7xmgct9?utm_sourceWeller, M. (2025, oct 2). Cathom house. https://www.chathamhouse.org/2025/10/can-trump-peace-plan-gaza-succeed?utm

Diplomacy
canada between Israel and Palestine.  Israel canada Palestine

Israel/Palestine and Canada’s Empty Support for International law

by Alex Neve

Abstract Canada has long maintained that international law must be central to resolution of the Israeli/Palestinian conflict. But has there been appropriate follow-through when international law has been violated? This policy brief examines Canada's positions and, importantly, actions, in the face of violations of international law by the Israeli government during its military offensive on Gaza following the 7 October 2023 attacks in southern Israel by Hamas and other armed Palestinian groups. The analysis makes it clear that Canada has rarely condemned those violations, let alone imposed sanctions or other consequences for them.Keywordshuman rights, Israel, Palestine, Gaza, Canada, Canadian foreign policy, international law, International Court of Justice, International Criminal Court, international humanitarian law Professed respect for international law “Israel has a right under international law to take the necessary measures, in accordance with human rights and international humanitarian law, to protect the security of its citizens from attacks by terrorist groups.” In many respects, this statement—taken from the section detailing “Support for Israel and its Security” in Global Affairs Canada's overview of “Canadian policy on key issues in the Israeli-Palestinian conflict”1—captures what is right in principle, but so terribly wrong in practice, when it comes to Canada's foreign policy regarding Israel and Palestine. As it should be, international law is lifted up and given a spotlight. Canada's position is grounded in an expectation that international human rights and international humanitarian law will be respected. But what the statement does not convey is that there is rarely an appropriate response by the Canadian government when it becomes clear that actions taken by Israel—particularly the Israel Defense Forces—to protect the security of its citizens consistently amount to grave, widespread, and systematic violations of both international human rights and international humanitarian law. International law and human rights also feature prominently in other key elements of Canada's policy regarding the conflict. Canada recognizes the “Palestinian right to self-determination.” The rights of Palestinian refugees are to be respected, “in accordance with international law.” Canada notes that the “Fourth Geneva Convention applies in the occupied territories” and consequently that Israeli settlements are in violation of that convention, as is the Israeli government's construction of the barrier inside the West Bank and East Jerusalem. Failure to uphold international law This is all good, in principle. But how does Canada react to the fact that the Palestinian right to self-determination and the rights of Palestinian refugees have undeniably been abrogated for decades? And what is Canada's response to the defiant expansion of the Geneva Convention–violating settlements throughout the West Bank and East Jerusalem? Rather than mount a robust defence (or any defence, for that matter) of the international legal principles at stake, Canada's policy more or less goes quiet at this point. There is no condemnation of the breaches of international law, and consideration of the possible implications under Canadian law is reluctant at best, with a bare minimum of legal, trade, or other consequences for these blatantly unlawful actions. The disconnect between rhetorical flourishes of support for the professed importance of international law but the failure and unwillingness to champion it when it is breached has, unfortunately but perhaps not surprisingly, dominated the key aspects of Canada's response to Israel's unrelenting assault on Gaza following the brutal attacks launched by Hamas and other armed Palestinian groups in southern Israel on 7 October 2023. It was evident from the outset. October 7th, Gaza, and Canada's empty resort to international law Reacting to the horror of the October 7th attack, Canada, like the United States, Australia, New Zealand, and many of its allies in Western Europe, almost immediately referenced the fact that Israel had a right to defend itself. Prime Minister Justin Trudeau's first statement, on October 8th, noted that Canada “reaffirm[ed] its support for Israel's right to defend itself.”2 But what, as a matter of international law, did that actually mean? The question as to whether Israel as a nation has the right to defend itself from attack is dictated by Article 51 of the United Nations (UN) Charter, International Court of Justice (ICJ) jurisprudence, and other public international law sources. As Marko Milanovic, professor of public international law at the University of Reading School of Law notes, “[M]any who think there is a single, clearly correct answer to the question whether Israel has a right to self-defence do so simply because the answer fits their prior narratives and worldviews.” Milanovic lays out the complexity and uncertainty in considerable detail and concludes that “the jus ad bellum is indeterminate on the question of whether non-state actors, whose conduct is not attributable to a state, can commit armed attacks in the sense of Article 51 of the Charter.”3 With the threshold question of whether an attack carried out by an armed group such as Hamas constitutes an armed attack of the nature that would trigger application of Article 51 being at best indeterminate, so too is the question as to whether a right of self-defence arises. As such, the Canadian government's simple assertion, without any further expansion or discussion, is clearly not without debate. Offering no qualification or explanation alongside that assertion, on a matter that is unsettled and complex within international law, is problematic. Article 51 states: “Nothing in the present Charter shall impair the inherent right of individual or collective self-defence if an armed attack occurs against a Member of the United Nations[.]”4 What emerges from a review of applicable international law, however, are differing views as to whether, and to what extent, a nation's right under Article 51 to resort to armed force in response to an attack—in other words, to go to war as a means of self-defence—arises when the attack is carried out by another state, not when the perpetrator is a non-state actor or armed group such as Hamas or the other Palestinian armed groups responsible for the October 7th attacks, operating within territory that is controlled by the state concerned. That is reflected in the conclusion of the ICJ in its 2004 Advisory Opinion, Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory: Article 51 of the Charter thus recognizes the existence of an inherent right of self-defence in the case of armed attack by one State against another State. However, Israel does not claim that the attacks against it are imputable to a foreign State. The Court also notes that Israel exercises control in the Occupied Palestinian Territory and that, as Israel itself states, the threat which it regards as justifying the construction of the wall originates within, and not outside, that territory. The situation is thus different from that contemplated by Security Council resolutions 1368 (2001) and 1373 (200 l), and therefore Israel could not in any event invoke those resolutions in support of its claim to be exercising a right of self-defence. Consequently, the Court concludes that Article 51 of the Charter has no relevance in this case.5 Having determined that Article 51 was not relevant, the Court also went on to consider whether Israel could more broadly rely on the customary international legal principle of a “state of necessity” to justify construction of the wall. The Court agreed that Israel had “the right, and indeed the duty, to respond in order to protect the life of its citizens” but noted that “measures taken are bound nonetheless to remain in conformity with applicable international law.”6 This is essentially where Canada's stated policy lands as well. For example, the now former prime minister's October 8th statement, referenced above, goes on to qualify that Israel's right to defend itself must be exercised “in accordance with international law.” This, in turn, echoes the numerous references to the need to respect international law noted above, which are scattered throughout Canada's overall Israel/Palestine policy—established long before October 7th. The phrase “in accordance with international law” has been repeated consistently in written statements, social media posts, and press comments by the prime minister,7 the minister of foreign affairs,8 and other ministers9 at various stages of the current conflict. But we do not find any further explanation as to what that entails-for instance, that regardless of whether or not a right of self-defence to an armed attack exists in these circumstances and legally justifies Israel launching a war against Hamas, fundamental principles from international humanitarian law, such as the requirements of necessity and proportionality, nevertheless always apply. That failure to have clearly acknowledged the applicable international humanitarian law framework is particularly problematic, because the evidence that those legal obligations have been systematically and gravely violated, to the extent of undeniably constituting war crimes, has become incontrovertible. Yet as Israel's full-scale assault on Gaza was launched and expanded—and as reports from the UN,10 humanitarian agencies,11 international12 and national13 human rights organizations, local human rights monitors,14and journalists15 made it clear that massive human rights violations and breaches of international humanitarian law were occurring—nothing more was said. Canada did not move from stating that international law must be respected to stating the obvious—that it was well-established that this was not happening. The Canadian government refused to criticize Israel for breaches of international law, let alone press for accountability and consequences for the violations. Canada and the ICJ's Genocide Convention case Nowhere has this been more apparent, or more consequential, than in Canada's response to announcements and rulings from the two international courts that have a key role in upholding international law in situations such as the Israeli-Palestinian conflict: the International Court of Justice and the International Criminal Court (ICC). Canada is often regarded as one of the world's most reliable champions of international courts. As such, its failure to show the expected support at this time has been widely noted with concern. The ICJ is actively engaged with the conflict through two separate cases. On 29 December 2023 South Africa launched proceedings16 against Israel, alleging violations of the Convention on the Prevention and Punishment of the Crime of Genocide (Genocide Convention) with respect to Israel's actions in Gaza. Given the gravity and urgency of the situation on the ground in Gaza, South Africa has applied to the Court on four separate occasions,17 seeking orders for interim provisional measures while the case proceeds. The Court consequently indicated a range of provisional measures in various orders18 issued between January and May 2024. The Court's provisional measures have been grounded in a finding that “at least some of the rights claimed by South Africa under the Genocide Convention and for which it was seeking protection were plausible, namely the right of the Palestinians in Gaza to be protected from acts of genocide and related prohibited acts mentioned in Article III, and the right of South Africa to seek Israel's compliance with the latter's obligations under that Convention.”19 The legal semantics of that ruling are nuanced, but nonetheless significant and with very real consequences. The Court has not reached any conclusion as to whether genocide has occurred in Gaza—or even whether it has possibly or potentially occurred—nor would it be expected to at this early stage of the case. But it is a clear statement that the Court considers the rights protected under the Genocide Convention to be plausibly pertinent to Israel's military operations in Gaza. Drawing on the Court's conclusion, many commentators,20 including legal experts and human rights organizations, now regularly reference plausible, potential, or prima facie genocide in Gaza. The Court's final ruling on whether Israel has in fact breached its obligations under the Genocide Convention is still some way off—likely late 2025, at the earliest. Among the provisional measures indicated by the Court to date are orders that Israel prevent the commission of all acts of genocide, prevent and punish incitement to genocide, enact immediate and effective measures to enable the provision of urgently needed basic services and humanitarian assistance in Gaza, and immediately halt its military offensive and any other action in Rafah that may inflict on Palestinians in Gaza conditions of life that could bring about their physical destruction as a group, in whole or in part. Canada's response to the ICJ rulings has been, at worst, tepid and incoherent, and at best, only supportive when consistent with Canada's already established positions. Following the first provisional measures indicated by the Court in January, Canada's foreign affairs minister, Mélanie Joly, issued a statement expressing support for the ICJ's “critical role … in upholding the international rules-based order,” but stressed that this support did “not mean that [Canada accepted] the premise of the case brought by South Africa.”21 There was not a word from the Canadian government calling on Israel to comply with the Court's order, which is what would have been expected from a self-declared champion of the Court. The response four months later to the Court's provisional measures concerning Rafah was stronger. Prime Minister Trudeau reiterated what was by then Canada's established position, calling for “no more military operations in Rafah by Israel, and certainly no escalation of military operations in Rafah.” The prime minister also underscored that the “ICJ's proposals are binding and we expect everyone to follow them as a matter of international law.”22 However, as is well established, Israel did not comply with the Court's ruling with respect to Rafah, and Canada has issued no express condemnation, let alone imposed any consequences, for that disregard of international law. Canada and the ICJ's advisory opinion The second ICJ case dealing with Israel-Palestine is an advisory opinion requested in January 2023,23 following a December 2022 UN General Assembly resolution seeking the Court's views on the legal consequences of Israeli practices in the Occupied Palestinian Territory (OPT), including East Jerusalem. The Court's Advisory Opinion24 was issued on 19 July 2024. The Court was unequivocal in concluding that “the sustained abuse by Israel of its position as an occupying Power, through annexation and an assertion of permanent control over the Occupied Palestinian Territory and continued frustration of the right of the Palestinian people to self-determination, violates fundamental principles of international law and renders Israel's presence in the Occupied Palestinian Territory unlawful.”25 Notably, the ICJ specifically addresses the question of the legal consequences of Israel's unlawful presence in the OPT for third states, which would obviously include Canada, and concludes that “all States are under an obligation not to recognize as legal the situation arising from the unlawful presence of Israel in the Occupied Palestinian Territory. They are also under an obligation not to render aid or assistance in maintaining the situation created by Israel's illegal presence in the Occupied Palestinian Territory.”26 This leads to a consideration of Canada's stance before and after the ICJ Advisory Opinion. Canada filed a written submission27 seven months in advance of the hearing, arguing that the Court should use its discretion and decline the General Assembly's request to issue an advisory opinion. Canada also initially requested an opportunity to make oral submissions during the hearing, and was one of fifty-four states and multilateral organizations slated to do so.28 However, as the hearing got underway on 19 February 2024, Canada withdrew its request to make an oral presentation29 and chose to rely solely on the earlier written submission—namely, that the Court should decline to issue an advisory opinion. The explanation offered for withdrawing from the oral hearing was that the government's position had not changed from the time of making its written submission. Apparently, that position was unchanged even though external circumstances had changed dramatically. After all, Canada's position had been formulated seven months earlier—before the October 7th attack in Israel, the subsequent Israeli offensive in Gaza, and the 26 January 2024 ICJ ruling on provisional measures in the case brought by South Africa under the Genocide Convention. Canada's response after the Advisory Opinion was issued was certainly lacking. The immediate reaction was limited to a statement that the government had “taken note” of the Advisory Opinion, stressing that it was “nonbinding.”30 Two weeks later, a passing reference to the Advisory Opinion appeared in a joint statement from Prime Minister Trudeau and the prime ministers of Australia and New Zealand reiterating their call for a ceasefire and expressing concern about the mounting hostilities between Israel and Hezbollah. The statement generically called on Israel “to respond substantively to the ICJ's advisory opinion,”31 but offered no examples as to what that substantive response should entail. Canada's response to the advisory opinion A resolution came before the UN General Assembly on 18 September 2024, following up on the ICJ Advisory Opinion, which had, after all. initially been sought by the General Assembly. Among other provisions, the resolution “[w]elcomes the Advisory opinion … [and] [d]emands that Israel comply without delay with all its legal obligations under international law, including as stipulated by the International Court of Justice.”32 The resolution passed with 124 votes in favour, 14 against, and 43 abstentions.33 Canada was one of the countries to abstain. Many of Canada's close allies, such as France, Ireland, Norway, and New Zealand, supported the resolution, while many others, including Australia, Germany, the Netherlands, and the United Kingdom, joined Canada in abstaining. Israel and the United States were among the fourteen states that opposed the resolution. In a statement, the government explained its decision to abstain rather than support the resolution, citing that it did not reference the “need to end terrorism, for which Israel has serious and legitimate security concerns” and that it contained “language that aligns with Boycott Divestment Sanctions, which Canada firmly opposes.”34 To a certain extent, the decision to abstain rather than oppose (which has tended to be Canada's voting record with UN General Assembly resolutions related to Israel/Palestine)35 the resolution may be seen as a small step forward. It was, however, sharply criticized by Canadian groups supportive of Israel.36 There has yet to be any acknowledgement of the steps that Canada is obliged to take—and therefore that it intends to take—in response to the ICJ's identification of a responsibility incumbent on third states not to “render aid or assistance in maintaining the situation created by Israel's illegal presence in the Occupied Palestinian Territory.” What implications might there be, for instance, for Canadian trade policy, the charitable status of Canadian organizations, the involvement of Canadians in real estate deals in the OPT, or the possibility that the actions of some Canadians with respect to settlements in the OPT might even be tantamount to criminal liability for war crimes? Canada designated Hamas a “terrorist entity” under Canadian law in 2002.37 Numerous other Palestinian armed groups, such as Palestinian Islamic Jihad and the Al-Aqsa Martyrs Brigades, have similarly been designated. Since the October 7th attack, there have been four rounds of sanctions, targeting thirty-nine individuals, including Hamas leadership.38 Canada has been slower to take action against individuals and groups responsible for violence and human rights abuses against Palestinians. After considerable pressure, in May, June, and September of 2024, the government imposed three rounds of sanctions against a total of fifteen individuals and seven groups deemed responsible for “extremist settler violence against Palestinian civilians in the West Bank.”39 These are the first ever sanctions of that nature. However, no sanctions have been imposed against Israeli political leaders who have been widely condemned for supporting, facilitating, and inciting that extremist settler violence—notably Finance Minister Bezalel Smotrich and Minister of Security Itamar Ben-Gvir.40 There have been repeated calls for Canada to impose a comprehensive arms embargo on any weapons, including parts and components, transferred either directly to Israel or indirectly through third countries, most notably the United States. While the government announced in January that no new export permits would be authorized, and later cancelled thirty existing permits, the ban is still far from comprehensive.41 For instance, Canadian-made parts are sold to companies in the United States, where they are used in the assembly of F-35 fighter jets destined for Israel. The Canadian Commercial Corporation, a Canadian Crown Corporation acting on behalf of General Dynamics Ordnance and Tactical Systems—Canada, also remains under contract to provide the US Department of Defense with artillery propellants that will be supplied to Israel.42 Reports indicate that C$95 million worth of military goods could be exported from Canada to Israel through to the end of 2025.43 It is also worth noting that the Canada–Israel Free Trade Agreement, which came into force in 1997 and was updated in 2019, extends its coverage to the “territory where [Israel's] customs laws are applied.”44 This means the trade deal includes Israeli settlements in the West Bank and East Jerusalem, which Canada considers to be unlawful. There was a concerted push by legal experts and human rights groups to exclude those unlawful settlements45—which, after all, constitute war crimes under international law—from the gamut of the trade deal when it was updated, but the government refused to make that change. Canada and the International Criminal Court Meanwhile, an announcement from Karim Khan, the chief prosecutor of the ICC, on 29 May 2024, raised further concerns about Canadian double standards regarding international law and institutions when it comes to Israel. Khan indicated that, as part of an ongoing investigation launched over three years ago, he was seeking arrest warrants for five key Israeli and Hamas leaders, including Israel's prime minister, Benjamin Netanyahu, and its then minister of defence, Yoav Gallant, on war crimes and crimes against humanity charges in connection with the October 7th attacks in southern Israel and the aftermath in Gaza.46 Canada, famously, was an ardent champion of the establishment of the ICC in 1998.47 Canada's foreign affairs minister at the time, Lloyd Axworthy, played a key leadership role, and a Canadian, Philippe Kirsch, served as the first ICC president. However, rather than express support and offer a commitment to cooperate with Khan and the Court as the case proceeds, Prime Minister Trudeau, Deputy Prime Minister Chrystia Freeland, and Foreign Affairs Minister Joly all pilloried the prosecutor for having sought the arrest warrants against Netanyahu and Gallant, decrying what they called an unhelpful “equivalence” between Hamas and the Israeli government.48 The government's position was criticized in an open letter to the prime minister from over 375 Canadian law professors, lawyers, legal scholars, academics, civil society, faith and labour movement leaders, and former diplomats and parliamentarians, including Axworthy and two former ambassadors to the United Nations, Allan Rock and Rosemary McCarney. The letter notes: The principles of equal treatment and access to justice in the field of international criminal justice do not, by any measure, amount to an equivalence of the nature you have decried. No country, no armed group, no corporation and no individual can be allowed to stand above or apart from the law. Nothing undermines justice more—at a national or international level—than double standards and exceptionalism. This commitment must be at the core of Canada's ICC position and foreign policy.49 Canada was among ninety-three states to subsequently endorse a joint statement on 14 June 2024 reaffirming that ICC officials and staff must be able to carry out their work “without intimidation.”50 While the statement does not explicitly mention the Israel/Palestine case, it is widely understood to be a response to threats that had been levelled at the Court by supporters of Israel, including the US House of Representatives.51 Beyond that, Canada's position regarding the application for the arrest warrants remained the same. On 21 November 2024, the ICC issued arrest warrants for Netanyahu, Gallant, and Mohammed Diab Ibrahim Al-Masri, more commonly known as Deif, commander-in-chief of the military wing of the Islamic Resistance Movement Hamas (known as the Al-Qassam Brigades). Warrants had initially been sought as well for Yahya Sinwar, then head of Hamas in the Gaza Strip, and Ismail Haniyeh, former head of the Hamas political bureau, but those applications were later withdrawn following evidence confirming their deaths.52 The arrest warrant issued for Deif was cancelled on 26 February 2025 after his death was also confirmed.53 In reaction to the news of the warrants against Netanyahu and Gallant being issued, Prime Minister Trudeau stated that Canada “will abide by all the regulations and rulings of the international courts.”54 Minister Joly, while declining to answer the “speculative” question about executing the Netanyahu and Gallant warrants if circumstances arose, confirmed that Canada must “abide by its treaty obligations.”55 While there is no explicit commitment to execute the warrants, the generic affirmations that Canada will abide by all rulings of the international courts, and by its treaty obligations, point in that direction. It is not as clear a statement of support as was made by many other governments, but at least it moves away from criticizing the prosecutor. Disregarding international law in Israel/Palestine weakens it everywhere And in the current volatile global context, with the United States, Russia, and China now regularly and flagrantly violating international law and disregarding—often contemptuously—international courts and human rights bodies, the need to vigorously and scrupulously reinforce international law has become imperative. The bottom line is that it is not enough, and is, in fact, dangerous hypocrisy, for the Canadian government to laud the important role of international law and international legal institutions in resolving the Israeli-Palestinian conflict if those legal standards and bodies are ignored, abandoned, or, at best, given lukewarm support by Canada when breached or disrespected. It is appropriate and necessary for international law to be at the heart of Canada's foreign policy with respect to the conflict. But that requires demonstrating, with decisive words and concrete measures, both internationally and nationally, that Canada means what it says in standing up for the rules-based international order that it has helped to shape since the 1940s. To do otherwise weakens the international legal framework at a time when it needs to be stronger than ever. Those consequences reverberate far beyond Israel and Palestine alone. Declaration of conflicting interestsThe author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.FundingThe author received no financial support for the research, authorship, and/or publication of this article.Notes1. Global Affairs Canada (GAC), “Canadian policy on key issues in the Israeli-Palestinian conflict,” https://www.international.gc.ca/world-monde/international_relations-relations_internationales/mena-moan/israeli-palestinian_policy-politique_israelo-palestinien.aspx?lang=eng (accessed 10 April 2025).2. Prime Minister of Canada, “Statement by the Prime Minister on attacks against Israel,” 8 October 2023, https://www.pm.gc.ca/en/news/statements/2023/10/08/statement-prime-minister-trudeau-attacks-against-israel (accessed 10 April 2025).3. Marko Milanovic, “Does Israel have the right to defend itself?,” EJIL: Talk!, 14 November 2023, https://www.ejiltalk.org/does-israel-have-the-right-to-defend-itself/ (accessed 22 April 2025).4. United Nations (UN), Charter of the United Nations, 26 June 1945, Article 51, https://www.un.org/en/about-us/un-charter/full-text (accessed 10 April 2025).5. International Court of Justice (ICJ), Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, Advisory Opinion, ICJ Reports 2004, paragraph 139, https://www.icj-cij.org/sites/default/files/case-related/131/131-20040709-ADV-01-00-EN.pdf (accessed 20 April 2025).6. Ibid., paragraph 141.7. Prime Minister of Canada, “Prime Minister Justin Trudeau speaks with Israel War Cabinet member Minister Benny Gantz, 16 November 2023,” https://www.pm.gc.ca/en/news/readouts/2023/11/16/prime-minister-justin-trudeau-speaks-israel-war-cabinet-member-minister (accessed 10 April 2025).8. GAC, “Statement by Minister Joly on the International Court of Justice's decision on South Africa's request for provisional measures in its case against Israel,” 26 January 2024, https://www.canada.ca/en/global-affairs/news/2024/01/statement-by-minister-joly-on-the-international-court-of-justices-decision-on-south-africas-request-for-provisional-measures-in-its-case-against-is.html (accessed 10 April 2025).9. Bill Blair (@BillBlair), “Canada continues to support Israel's right to defend itself in accordance with international law, following the brutal terror attack by Hamas on October 7. Hamas must immediately release those being held hostage,” X, 4 November 2023, https://x.com/BillBlair/status/1720983221398069565 (accessed 10 April 2025).10. UN Human Rights Council, The Independent International Commission of Inquiry on the Occupied Palestinian Territory, including East Jerusalem, and Israel, https://www.ohchr.org/en/hr-bodies/hrc/co-israel/index (accessed 10 April 2025).11. International Committee of the Red Cross (ICRC), “ICRC president tells Gaza forum: civilians must be protected, hostages must be released unharmed,” 9 November 2023, https://www.icrc.org/en/document/icrc-president-tells-paris-conference-gaza-immediate-imperative-is-to-save-lives (accessed 10 April 2025).12. Amnesty International, “Damning evidence of war crimes as Israeli attacks wipe out entire families in Gaza,” 20 October 2023, https://www.amnesty.org/en/latest/news/2023/10/damning-evidence-of-war-crimes-as-israeli-attacks-wipe-out-entire-families-in-gaza/ (accessed 10 April 2025).13. B’Tselem—The Israeli Information Center for Human Rights in the Occupied Territories, “Manufacturing famine: Israel is committing the war crime of starvation in the Gaza Strip,” April 2024, https://www.btselem.org/publications/202404_manufacturing_famine (accessed 10 April 2025).14. Euro-Med Human Rights Monitor, “About 10 percent of the Gaza Strip's population killed, injured, or missing due to the Israeli genocide,” 25 July 2024, https://euromedmonitor.org/en/article/6420/About-10-percent-of-the-Gaza-Strip%E2%80%99s-population-killed,-injured,-or-missing-due-to-the-Israeli-genocide (accessed 10 April 2025).15. Bethan McKernan et al., “Palestinian prisoners describe systemic abuse in Israel's jails,” The Guardian, 5 August 2024, https://www.theguardian.com/world/article/2024/aug/05/palestinian-prisoners-describe-widespread-abuse-in-israels-jails (accessed 10 April 2025).16. ICJ, Application Instituting Proceedings Containing a Request for the Indication of Provisional Measures, Application of the Convention on the Prevention and Punishment of the Crime of Genocide in the Gaza Strip (South Africa v. Israel), 29 December 2023, https://www.icj-cij.org/sites/default/files/case-related/192/192-20231228-app-01-00-en.pdf (accessed 10 April 2025).17. 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Alexandre Skander Galand and Wim Muller, “The ICJ's findings on plausible genocide in Gaza and its implications for the International Criminal Court, Opinio Juris,” 5 April 2024, https://opiniojuris.org/2024/04/05/the-icjs-findings-on-plausible-genocide-in-gaza-and-its-implications-for-the-international-criminal-court/ (accessed 10 April 2025).21. GAC, “Statement by Minister Joly,” 26 January 2024.22. Darren Major, “Trudeau says Israel needs to follow ICJ ruling and halt operations in Rafah,” CBC News, 24 May 2024, https://www.cbc.ca/news/politics/trudeau-icj-decision-rafah-1.7214231 (accessed 10 April 2025).23. ICJ, Request for Advisory Opinion pursuant to General Assembly Resolution 77/247 of 30 December 2022: Legal Consequences Arising from the Policies and Practices of Israel in the Occupied Palestinian Territory, including East Jerusalem, 17 January 2023, https://www.icj-cij.org/sites/default/files/case-related/186/186-20230117-REQ-01-00-EN.pdf (accessed 10 April 2025).24. ICJ, Advisory Opinion, Legal Consequences Arising from the Policies and Practices of Israel in the Occupied Palestinian Territory, including East Jerusalem, 19 July 2024, https://www.icj-cij.org/sites/default/files/case-related/186/186-20240719-adv-01-00-en.pdf (accessed 10 April 2025).25. Ibid., paragraph 261.26. Ibid., paragraph 279.27. ICJ, Request by the United Nations General Assembly for an Advisory Opinion on the Question of the “Legal Consequences Arising from the Policies and Practices of Israel in the Occupied Palestinian Territory, including East Jerusalem,” Written Statement of the Government of Canada, 14 July 2023, https://www.icj-cij.org/sites/default/files/case-related/186/186-20230724-wri-01-00-en.pdf (accessed 10 April 2025).28. ICJ, Legal Consequences arising from the Policies and Practices of Israel in the Occupied Palestinian Territory, including East Jerusalem (Request for Advisory Opinion), Public hearings to be held from Monday 19 to Monday 26 February 2024, Press Release, 9 February 2024, https://www.icj-cij.org/sites/default/files/case-related/186/186-20240209-pre-01-00-en.pdf (accessed 10 April 2025).29. Justice for All Canada, “Canada's absence from ICJ hearings is a blow to Palestinian justice,” 20 February 2024, https://www.justiceforallcanada.org/icj-canada-withdrawal-feb20-2024.html (accessed 10 April 2025).30. The Canadian Press, “Ottawa says it has ‘taken note’ of UN court call for end to Israeli settlements,” The Globe and Mail, 19 July 2024, https://www.theglobeandmail.com/canada/article-ottawa-says-it-has-taken-note-of-un-court-call-for-end-to-israeli/ (accessed 10 April 2025).31. Prime Minister of Canada, “Joint statement by the prime ministers of Australia, Canada and New Zealand,” 26 July 2024, https://www.pm.gc.ca/en/news/statements/2024/07/26/joint-statement-prime-ministers-australia-canada-and-new (accessed 10 April 2025).32. UN General Assembly, Resolution ES-10/24: Advisory opinion of the International Court of Justice on the legal consequences arising from Israel's policies and practices in the Occupied Palestinian Territory, including East Jerusalem, and from the illegality of Israel's continued presence in the Occupied Palestinian Territory, UN Document A/RES/ES-10/24, 9 September 2024, paragraphs 1 and 3, https://documents.un.org/doc/undoc/gen/n24/272/75/pdf/n2427275.pdf (accessed 10 April 2025).33. UN, “UN General Assembly demands Israel end ‘unlawful presence’ in Occupied Palestinian Territory,” 18 September 2024, https://news.un.org/en/story/2024/09/1154496 (accessed 10 April 2025).34. GAC, “Canada abstains from United Nations General Assembly resolution on the Advisory opinion of the International Court of Justice on the legal consequences arising from Israel's policies and practices in the Occupied Palestinian Territory,” 18 September 2024, https://www.canada.ca/en/global-affairs/news/2024/09/canada-abstains-from-united-nations-general-assembly-resolution-on-the-advisory-opinion-of-the-international-court-of-justice-on-the-legal-conseque.html (accessed 10 April 2025).35. Jeremy Wildeman, “Assessing Canada's foreign policy approach to the Palestinians and Israeli-Palestinian peacebuilding, 1979–2019,” Canadian Foreign Policy Journal 27 no. 1 (2021): 62–80.36. Centre for Israel and Jewish Affairs, “Canadian government breaks UN promise,” 18 September 2024, https://www.cija.ca/canadian_government_breaks_un_promise (accessed 10 April 2025).37. Public Safety Canada, “Currently listed entities,” https://www.publicsafety.gc.ca/cnt/ntnl-scrt/cntr-trrrsm/lstd-ntts/crrnt-lstd-ntts-en.aspx#25 (accessed 10 April 2025).38. GAC, “Canadian sanctions related to terrorist entities,” https://www.international.gc.ca/world-monde/international_relations-relations_internationales/sanctions/terrorists-terroristes.aspx?lang=eng (accessed 10 April 2025).39. GAC, “Canada imposes third round of sanctions on perpetrators of extremist settler violence against Palestinian civilians in West Bank,” 18 September 2024, https://www.canada.ca/en/global-affairs/news/2024/09/canada-imposes-third-round-of-sanctions-on-perpetrators-of-extremist-settler-violence-against-palestinian-civilians-in-west-bank.html (accessed 10 April 2025).40. Canadians for Justice and Peace in the Middle East, “Canada's sanctions on illegal settlers in the OPT,” August 2024, https://www.cjpme.org/fs_248 (accessed 10 April 2025).41. Steven Chase, “Mélanie Joly says Canada will block U.S.-bound ammunition sale destined for Israel,” The Globe and Mail, 10 September 2024, https://www.theglobeandmail.com/canada/article-canada-suspends-arm-sales-israel-through-united-states/ (accessed 10 April 2025).42. Kelsey Gallagher, “Canada under contract to supply the IDF with artillery propellant,” Project Ploughshares, 26 March 2025, https://www.ploughshares.ca/publications/canada-under-contract-to-supply-the-idf-with-artillery-propellant (accessed 22 April 2025).43. Emma Paling, “$95 million in new Canadian military goods could flow To Israel By 2025,” The Maple, 1 August 2024, https://www.readthemaple.com/95-million-in-new-canadian-military-goods-could-flow-to-israel-by-2025/ (accessed 10 April 2025).44. 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Khan KC on the issuance of arrest warrants in the situation in the State of Palestine,” 21 November 2024, https://www.icc-cpi.int/news/statement-icc-prosecutor-karim-aa-khan-kc-issuance-arrest-warrants-situation-state-palestine (accessed 10 April 2025).53. ICC, Decision terminating proceedings against Mr Mohammed Diab Ibrahim Al Masri (Deif), 25 February 2025, https://www.icc-cpi.int/court-record/icc-01/18-417 (accessed 10 April 2025).54. Robert Fife, “Trudeau says Canada would abide by ICC arrest warrants for Netanyahu, former defence minister,” The Globe and Mail, 21 November 2024, https://www.theglobeandmail.com/politics/article-trudeau-says-canada-would-abide-by-icc-arrest-warrants-for-netanyahu/ (accessed 10 April 2025).55. CBC News, “Canada needs to follow ICC obligations, Joly says,” 21 November 2024, https://www.cbc.ca/player/play/video/9.6571268 (accessed 10 April 2025).

Diplomacy
Kim and Trump shaking hands at the red carpet during the DPRK–USA Singapore Summit 2018

Democratic People's Republic of Korea and Trump 2.0: Another cycle with new attributes?

by Jesús de los Ángeles Aise Sotolongo

Abstract Never before had a sitting U.S. president managed relations with the DPRK as Donald Trump did, nor had any leader from Pyongyang sat face-to-face with a sitting U.S. president during their term as Kim Jong Un did. With Trump’s potential return, could there be another cycle of rapprochement? This paper seeks to address this question. The failure of the previous negotiating cycle, the DPRK’s advances in deterrence, and shifts in peninsular, regional, and global circumstances suggest that both leaders might bring new attributes to their interactions, potentially yielding surprising outcomes Introduction Except for a few moments of rapprochement, since the founding of the Democratic People’s Republic of Korea (DPRK), U.S. administrations have maneuvered with various forms and methods to destabilize its political and economic system. And since Pyongyang decided to develop nuclear weapons, Washington has labeled them illegal, demanding that they be abandoned, sponsoring United Nations Security Council (UNSC) sanctions, and implementing strict unilateral penalties. Meanwhile, successive DPRK leaders have persevered in a military doctrine based on the development of nuclear deterrence to guarantee national defense and security. Nevertheless, an unprecedented moment that broke with that persistent circumstance took place during Donald Trump’s previous term, when the relationship shifted from “fire and fury” to successive summits with Kim Jong Un in 2018 and 2019, in Singapore, Hanoi, and Panmunjom. The exchange of insults — Trump calling Kim “little rocket man” and Kim referring to Trump as a “dotard” — mutated into their approaching one another as “pen pals.” This surprising shift in U.S. policy toward the DPRK temporarily, though without the expected results, loosened the “Korean Gordian knot.” No U.S. president has managed relations with the DPRK as Donald Trump did, and in history, no North Korean leader had ever stood face-to-face, on equal footing, with a sitting U.S. president as Kim Jong Un did. Former President Barack Obama delivered several appealing speeches, but he seemed weak to many countries in East Asia, including U.S. allies and partners. For eight years, he did nothing about North Korea, calling it “strategic patience.” This eroded deterrence and allowed Pyongyang to advance its weapons and nuclear programs (Kausikan, 2025). For his part, at the beginning of his term, Joe Biden announced a “new strategy” toward the DPRK that never materialized; he pleaded for dialogue with Kim Jong Un while simultaneously increasing war threats; he grouped China, Russia, Iran, and North Korea into an ideological category that resurrected the Bush-era notion of the “axis of evil.” Biden’s simplistic binary categorization was not a policy. It ignored the differences in how these four countries define their interests, the degree of integration into the global economy, and the scope of their ambitions. These differences should be the starting point for U.S. diplomacy toward North Korea (Kausikan, 2025). The purpose of this article is to examine the circumstances, obstacles, and expectations for a new cycle of negotiations between Washington and Pyongyang with Donald Trump’s return to the U.S. presidency. Development This second term of President Donald Trump, more transactional and less predictable, seems to be raising expectations of reducing confrontational stress on the Korean Peninsula, and everything indicates that it brings with it a modification of Washington’s policy toward the DPRK. This is conditioned by the following radical changes in strategic circumstances compared to his previous term: DPRK’s nuclear and missile programs have undergone new and sophisticated advances. The DPRK has broken all ties and symbols of its relations with the Republic of Korea, which it classifies as its “principal and unchanging enemy.” Declaring that it has no intention of avoiding war, it has instructed the Korean People’s Army to accelerate preparations to “occupy, subdue, and completely reclaim” South Korea. There has been a tightening of ties between Pyongyang and Moscow. The two Kim Jong Un–Vladimir Putin summits, and Kim’s reference to Putin as his “closest comrade,” have shown the very high level of understanding and commitment between the parties. This is reflected in the DPRK’s unrestricted support for Russia’s special military operation in Ukraine and the signing of a Comprehensive Strategic Partnership Treaty, ratified by both legislatures, which includes a “mutual military assistance” clause. Meanwhile, Russia supports the DPRK diplomatically and economically, opposing multilateral and unilateral sanctions, and expanding its exports — essentially oil, raw materials, and food — as well as providing assistance in various fields. An emerging anti-U.S. and anti-Western axis has been taking shape among China, Russia, the DPRK, and Iran, which has become so significant that Washington and its allies describe it as a “new axis.” Within this interconnection, the DPRK holds important advantages in three strategic dimensions: economic, military, and diplomatic. The removal of President Yoon Suk Yeol over his irresponsible Martial Law is reinforcing the possibility of a new government led by the Democratic Party, with Lee Jae Myung as the clear favorite and, as of today, more likely to win. [1] This would open the door to a revival of North–South détente reminiscent of the Moon Jae In era. Trump’s foreign policy objectives are based on his “Make America Great Again” (MAGA) vision — now reinforced — which prioritizes U.S. strategic and economic interests over traditional alliance commitments (e.g., South Korea and Japan). At least these six factors seem to be significantly influencing Donald Trump’s decision to return to diplomacy with Kim Jong Un. While the DPRK occupies a relatively lower position on Trump’s list of priorities (with China and the Russia–Ukraine conflict taking precedence), and dialogue does not appear imminent, he has made it clear that he would like to reconnect with Kim Jong Un, seems willing to reopen negotiations, and is evaluating and discussing possible avenues of interaction that could lay the groundwork for a potential summit. It is said that Washington has been holding discreet conversations with Pyongyang, consulting external experts, and considering options to potentially restart dialogue. Meanwhile, Kim Jong Un — clearly more assertive and militarily more powerful in Washington’s eyes — has not publicly shown any willingness to renew his earlier offers related to denuclearization. In his own words: “the DPRK’s nuclearization is non-negotiable,” and he continues to exert pressure by showcasing the country’s missile–nuclear power. This has been illustrated unequivocally and consistently when Kim Jong Un visited nuclear material production facilities and the Nuclear Weapons Institute (NWI) in September 2024 and January 2025. For the DPRK, survival is an existential matter, and Pyongyang considers its nuclear–missile programs absolutely indispensable to secure it; there is nothing we can see that would persuade or force it to renounce them, as that would imply regime change. Everything indicates that the U.S. president is aware that his counterpart has not yet overcome the discouragement caused by the failure of the previous negotiation process, and for that reason, he is sending increasingly precise messages about the possibility of renewed talks, while boasting of his personal relationship with Kim Jong Un. At the same time, however, Pyongyang continues to issue contradictory signals of distrust toward Washington, in response to the confrontational attitude and the increasingly close military and intelligence ties with the DPRK’s immediate neighbors. It is worth noting that, this past February, the U.S. sent a nuclear submarine and several B-1B bombers to South Korea; U.S. military forces carried out multiple war exercises, including live-fire drills along the Demilitarized Zone, as well as heavy bombing maneuvers and even space force operations. In March, a large-scale scheduled exercise took place—70 percent larger than the one held the previous year. Nevertheless, it appears that by the end of 2024 the DPRK leadership decided to create a certain margin of diplomatic maneuver in anticipation of the incoming Trump administration. The coverage given to Trump’s inauguration on January 22 marked a shift from Pyongyang’s initial decision to remain silent on the outcome of the U.S. presidential elections in November. Moreover, this information was published in media outlets aimed at both domestic and international audiences, suggesting that North Korea has begun preparing its people for a new approach to Trump, when appropriate. Despite the steady flow of official statements and media commentary criticizing the United States, anti-American rhetoric has become somewhat less intense. Notably, the use of the expression “U.S. imperialists” has significantly decreased since then. This is also true of Kim’s public statements, which are considered the most authoritative in North Korea. For example, Kim’s speech at the Ministry of Defence on February 8 was the harshest and most detailed on the United States since his speech at a national defence exhibition in November 2024. However, unlike in many of his previous speeches at defence-related venues or events, he did not use derogatory terms such as “U.S. imperialists.” In fact, the last reported use by Kim of the term “U.S. imperialists” was in his defence exhibition speech last November. While there has been a rise in criticism of the United States since early February, as demonstrated by a series of “KCNA commentaries,” the broader trend since December still holds. The media have refrained from mentioning Trump by name, even when criticizing U.S. statements or actions. When issuing criticism, they have only referred to “the new U.S. administration,” “the current administration,” or the “U.S. ruler.” KCNA’s commentary on February 12 regarding the Gaza Strip, for example, blamed the “current U.S. administration” for the plan to take control of Gaza, omitting Trump’s name. All these articles were published in outlets aimed at domestic audiences, likely because they addressed foreign policy issues not directly relevant to North Korea. In contrast, the North Korean Ministry of Foreign Affairs’ criticism of Rubio’s statement about the “rogue state” was only published on external websites and not disseminated to the domestic audience. This allowed Pyongyang to register its rejection of the statement to external audiences while controlling the narrative about the Trump administration at home. Pyongyang also appears to be creating diplomatic space by attempting to influence Washington’s thinking while it awaits the new Trump administration’s policy toward North Korea. Its Ministry of Defence stated that the United States was “openly ignoring the DPRK’s security concerns” in reference to a U.S. nuclear-powered submarine that entered a South Korean port — an unusually direct accusation that the United States “ignores” its security concerns. If we consider the reverse side of this message (do not ignore North Korea’s security concerns), it is in fact a call from Pyongyang to the new administration to take its “security concerns” into account in its policy toward North Korea (Minyoung Lee, 2025). We can therefore see some Trumpist signals that could prove attractive to Pyongyang’s leadership: Repeated references by the U.S. president, describing the DPRK as a “nuclear power,” a concept recently reinforced when he qualified it as a “great nuclear power.” It is noteworthy that very recently U.S. Secretary of State Marco Rubio used the expression “nuclear-armed state” to refer to the DPRK, implicitly admitting Pyongyang’s possession of nuclear weapons. This comment suggests that the U.S. is unofficially considering the DPRK as a nuclear-armed nation, just as it does with India, Pakistan, and Israel. There are signs of a strategic shift aimed at overcoming deadlock and building trust by moving from denuclearization as the priority toward nuclear security. In other words, instead of demanding denuclearization, the focus would be on improving the safety of nuclear facilities — such as preventing accidents, leaks, or proliferation risks to third countries — through active bilateral technical cooperation that aligns reciprocal interests. The decisions that have shaken the peninsular geopolitical context and the Washington–Seoul alliance, when the U.S. classified South Korea as a “sensitive country,” as well as the so-called “strategic flexibility” that “modifies the mission of U.S. Forces Korea (USFK).” It is true that many officials in the Trump administration continue to officially reiterate their commitment to the DPRK’s denuclearization. However, statements by the U.S. president and his Secretary of State suggest that they recognize North Korea as a nuclear-armed state, generating a dual reaction: on one hand, surprise at an abrupt shift in policy toward the DPRK’s nuclearization, and on the other, uncertainty about what would happen to the security concerns of its allies — South Korea and Japan — as well as those of the U.S. itself. It should be noted that Trump stated — no less than in front of NATO Secretary General Mark Rutte — that he intended to re-establish relations with Kim Jong Un, that “he would do it,” that he has “…an excellent relationship with Kim Jong Un and we’ll see what happens.” And he declared: “But without a doubt, it is a nuclear power.” In that same setting, Trump also mentioned that India and Pakistan possessed nuclear weapons, effectively recognizing them as de facto nuclear-armed states, adding that Kim Jong Un “possesses numerous nuclear weapons” and that “others possess them as well.” Therefore, the statements by Trump and Rubio that tacitly recognize the DPRK as a “nuclear power” indicate a shift in Washington’s policy toward Pyongyang. It seems that interactions between the DPRK and the U.S. are moving toward a turning point: from denuclearization as the priority to nuclear security — a strategic change in U.S. policy aimed at overcoming deadlock and establishing trust, as a preliminary step toward a possible peace treaty. The repeated reference by U.S. President Donald Trump to the DPRK as a nuclear power could be an effort to draw Pyongyang back to the negotiating table, since North Korea seeks de facto recognition by the U.S. as a nuclear-armed state. Trump seems to be maintaining the perspective that the next negotiation should focus on reducing threats rather than denuclearization, despite his stated pursuit of “complete denuclearization.” Everything suggests that Trump is emphasizing the evident reality of Pyongyang’s progress in its nuclear program. It can also be considered that Trump’s remarks may imply that, as a result of the failure of his summit efforts to reach an agreement with Kim Jong Un to halt North Korea’s nuclear program, he may now be encouraging the consideration of an alternative strategy. However, Pyongyang is publicly and incessantly rejecting Trump’s attempts to restart dialogue; this stance has much to do with the recent history of U.S. negotiations and the president’s insufficient reciprocity to the concrete measures proposed by Kim Jong Un. In addition to the above, it is worth highlighting the latest developments that have shaken the peninsular geopolitical context and the Washington–Seoul alliance, which could, to some extent, influence a shift in Pyongyang’s perception and lead it to accept talks with Washington. We refer to the classification of South Korea as a “sensitive country” and the idea of “modifying the mission of U.S. Forces Korea (USFK).” The U.S. Department of Energy (DOE) designated South Korea as a “sensitive country,” a classification that significantly restricts collaboration in areas of advanced technology, including nuclear energy, artificial intelligence, quantum science, and advanced computing. This measure, which took effect on April 15, subjects South Korean researchers to stricter controls for collaborating or participating in research at DOE facilities or research centers and marks the first time South Korea has received such a designation from the U.S. government. In this regard, the “sensitive country” classification is based on unilateral criteria such as national security, nuclear non-proliferation, regional instability, threats to economic security, and alleged support for terrorism. This list, maintained by the DOE’s Office of Intelligence and Counterintelligence (OICI) along with the National Nuclear Security Administration (NNSA), already included countries such as India, Israel, Pakistan, Saudi Arabia, and Taiwan. Additionally, North Korea and Iran are designated as “state sponsors of terrorism,” while China and Russia are considered “countries of concern.” Such a designation suggests that the U.S. has growing concerns about the increasing voices among South Korean academics, politicians, and citizens who support the development of domestic nuclear weapons. Recent surveys reveal that popular support for nuclear armament has reached between 60% and 70%, apparently stemming from the belief that South Korea must take a bold defensive measure against North Korea’s growing nuclear threats. Although some who favor this idea believe that President Donald Trump’s skeptical view of alliances — focused on reducing the financial burden of protecting U.S. allies — might allow Seoul to develop nuclear weapons and thus reduce Washington’s responsibilities on the Korean Peninsula, the likelihood of this happening remains slim. However, the debate will not disappear in the short term due to growing skepticism about the so-called U.S. “extended deterrence,” which relies only on the deployment of strategic assets in the South of the peninsula. In the meantime, the DPRK is very likely to feel satisfied, as it sees its long-standing desire fulfilled: to witness cracks in the Washington–Seoul alliance. Another decision that would benefit the DPRK under the so-called “strategic flexibility” is the projection that the Trump administration may deploy U.S. troops stationed in South Korea in the event of a conflict in the Taiwan Strait, following the circulation of a purported Pentagon memorandum detailing its objective of deterring China from occupying Taiwan. As is well known, the primary mission of the 28,500 U.S. troops in South Korea is to deter threats from the DPRK. Should this decision materialize, their mission would then shift to countering China, considered a key component of the current administration’s foreign policy. This would create a security vacuum for Seoul and further strain its relations with Beijing. In such a circumstance, the Trump administration could pressure South Korea to handle conventional military actions from the DPRK independently, with the U.S. intervening only in the case of nuclear threats. Therefore, the best option for Seoul is to significantly strengthen its defensive capabilities, preparing for a scenario in which U.S. troops are not involved in a conventional war with the DPRK. The notion of “strategic flexibility” for the USFK reflects a shift in the main mission of U.S. forces abroad, moving from the defense of nations through their permanent presence to rapid deployment in other parts of the world where conflicts arise. As expected, unease is growing in Seoul in the face of Pyongyang’s increasing assertiveness, while the latter shows greater defiance. First, due to the possibility that Trump’s second administration may divert part of the USFK’s resources to a conflict in the Taiwan Strait, which would leave South Korea more vulnerable. Second, because South Korea is currently in open political turmoil over the impeachment of President Yoon Suk Yeol, and everything seems to indicate that the so-called South Korean democracy has failed to demonstrate itself as reliable in the eyes of Trump and his team. It is worth mentioning what Moon Chung In, emeritus professor at Yonsei University, stated in his most recent book, titled “Why American Diplomacy Fails”. The expert describes North Korea’s nuclear problem as an illustrative failure of U.S. diplomacy. His remarks are eloquent when he says: “In my conversations with members of the Trump administration during my trip to America, I had the impression that they firmly feel that Korea [South Korea] has been getting a free ride [on U.S. security] for far too long. South Korea’s excessive dependence on the United States could have serious consequences. The Korean government needs to develop autonomous strategic thinking. It needs to explore creative contingency plans for the worst-case scenario of a U.S. absence from the Korean peninsula.” We can see that Trump’s return is testing diplomatic limits and fueling a key question: Will Trump’s return to the White House open another cycle of engagement with Kim Jong Un, but with new attributes? The U.S. president always highlights his good personal relationship with the DPRK leader, something that, undoubtedly, could have a positive effect. But, as of today, Pyongyang seems to lack incentives to negotiate with Washington for four essential reasons: Military, it has achieved significant advances in its conventional weapons programs, strategic missiles, and nuclear arms, which provide it with a high deterrent capability. Economically, even under heavy sanctions, it is experiencing moments of economic expansion, it has made progress in import substitution, its local industry is reviving, and infrastructure construction is in full development. This makes negotiating the lifting of sanctions, in general and with Washington in particular, less urgent for Pyongyang. Its willingness to take political risks in exchange for economic benefits has clearly diminished. Geostrategically, its military alliance with Russia may generate new revenues, transfers of military technology, practical experience in modern warfare, and weaken the international sanctions regime. Geopolitically, the world is entering a period of dynamic geopolitical realignment that could eventually result in a multipolar order. The DPRK seems well positioned due to its ties with two key actors in the multipolarization process: Russia and China. At the same time, it observes the disruption of the traditional alliance structure with the United States and sees Washington distancing itself from its main allies, who are also DPRK’s adversaries in East Asia. Therefore, it appears willing to watch the evolution of events and their outcome. Donald Trump has stated that his administration has opened a line of communication with the DPRK and considered that, at some point, “something will probably happen,” emphasizing: “There is communication. I have a very good relationship with Kim Jong Un… I get along wonderfully with him… I think it is very important. It is a ‘great nuclear nation,’ and he is a ‘very smart guy.’ I got to know him very well… We will probably do something at some point.” It cannot be ruled out in this analysis that the DPRK is doubly leveraged. On one hand, with stable trade with China; on the other, with Russia’s reciprocity for its declared and materially sustained support for Russia’s special military operation in Ukraine. Therefore, additional incentives directly linked to DPRK’s comprehensive security must emerge. If the U.S. were to formally recognize the DPRK as a “de facto nuclear power,” which would represent a radical change in U.S. strategy, the prospect of future negotiations focused on threat reduction rather than denuclearization would open up. Despite Trump’s flattering words and the expectations they raise, it is not clear whether the U.S. president would be able to secure internal consensus within his administration to make such a decision without major obstacles, and, at the same time, manage to mitigate the suspicion and animosity of Kim Jong Un and the leadership around him. Conclusions The viability of negotiations between the U.S. and the DPRK under Trump’s new government remains uncertain, but it is possible that Trump will pursue a new “diplomatic victory” — similar to his 2018 Singapore summit with Kim Jong Un — through an alternative strategy that bilaterally satisfies Pyongyang’s aspiration to be recognized as a de facto nuclear state. However, it is unlikely that the international community would accept the U.S. unilaterally recognizing the DPRK as a nuclear-armed state. According to the Nuclear Non-Proliferation Treaty (NPT), a vote by the UN Security Council would be required, where the United Kingdom and France would surely veto it; and if it were brought to the General Assembly as a resolution, the number of opposing votes would probably be a majority. It is worth noting that the DPRK is doubly leveraged: it has stable trade with China and reciprocity from Russia for its material support, in addition to enjoying the diplomatic backing of both powers. Given its persistent distrust of Washington, it is to be expected that Pyongyang will maintain its close coordination with Beijing and Moscow and use it to strengthen its position vis-à-vis Washington. Thus, for the time being, it is not clear whether the U.S. president will be able to mitigate the suspicion and animosity of Kim Jong Un and the leadership surrounding him. Notes[1] Lee Jae Myung was elected as president of the Republic of Korea after the June 3rd, 2025 elections. References Aise Sotolongo, J. (2025). Return of Donald Trump: Continuity or change with the DPRK? World and New World Journal. https://worldnewworld.com/page/content.php?no=4082Chan-kyong, P. (2025, 12 de marzo). Kim Jong Un seeks negotiating leverage over Trump's new nuclear demands, analysts say. South China Morning Post. https://www.scmp.com/week-asia/politics/article/3296722/kim-jong-un-seeks-negotiating-leverage-over-trump-new-nuclear-demands-analystsChung-in, M. (2025, 15 de febrero). It's time Korea prepares itself for a peninsula without the US, expert advises. The Korea Herald. https://m.koreaherald.com/article/10455463Depetris, D. R. (2025, 9 de abril). Kim Jong Un is watching Trump's Ukraine diplomacy with interest. 38 North. https://www.38north.org/2025/04/kim-jong-un-iswatching-trump-ukranie-diplomacy-with-interestEFE. (2025a, 10 de enero). Pionyang dice que sus armas nucleares no son moneda de cambio para negociar. Swissinfo. https://www.swissinfo.ch/spa/pionyangdice-que-sus-armas-nucleares-no-son-moneda-decambio-para-negociar/88844909EFE. (2025b, 22 de marzo). Washington, Seúl y Tokio reafirman su compromiso para desnuclearizar a Corea del Norte. Swissinfo. https://www.swissinfo.ch/spa/washington%2C-se%C3%BAl-y-tokio-reafirman-su-compromiso-para-desnuclearizar-a-corea-del-norte/88881832EM Redacción. (2025, 12 de marzo). Estados Unidos califica a Corea del Sur como un "país sensible", limitando la cooperación en tecnología avanzada. Escenario Mundial. https://www.escenariomundial.com/2025/03/12/estados-unidos-califica-a-corea-del-sur-como-un-pais-sensible-limitando-la-cooperacion-en-tecnologia-avanzada/KBS WORLD. (2025, 5 de febrero). Seúl y Washington acuerdan limitar el término "desnuclearización" a Corea del Norte y no a toda la península. http://world.kbs.co.kr/service/news_view.htm?lang=s&Seq_Code=92262Kipiahov, O. (2025, 9 de febrero). Rossiian vstrechaiut s ulybkami posol RF v KNDR rasskazal kak zhivet severnaia koreia. Rossiyskaya Gazeta. https://rg.ru/2025/02/09/rossiian-vstrechaiut-s-ulybkami-posol-rf-v-kndr-rasskazal-kak-zhivet-severnaia-koreia.htmlKYODO NEWS. (2025, 18 de marzo). China eyes teaming up with Japan, South Korea to denuclearize N. Korea. https://english.kyodonews.net/news/2025/03/c5e26b7d5347-htmlLankov, A. (2025, 9 de febrero). Trump’s North Korea nuclear diplomacy: Between bad and worse. Asialink Diplomacy. https://asialink.unimelb.edu.au/diplomacy/article/trump-north-korea-diplomacy-between-bab-and-worse/McCartney, M. (2025, 17 de abril). Trump plans to disarm North Korea, but Kim wants more nuclear weapons. Newsweek. https://www.newsweek.com/us-north-korea-kim-jong-un-donald-trump-nuclear-weapons-2022678Minyoung Lee, R. (2025, 25 de abril). North Korea leaving maneuvering room with the US while preparing for long-term confrontation. 38 North. https://www.38north.org/2025/04/noth-koreas-acknowledgement-of-war-participation/Reddy, S. (2025, 9 de febrero). Russian envoy to DPRK says Moscow welcomes talks between US and North Korea. NK News. https://www.nknews.org/2025/02/russian-envoy-to-dprk-says-moscow-welcomestalks-between-us-and-north-korea/Sneider, D. (2025, 3 de abril). Is North Korea the next target of Trump’s search for a deal? Keia. https://wwwkeia.org/2025/04/north-korea-the-netx-target-oftrmps-search-for-a-deal/Sputnik. (2025, 31 de marzo). Trump valora su relación con líder norcoreano Kim Jong Un y planea un eventual contacto. El País CR. https://www.elpais.cr/2025/03/31/trump-valora-su-relacion-con-lidernorcoreano-kim-jong-un-y-planea-un-eventual-contacto/YONHAP. (2025, 8 de marzo). Trump appears to use 'nuclear power' label to lure N. Korea to dialogue: US expert. The Korea Times. https://m.koreatimes.co.kr/pages/article.asp?newsIdx=394200

Energy & Economics
Global business connection concept. Double exposure world map on capital financial city and trading graph background. Elements of this image furnished by NASA

Liaison countries as foreign trade bridge builders in the geo-economic turnaround

by Eva Willer

Introduction Geopolitical tensions are making global trade increasingly difficult. In order to reduce the associated risk of default, companies are shifting their trade relations to trading partners that are politically similar to them. In the course of the beginnings of geo-economic fragmentation, politically and economically like-minded countries are also gaining in importance for German and European decision-makers. Liaison countries1 in particular can form a counterforce to the trend towards polarization in foreign trade - especially between the USA and China: they are characterized by a pronounced economic and trade policy openness that overrides differences between geopolitical or ideological camps. Consequently, the question arises: How can relevant connecting countries for Germany and Europe be identified? What opportunities and risks do closer trade relations with these countries offer in order to strengthen foreign trade resilience in geopolitically uncertain times?  With a high degree of openness - defined as the sum of imports and exports in relation to gross domestic product - of over 80 percent2 , the German economy is strongly integrated into global trade. Accordingly, the disruptive effect of geo-economic fragmentation on the German economy would be above average. The defensive strategy to strengthen Germany's economic security by pushing for trade policy independence would only reinforce geo-economic fragmentation. Against the backdrop of comparatively high economic vulnerability, it is necessary to focus on those potential partner countries with which German and European foreign trade could be developed and expanded even under the condition of increasing fragmentation.  Geoeconomic Fragmentation  The term "geo-economic fragmentation" is used to describe the politically motivated reorganization of global goods and financial flows, in which strategic, economic and political interests primarily determine the choice of countries of origin and destination for trade flows.3 In the scenario of geo-economic fragmentation, the result would be the formation of a bloc within the global community of states, which would fundamentally change the regulatory structure of global economic networking. In this case, trade and investment would probably concentrate from a previously diverse range of economic partner countries - prior to the formation of the bloc - on those countries that now - since the formation of the bloc - belong to the same bloc.  The likelihood of this scenario occurring and leading to an increased fragmentation of the global economic order has increased again in the recent past. For example, Donald Trump's second term as US president is causing increasing geopolitical uncertainty worldwide.  Statements on the concrete form of a possible demarcation of potential blocs are subject to a great deal of uncertainty. However, the division of a large part of the global economy into a "US bloc" and a "China bloc" is a conceivable scenario for which German politics and business should prepare.  Data already shows that, at a global level, foreign trade openness has decreased in the recent past. Data from the World Trade Organization (WTO) illustrates the increasing hurdles in global trade in goods. While 3.1% of global imports were still affected by tariff or non-tariff barriers to trade in 2016 - including under WTO rules - this figure rose to 11.8% in 2024 over the following years.4 This development goes hand in hand with a noticeable loss of importance and enforcement of the WTO since the 2010s, which previously played a central role as the guardian of the rules-based global economic order.  Studies by the International Monetary Fund (IMF) have already found indications of an incipient geo-economic fragmentation along potential bloc borders. It shows that trade in goods and foreign direct investment between countries that would belong to the opposing camp in the event of a bloc formation declined on average in 2022 and 2023 - in contrast to foreign trade between countries that are geopolitically close.5  In this initial phase of geo-economic fragmentation, liaison countries are beginning to establish themselves as a counterforce, holding the fragmenting global community of states together with new trade and investment routes.  Identification of liaison countries Specifically, liaison countries have the following characteristics: a pronounced openness to foreign trade in the form of a high foreign trade quota and low tariff and non-tariff trade barriers, as well as pronounced economic relations with partner countries from different geopolitical camps. The geopolitical orientation of countries can be examined using data on voting behavior within the United Nations.6 This involves analyzing whether a country can be assigned to the US or Chinese camp - or whether there is no pronounced proximity and therefore political neutrality or "non-alignment" in the sense of ideological independence. The data-based identification of connecting countries is relatively new. Empirical analyses are also limited to connecting countries in the context of US-Chinese foreign trade - specifically US imports from China. In this case, the characteristics of a connecting country can be broken down into (1) "non-alignment" - i.e. a geopolitical distance to both a Western and an Eastern bloc - as well as (2) an increase in imports and foreign investment from China and (3) a simultaneous increase in exports to the United States. In a narrower sense, this is an evasive reaction to trade restrictions, i.e. circumventing trade. If the foreign trade indicators - specifically the trade and investment data relating to the US and China - of "non-aligned" countries for the period from 2017 to 2020 show corresponding characteristic-related changes compared to previous years, these can be identified as countries connecting the US and China.  The analysis of trade data shows that the value of direct exports from China to the USA fell during Donald Trump's first term in office. At the same time, both Chinese exports to some of the "non-aligned" countries and exports from these countries to the USA have increased significantly. These countries have presumably stepped in as a link on the export route from China to the US after the previously direct trade flow was interrupted by trade barriers and had to find a new route. Companies producing in China are therefore likely to have sought new, indirect ways to maintain access to the US sales market.  A certain statistical inaccuracy in the foreign trade data makes it difficult to draw a definitive conclusion in this context. It should be noted: No single commodity can be tracked across national borders in trade data collection. Whether the additional goods imported from China actually found their way to the United States can only be assumed approximately. However, if the trade flows are aggregated, a clearer picture emerges and the circumvention trade via selected connecting countries - including Vietnam and Mexico - becomes visible.  Data on foreign direct investment rounds off the analysis.7 "Non-aligned" countries in which an increase in Chinese investment can be seen between 2016 and 2020 in addition to trade flows can be identified as connecting countries. Here, too, available data suggests that the companies concerned either exported their goods to the United States via a stopover or even outsourced parts of their production destined for the US market to connecting countries. Five connecting countries between the US and China Based on the 2017-2020 study period, various connecting countries can be empirically identified that were used to indirectly maintain access to the US market. In terms of foreign trade volume, the economically most important connecting countries include Mexico, Vietnam, Poland, Morocco and Indonesia.8 All five countries are characterized by the fact that both their exports of goods to the US and their imports of goods from China increased significantly between 2017 and 2020. In addition, greenfield investments (foreign direct investment to set up a new production facility) have risen significantly compared to the period before 2017.  However, the five countries show different priorities in their development, which differentiate them in their role as connecting countries between the USA and China. In Vietnam, exports to the USA in particular have risen sharply. China has been the most important procurement market for Vietnamese companies for years. Poland, Mexico and Indonesia are characterized as connecting countries primarily by the significant increase in imports from China. Morocco, in turn, was able to attract more Chinese foreign investment in particular. Greenfield investments have almost tripled here since 2017. However, Poland - a rather surprising candidate for the role of liaison country, as it is intuitively assigned to the US-oriented bloc - is positioned fairly centrally between the US and China according to the analysis of voting behavior within the United Nations9. In addition, Poland qualifies primarily due to the sharp rise in greenfield investments from China, primarily in the expansion of domestic battery production.10  It cannot be concluded from the previous studies on the USA and China whether German companies are also circumventing trade barriers from the USA via the countries identified. As the trade policy conflicts between the US and China differ significantly from those between the EU and China, there has been a lack of comparable empirical data to analyze connecting countries in the EU context. Opportunities and challenges As the German economy is strongly oriented towards foreign trade and is closely networked with both the USA and China, German companies play a particularly exposed role in the area of tension between the USA and China. Increased economic exchange with potential connecting countries would offer German companies an opportunity to mitigate the expected shock of a geopolitical bloc. They could at least maintain international trade to a certain extent and thus secure some of the endangered sales and procurement markets. On the other hand, there are also costs associated with expanding foreign trade relations with potential connecting countries. The greater complexity also increases the risk in the value chains. Companies that position themselves wisely within this trade-off buy themselves valuable time in the event of a shock to reorganize themselves against the backdrop of changed foreign trade conditions.  From the perspective of foreign trade policy, it is also possible to examine the extent to which stronger foreign trade cooperation with (potential) connecting countries could have advantages. The trade-off between resilience and complexity must then be assessed at a macroeconomic level, beyond individual company interests. In order to make it easier for companies to connect to potential connecting countries and to create appropriate framework conditions, German and European policy can build on existing comprehensive strategies at national and European level. Both the China Strategy11 and the National Security Strategy12 focus foreign policy on connecting countries as part of a stronger economic and political risk diversification. There is also a similar framework at European level with the EU's Strategic Compass13 . Following on from this, the German government could create targeted incentives to open up new markets in liaison countries, which would diversify critical supply chains and reduce one-sided dependencies.  At the same time, connecting countries pose a challenge. These can be used to circumvent foreign trade measures such as sanctions if flows of goods can find alternative routes via connecting countries more easily than before.  In order to realize opportunities and overcome challenges, close cooperation between science, politics and companies is required. This first requires the identification of a selection of potential connecting countries through scientifically sound analysis. This creates the basis for the subsequent steps in which European and German policymakers work closely with companies to create attractive framework conditions for trade with potential connecting countries - for example through bilateral trade agreements.  Attractive foreign trade framework conditions can create the necessary incentive to actually expand trade relations with potential connecting countries. Companies need to weigh up individual cases and make forward-looking decisions: To what extent is there a risk of a loss of production triggered by geopolitical conflicts? And how much would the complexity of the value chain increase if more potential connecting countries were included? Ultimately, the actual choice of preferred sales and procurement markets lies with the individual companies. LicenseThis work is licensed under CC BY 4.0 References1. Verbindungsländer werden im Sinne von Connectors verstanden, vgl. Gita Gopinath/Pierre-Olivier Gourinchas/Andrea F Presbitero/Petia Topalova, Changing Global Linkages: A New Cold War?, Washington, D.C.: IMF, April 2024 (IMF Working Paper) <https://www.imf.org/en/Publications/WP/Issues/2024/04/05/Changing-Global-Linkages-A-New-ColdWar-547357/>. 2. Statistisches Bundesamt (Destatis), Außenwirtschaft. 2025, <https://www.destatis.de/DE/Themen/Wirtschaft/Globalisierungsindikatoren/aussenwirtschaft.html#246 078/>.  3. Shekahar Aiyar/Franziska Ohnsorge, Geoeconomic Fragmentation and ‚Connector’ Countries, Online verfügbar unter:  <https://mpra.ub.uni-muenchen.de/121726/1/MPRA_paper_121726.pdf>.4. WTO, WTO Trade Monitoring Report, Genf, November 2024, <https://www.wto.org/english/tratop_e/tpr_e/factsheet_dec24_e.pdf/>. 5. Gita Gopinath/Pierre-Olivier Gourinchas/Andrea F Presbitero/Petia Topalova, Changing Global Linkages: A New Cold War?, Washington, D.C.: IMF, April 2024 (IMF Working Paper) <https://www.imf.org/en/Publications/WP/Issues/2024/04/05/Changing-Global-Linkages-A-New-ColdWar-547357/>.  6. Michael A. Bailey/Anton Strezhnev/Erik Voeten, »Estimating Dynamic State Preferences from United Nations Voting Data«, Journal of Conflict Resolution, 61 (2017) 2, S. 430-456, <https://journals.sagepub.com/doi/10.1177/0022002715595700/>.7. Gita Gopinath/Pierre-Olivier Gourinchas/Andrea F Presbitero/Petia Topalova, Changing Global Linkages: A New Cold War?, Washington, D.C.: IMF, April 2024 (IMF Working Paper) <https://www.imf.org/en/Publications/WP/Issues/2024/04/05/Changing-Global-Linkages-A-New-ColdWar-547357/>. War-547357. 8. Enda Curran/Shawn Donnan/Maeva Cousin, »These Five Countries are Key Economic ‚Connectors‘ in a Fragmenting World«, in Bloomberg (online), 1.11.2023, <https://www.bloomberg.com/news/articles/2023-1102/vietnam-poland-mexico-morocco-benefit-from-us-china-tensions/>.9. Michael A. Bailey/Anton Strezhnev/Erik Voeten, »Estimating Dynamic State Preferences from United Nations Voting Data«, Journal of Conflict Resolution, 61 (2017) 2, S. 430-456, <https://journals.sagepub.com/doi/10.1177/0022002715595700/>.  10. Enda Curran/Shawn Donnan/Maeva Cousin, »These Five Countries are Key Economic ‚Connectors‘ in a Fragmenting World«, in Bloomberg (online), 1.11.2023, <https://www.bloomberg.com/news/articles/202311-02/vietnam-poland-mexico-morocco-benefit-from-us-china-tensions/>.11. Auswärtiges Amt, China‐Strategie der Bundesregierung, Berlin, Juli 2023, <https://www.auswaertigesamt.de/resource/blob/2608578/810fdade376b1467f20bdb697b2acd58/china-strategie-data.pdf/>.  12. Auswärtiges Amt, Integrierte Sicherheit für Deutschland: Nationale Sicherheitsstrategie, Berlin, Juni 2023, <https://www.bmvg.de/resource/blob/5636374/38287252c5442b786ac5d0036ebb237b/nationalesicherheitsstrategie-data.pdf/>.  13. Rat der Europäischen Union, Ein Strategischer Kompass für Sicherheit und Verteidigung, Brüssel, März 2022, <https://data.consilium.europa.eu/doc/document/ST-7371-2022-INIT/de/pdf/>.

Diplomacy
Flag of USA and China on a processor, CPU or GPU microchip on a motherboard. US companies have become the latest collateral damage in US - China tech war. US limits, restricts AI chips sales to China.

AI’s Great Power Paradox: Cooperation and Competition in the US-China Tech Rivalry

by Emmie Hine

As AI accelerates, the US and China shape the global governance landscape through parallel ambitions and contrasting ideologies. Understanding their policy trajectories reveals key inflection points for potential engagement. The United States and China are the world’s leading powers in artificial intelligence (AI)—and each has global ambitions. As AI development accelerates, so too do calls to regulate it responsibly. Both countries have the capacity to shape the future of AI governance. But understanding where cooperation might be possible requires understanding how each country’s approach has evolved. While their methods and ideologies differ, and their leadership aspirations often appear at odds, two underexamined forces—infrastructure and philosophy—may create unexpected space for mutual engagement. In the US, AI governance has long been shaped by the mythology of the free market. Under President Barack Obama, that mythology was tempered by calls for pipeline diversity. President Donald Trump discarded these in favour of rhetoric about “American values,” an ill-defined phrase deployed more as a competitive cudgel against China than a coherent policy vision. President Joe Biden attempted to resurrect some of Obama’s normative commitments—launching the Blueprint for an AI Bill of Rights, Executive Order 14110 on “safe, secure, and trustworthy AI,” and initiatives like the National AI Research Resource—but the foundations of his administration’s policies remained countering China’s influence through increased export controls and other measures. Trump’s second administration has once again changed focus away from equity and community-centredness, but the continued focus on competing with China and ensuring US “victory” in the “AI race” shows there’s more continuity than often assumed between different administrations’ AI approaches. China, for its part, has been more consistent in its governance strategy, even as it experiments at the margins. Its 2017 New Generation AI Development Plan cast AI as a pillar of national strength, and subsequent regulations on algorithms, deepfakes, generative AI, and facial recognition underscore a clear priority: balancing the “twin miracles” of economic development and social stability. Though early days of “fragmented authoritarianism” have given way to a more centralised approach with specific vertical laws, this logic remains embedded throughout the governance system. China is generally less explicit in its rhetoric than the US, with fewer exhortations about race dynamics and countering the US. In fact, it frequently invokes ideas of ethical pluralism and the language of international cooperation. This framing likely reflects a blend of genuine ideological positioning and diplomatic strategy, but it presents a challenge to US policymakers who continue to frame AI governance in moralising binaries. This is evident in two parallel AI Action Plans released in July 2025. The US released a guiding document—indicatively titled “Winning the Race: America’s AI Action Plan”—with an epigraph from President Trump stating: “As our global competitors race to exploit these technologies, it is a national security imperative for the United States to achieve and maintain unquestioned and unchallenged global technological dominance.” Though the Action Plan itself contains only three substantive references to China, it is built on the premise that global AI is an inherently competitive “race,” and China is clearly the US’s main competitor. A few days after the US AI Action Plan was released, China released its “Global AI Governance Action Plan.” It builds on the 2023 Global AI Governance Initiative, which seeks to portray China as a leader in the global pursuit of AI for the good of humanity and a “champion of the Global South.” The Global AI Governance Action Plan contains fewer specifics than the US AI Action Plan, but calls for “strengthening international cooperation on AI capacity building,” including supporting developing countries to design, implement, and govern AI. It also calls for building a global AI governance system through the UN and again shows the key balance of economic development and social stability: while it acknowledges the need to “jointly push for innovation breakthroughs,” it also advocates for strengthening “policy and regulatory coordination” and building an international AI safety governance framework. The US, on the other hand, is determined to cut “bureaucratic red tape and onerous regulation” while working primarily with its allies. However, recent events have called into question the feasibility of this approach. Notably, despite calls to increase export controls—and mobilise allies to do the same—the US announced shortly before the release of the AI Action Plan that it would again permit Nvidia to export H20 chips to China after previously restricting them. This was part of a trade deal in which China agreed to lighten restrictions on rare earth exports. Though seemingly counterintuitive, this deal reflects a fundamental reality of the modern AI ecosystem: the resources and supply chains enabling it are inextricably intertwined. China mines roughly 70 percent and processes 90 percent of rare earth minerals. US-based Nvidia has 92 percent of the GPU market. Both of these are critical for progress in AI. Both countries are attempting infrastructure decoupling, but the US may have to compromise on its fundamentalism to maintain access to the critical resources it needs. Meanwhile, its advanced chip dominance in turn provides leverage over China. Will this lead to broader cooperation? Geopolitical issues are likely too entrenched for each country to join hands and promote harmonious global AI governance. However, each country’s primary goal is the same: to benefit the “people.” China is claiming that its definition of “the people” is the global community—though this comes with the noted exclusion of domestic critics, including the Uighurs of Xinjiang, who are subject to AI-enabled surveillance and detention. The US’s definition of “the people” has changed from administration to administration, but currently seems to include the American people and potentially allied nations. It’s doubtful that the current administration will agree to substantive global AI governance discussions. But through its Action Plan, China has thrown down the gauntlet—engage with global AI governance or be an obstructionist. What the US will choose remains to be seen. Emmie Hine is a Research Associate at the Yale Digital Ethics Center and a PhD candidate in Law, Science, and Technology at the University of Bologna and KU Leuven. She researches the ethics and governance of emerging technologies, including AI. You can also find her byline in her weekly tech-focused newsletter, the Ethical Reckoner. Emmie holds degrees from Williams College and the University of Oxford, and previously worked as a software engineer. She’s on Bluesky here and X here. This article is published under a Creative Commons License and may be republished with attribution.

Diplomacy
US dollar and Chinese yuan on the map of Brazil. Economic competition between the China and USA in Latin America countries

China Advances and the US Retreats in Latin America and the Caribbean

by Hyeran Jo , Nathalie Mendez

The BRICS meeting in Rio on July 6th and 7th gives a snapshot of the great power competition between China and the United States in different regions around the world, including Latin America. China has become the largest trading partner for many countries in Latin America, investing heavily in infrastructure and forging political alliances that further its strategic objectives. For its part, the Trump Administration of the United States issued the statement that those participating countries will face increased tariffs. The statement was the continuation of exercise and assertion of its authority for the past and present century. The positioning of various BRICS members and participating countries is particularly telling of what the great power competition means in the region and also globally. Brazil’s Lula hosted the meeting aiming to showcase its foreign policy leadership, not necessarily antagonizing the West. Russia is still going through the war in Ukraine, and Putin attended only online. India’s Modi was present as well as Ramaphosa from South Africa. No show of Xi Jinping was notable, although Premier Li Qiang was attending. Besides the BRICS core, other countries also showed promotion of their interests. Iran, for one, joined the group in 2024 and sent a ministerial level delegation to rebuke recent strikes on Iran. As the United States appears to be pulling back from its traditional leadership role in the world, China is seizing the opportunity to expand its influence and reshape global dynamics. Through a combination of state-driven development policies and active international engagement, Beijing has positioned itself as a major player in the Global South, extending its reach beyond Asia to regions such as Africa and Latin America. China’s increasing presence in the region has been mainly driven by the Belt and Road Initiative (BRI) and a surge in trade volumes, marking a major shift in the region’s economic landscape. Many experts point to China’s use of “infrastructure diplomacy”—financing ambitious, strategic infrastructure projects across the region—as a key factor in this rise. The numbers tell a compelling story. Trade data from the World Bank (Figure 1) shows that in the past ten years, China has overtaken the United States as the leading trading partner for much of the region, upending a dynamic that had held steady since the early 2000s. Beyond trade, China’s influence deepens through the 22 countries in Latin America and the Caribbean that have joined the Belt and Road Initiative. Chinese loans have poured in, funding major energy, infrastructure, and development projects that have reshaped local economies. China’s push isn’t just economic—it’s political too. Beijing has taken steps to strengthen cultural ties, increase academic exchanges and boost tourism in Latin America, including waiving visa requirements for travelers from some countries. This multi-faceted approach highlights China’s pragmatic mix of economic self-interest and strategic diplomacy as it works to secure resources, expand markets, and bolster its global standing. On the other hand, the United States has long been a strategic ally and key trading partner for Latin America. Agencies like USAID have funneled millions of dollars into economic and military initiatives across the region. With the recent changes in the aid policy, immigration policy, and tariff policy, Washington’s recalibration of its foreign policy are transforming the geopolitical balance in Latin America and the Caribbean. As both powers deploy their strategies — from deepening economic ties to defending national interests — the decisions of Latin American states remain critical in shaping their alignments with global powers. The ultimate outcome is still up in the air, but one thing is clear: power in the region is actively being renegotiated. The diverging approaches from China and the US have set the stage for a broader reconfiguration of power in Latin America and the Caribbean. Yet, it’s essential to recognize that each country’s internal decisions and policies also play a critical role in shaping this shifting landscape. Colombia provides a case in point. Historically, it has maintained close diplomatic ties with the United States while keeping China at arm’s length. Unlike countries like Brazil, Argentina, and Peru, Colombia has received relatively little Chinese infrastructure investment. However, with the election of president Gustavo Petro—the first left-wing president in the country’s history—Colombia has taken decisive steps to strengthen its relationship with China, presenting new challenges for the United States to maintain its strategic foothold in the country. We observe – both on political and economic dimensions – that the changes in China’s strategy, coupled with Colombia’s domestic policies, have reduced the country’s dependence on the US while increasing its desire to integrate with China. Politically, Colombia and the United States have long enjoyed a strong diplomatic relationship, as reflected in their shared memberships in international organizations, high-level dialogues, and multiple bilateral agreements. However, diplomatic tensions have emerged in recent years. Disputes between the two leaders, the change of course of USAID, and a significant drop in new bilateral agreements over the past four years have contributed to a shift in this traditionally stable partnership. Against this backdrop, diplomatic ties between China and Colombia have strengthened. In 2023 alone, both countries signed 12 cooperation agreements in trade, technology, and economic development, upgraded their relationship to a strategic partnership, and Colombia’s entry into the Belt and Road Initiative during recent China – CELAC Forum in May. Colombia also joined the BRICS New Development Bank a few weeks after that Forum. Economically, the US has traditionally been Colombia’s largest trading partner, backed by a free trade agreement and significant investment. Yet, in recent years, the share of US trade has steadily declined, while China’s footprint has grown (see figure 1). Although there’s no formal trade agreement, ties have strengthened during the current administration, including the opening of a Buenaventura-Shanghai trade route in 2025. Additionally, China’s “infrastructural diplomacy” has significantly grown: over 100 Chinese companies now operate in Colombia, and major infrastructure projects like Bogotá’s Metro Line 1 and the Regiotram are underway, along with investments in mobility, technology, and health. Latin America, and Colombia in particular, finds itself at the center of a geopolitical tug-of-war with China’s calculated investments and the US’s shifting policies. While Beijing leverages trade, infrastructure, and cultural diplomacy to expand its influence, Washington’s recalibration of its foreign policy leaves room for new alliances and opportunities. Our analysis shows that power reconfiguration is not merely a product of external rivalry. It is driven by the choices each Latin American nation makes. As Colombia’s case demonstrates, the region’s destiny hinges not just on global superpowers, but on its own internal political decisions and developments. The coming years will test how Latin America navigates these shifting currents. Disclaimer This article was made possible in part by a grant from the Carnegie Corporation of New York (G-PS-24-62004, Small State Statecraft and Realignment). The statements made and views expressed are solely the responsibility of the authors. Figure 1: China vs. US Import and Export TrendsDrawn by the authors using data from the World Bank.  

Defense & Security
China Cyber Security Ransomware Email Phishing Encrypted Technology, Digital Information Protected Secured. 3d illustration

Chinese cyberespionage: The Invisible War That Threatens the West

by Gabriele Iuvinale

On March 4, the U.S. Department of Justice charged ten Chinese nationals with carrying out massive hacks against government agencies, media outlets, and dissidents in the United States and around the world. They allegedly acted on behalf of the Chinese company i-Soon, under contract from the Beijing government. Two officials from China’s Ministry of Public Security (MPS) were also indicted, identified as the ones “directing the attacks.” According to documents held by the U.S. justice system, China’s domestic intelligence services (MPS) and foreign intelligence (Ministry of State Security, MSS) relied on a vast network of private companies and domestic contractors to hack and steal information, thereby masking the Chinese government’s direct involvement. In some cases, the MPS and MSS paid private hackers to target specific victims. In many others, the attacks were speculative: hackers identified vulnerable computers, breached them, and extracted information that was later sold — either directly or indirectly — to the Chinese government. The Growth of Chinese Cyberespionage and Its Main Areas of Operation This is not an isolated case. Over the past decade, the People’s Republic of China’s (PRC) hacking program has expanded rapidly. In 2023, then-FBI Director Christopher Wray stated that it was larger than that of all other world powers combined. This increase in power and sophistication has led to success in three key areas: political interference, sabotage of critical infrastructure, and large-scale intellectual property theft. Beijing integrates computer networks, electronic warfare, economic, diplomatic, legal, military, intelligence, psychological, and military deception resources, along with security operations, to weaken states, make them economically dependent on China, and more receptive to a “new authoritarian world order with Chinese characteristics.” For this reason, unlike traditional interpretations, Chinese state-sponsored hacking should be understood within a broader context — where control over technology, strategic infrastructure, and global supply chains is part of “trans-military” and “non-military” warfare operations, as described by two People’s Liberation Army (PLA) colonels in the 1999 book “Unrestricted Warfare”. This approach is known as liminal warfare — an escalating conflict in which the spectrum of competition and confrontation with the West is so wide that the battlefield is, quite literally, everywhere. Cyberespionage as a Tool of Electronic Warfare In electronic warfare, hacking is used for sabotage during times of crisis or conflict. These actions are led by the People’s Liberation Army (PLA), the armed wing of the Chinese Communist Party. In 2023, it was discovered that a hacker group linked to the PLA, known as “Volt Typhoon”, had infiltrated a wide range of critical infrastructure in the U.S. for years, including ports, factories, and water treatment plants — both on the mainland and in strategic locations like Guam. “Volt Typhoon is a military operation with political and potentially military strategic purposes,” explained Ciaran Martin, former director of the UK’s cybersecurity agency. Led by the PLA’s cyber unit, the operation involved installing readiness capabilities — “digital traps,” as some call them — within critical U.S. infrastructure. In addition to a sustained attack in 2023 on a power company in Massachusetts, which aimed to extract sensitive data about its operational technology (OT) infrastructure, “Volt Typhoon” gained notoriety for multiple attacks on telecommunications systems in the U.S. and other critical infrastructures globally. One of its subunits, “Voltzite”, targeted the Littleton Electric and Water Departments, prompting the FBI and cybersecurity firm Dragos to respond jointly and publish a detailed report on the attack and its mitigation. Intellectual Property Theft Through Cyberespionage The most damaging channel for intellectual property theft is cyberespionage. These intrusions allow Chinese companies — sometimes with direct support from the Communist Party or the state — to access information on operations, projects, and technology from foreign firms. China has used state-backed and coordinated cyberespionage campaigns to steal information from companies in strategic sectors such as oil, energy, steel, and aviation. These actions serve both to acquire science and technology and to gather intelligence useful for future attacks on military, government, or technical systems. In the United States, there have been numerous precedents: • In 2014, five PLA hackers were indicted for economic espionage.• In 2017, three hackers linked to the Chinese firm Boyusec were charged with stealing confidential business information.• In 2018, two Chinese nationals were indicted for intellectual property theft.• In 2020, two hackers connected to the MSS were charged with targeting COVID-19 research. Among these, the 2018 indictment stands out as part of a broader U.S. effort to raise awareness about Chinese cyberespionage. On that occasion, Chinese hackers carried out a campaign known as “Cloud Hopper”, which involved a supply chain attack on service providers like Hewlett Packard and IBM. The defendants worked for Huaying Haitai and collaborated with the Tianjin State Security Bureau of the MSS. In 2017, the U.S. Commission on the Theft of American Intellectual Property estimated that such crimes cost the U.S. economy up to $600 billion annually — a figure comparable to the Pentagon’s defense budget and greater than the combined profits of the 50 largest companies in the Fortune 500. Beyond the United States: The Global Impact of Chinese Cyberespionage In June 2024, Dutch military intelligence (MIVD) warned that Chinese cyberespionage was broader than previously believed, affecting Western governments and defense companies. A 2023 cyberattack on the Dutch Ministry of Defense reportedly affected at least 20,000 people within a few months. In 2018, the Czech Republic’s National Cyber and Information Security Agency (NUKIB) issued a warning about risks linked to China. Since then, the country has strengthened its capabilities and controls against Beijing and has worked on mechanisms to counter foreign information manipulation. According to U.S. prosecutors, dozens of European parliamentarians have been targeted by Chinese attacks. In March 2024, the U.S. Department of Justice indicted hackers linked to the MSS for attacking “all EU members” of the Inter-Parliamentary Alliance on China (IPAC), a coalition critical of Beijing. In 2021, the hackers sent over a thousand emails to around 400 accounts linked to IPAC, attempting to spy on their internet activity and devices. In addition, ASML, the Dutch leader in semiconductor lithography, suffers “thousands of security incidents per year,” including several successful infiltration attempts by Chinese actors. Research centers like Imec (Belgium) are also frequent targets. Belgium has expelled Chinese researchers suspected of espionage. The European Union has reinforced security and identified advanced semiconductors as one of four critical technologies requiring risk assessments and enhanced protection. Notably, APT41 is one of the most active and sophisticated Chinese cyberespionage groups, based in the PRC and linked to the MSS. According to Google’s Threat Intelligence Group, APT41 combines state espionage with ransomware attacks — malicious programs that encrypt files and demand financial ransom to restore them — making attribution more difficult. Unlike other PLA-aligned groups whose operations are region-specific, APT41 acts globally, attacking strategic sectors in the U.S., Europe, Latin America, and the Caribbean. It also carries out financially motivated operations, particularly in the gaming industry. Mandiant, a global cybersecurity leader, highlights APT41’s technical capabilities: it frequently exploits zero-day and n-day vulnerabilities and uses techniques like phishing, social engineering, and SQL injections. Since 2020, APT41 has conducted large-scale campaigns against over 75 companies in more than 20 countries. It is responsible for compromising supply chains, such as in the “ShadowHammer” campaign targeting ASUS, which affected over 50,000 systems in 2018. APT41 is also linked to the use of “MESSAGETAP” malware in telecommunications networks. The Role of Chinese Universities in Cyberespionage Chinese universities also collaborate with the PLA and MSS in state-sponsored cyberespionage operations. Shanghai Jiao Tong University works directly with the Chinese military on such operations. Zhejiang University and the Harbin Institute of Technology are key centers for recruiting hackers. Xidian University offers students hands-on experience at provincial MSS offices and previously maintained ties with the Third Department of the PLA’s General Staff before its reorganization in 2015 into the Network Systems Department. One of its graduate programs is co-directed with the Guangdong Office of the Chinese Information Technology Security Evaluation Center (ITSEC), an MSS-run office that leads an active team of contractor hackers. Southeast University also maintains links with security services and co-manages the “Purple Mountain Lab” with the PLA’s Strategic Support Force. There, researchers collaborate on “critical strategic requirements,” operating systems, and interdisciplinary cybersecurity studies. The university also receives funding from the PLA and MSS to develop China’s cyber capabilities. The Cybersecurity undergraduate program at Shanghai Jiao Tong University (SJTU) is taught at a PLA information engineering base. Within this program, SJTU claims to work on “network and information systems testing and evaluation, security testing for connected smart networks, APT attack and defense testing, and key technologies for cyber ranges.” Universities associated with the MSS for talent recruitment include the University of Science and Technology of China, Shanghai Jiao Tong University, Xi’an Jiao Tong University, Beijing Institute of Technology, Nanjing University, and the Harbin Institute of Technology. In addition, some cybersecurity firms — such as Beijing TopSec — collaborate with the PLA in hacking campaigns, operator training, and developing future hackers. This article was originally published by Agenda Digitale and later by Expediente Abierto, who granted us permission for its translation and republication.

Energy & Economics
Commodity and alternative asset, gold bar and crypto currency Bitcoin on rising price graph as financial crisis or war safe haven, investment asset or wealth concept.

Assessing Bitcoin and Gold as Safe Havens Amid Global Uncertainties: A Rolling Window DCC-GARCH Analysis

by Anoop S Kumar , Meera Mohan , P. S. Niveditha

Abstract We examine the roles of Gold and Bitcoin as a hedge, a safe haven, and a diversifier against the coronavirus disease 2019 (COVID-19) pandemic and the Ukraine War. Using a rolling window estimation of the dynamic conditional correlation (DCC)-based regression, we present a novel approach to examine the time-varying safe haven, hedge, and diversifier properties of Gold and Bitcoin for equities portfolios. This article uses daily returns of Gold, Bitcoin, S&P500, CAC 40, and NSE 50 from January 3, 2018, to October 15, 2022. Our results show that Gold is a better safe haven than the two, while Bitcoin exhibits weak properties as safe haven. Bitcoin can, however, be used as a diversifier and hedge. This study offers policy suggestions to investors to diversify their holdings during uncertain times. Introduction Financial markets and the diversity of financial products have risen in both volume and value, creating financial risk and establishing the demand for a safe haven for investors. The global financial markets have faced several blows in recent years. From the Global Financial Crisis (GFC) to the outbreak of the pandemic and uncertainty regarding economic policy measures of governments and central banks, the financial markets including equity markets around the world were faced with severe meltdowns. This similar behavior was observed in other markets including equity and commodity markets, resulting in overall uncertainty. In this scenario, the investors normally flock toward the safe-haven assets to protect their investment. In normal situations, investors seek to diversify or hedge their assets to protect their portfolios. However, the financial markets are negatively impacted when there are global uncertainties. Diversification and hedging methods fail to safeguard investors’ portfolios during instability because almost all sectors and assets are negatively affected (Hasan et al., 2021). As a result, investors typically look for safe-haven investments to safeguard their portfolios under extreme conditions (Ceylan, 2022). Baur and Lucey (2010) provide the following definitions of hedge, diversifier, and safe haven: Hedge: An asset that, on average, has no correlation or a negative correlation with another asset or portfolio. On average, a strict hedge has a (strictly) negative correlation with another asset or portfolio.Diversifier: An asset that, on average, has a positive correlation (but not perfect correlation) with another asset or portfolio. Safe haven: This is the asset that in times of market stress or volatility becomes uncorrelated or negatively associated with other assets or a portfolio. As was previously indicated, the significant market turbulence caused by a sharp decline in consumer spending, coupled with insufficient hedging opportunities, was a common feature of all markets during these times (Yousaf et al., 2022). Nakamoto (2008) suggested a remedy by introducing Bitcoin, a “digital currency,” as an alternative to traditional fiduciary currencies (Paule-Vianez et al., 2020). Bitcoin often described as “Digital Gold” has shown greater resilience during periods of crises and has highlighted the potential safe haven and hedging property against uncertainties (Mokni, 2021). According to Dyhrberg (2016), the GFC has eased the emergence of Bitcoin thereby strengthening its popularity. Bouri et al. (2017) in their study indicate that Bitcoin has been viewed as a shelter from global uncertainties caused by conventional banking and economic systems. Recent research has found that Bitcoin is a weak safe haven, particularly in periods of market uncertainty like the coronavirus disease 2019 (COVID-19) crisis (Conlon & McGee, 2020; Nagy & Benedek, 2021; Shahzad et al., 2019; Syuhada et al., 2022). In contrast to these findings, a study by Yan et al. (2022) indicates that it can function as a strong safe haven in favorable economic times and with low-risk aversion. Ustaoglu (2022) also supports the strong safe-haven characteristic of Bitcoin against most emerging stock market indices during the COVID-19 period. Umar et al. (2023) assert that Bitcoin and Gold are not reliable safe-havens. Singh et al. (2024) in their study reveal that Bitcoin is an effective hedge for investments in Nifty-50, Sensex, GBP–INR, and JPY–INR, at the same time a good diversifier for Gold. The study suggests that investors can incorporate Bitcoin in their portfolios as a good hedge against market volatility in equities and commodities markets. During the COVID-19 epidemic, Barbu et al. (2022) investigated if Ethereum and Bitcoin could serve as a short-term safe haven or diversifier against stock indices and bonds. The outcomes are consistent with the research conducted by Snene Manzli et al. (2024). Both act as hybrid roles for stock market returns, diversifiers for sustainable stock market indices, and safe havens for bond markets. Notably, Bhuiyan et al. (2023) found that Bitcoin provides relatively better diversification opportunities than Gold during times of crisis. To reduce risks, Bitcoin has demonstrated a strong potential to operate as a buffer against global uncertainty and may be a useful hedging tool in addition to Gold and similar assets (Baur & Lucey, 2010; Bouri et al., 2017; Capie et al., 2005; Dyhrberg, 2015). According to Huang et al. (2021), its independence from monetary policies and minimal association with conventional financial assets allow it to have a safe-haven quality. Bitcoins have a substantial speed advantage over other assets since they are traded at high and constant frequencies with no days when trading is closed (Selmi et al., 2018). Additionally, it has been demonstrated that the average monthly volatility of Bitcoin is higher than that of Gold or a group of international currencies expressed in US dollars; nevertheless, the lowest monthly volatility of Bitcoin is lower than the maximum monthly volatility of Gold and other foreign currencies (Dwyer, 2015). Leverage effects are also evident in Bitcoin returns, which show lower volatilities in high return periods and higher volatilities in low return times (Bouri et al., 2017; Liu et al., 2017). According to recent research, Bitcoins can be used to hedge S&P 500 stocks, which increases the likelihood that institutional and retail investors will build secure portfolios (Okorie, 2020). Bitcoin demonstrates strong hedging capabilities and can complement Gold in minimizing specific market risks (Baur & Lucey, 2010). Its high-frequency and continuous trading further enrich the range of available hedging tools (Dyhrberg, 2016). Moreover, Bitcoin spot and futures markets exhibit similarities to traditional financial markets. In the post-COVID-19 period, Zhang et al. (2021) found that Bitcoin futures outperform Gold futures.Gold, silver, palladium, and platinum were among the most common precious metals utilized as safe-haven investments. Gold is one such asset that is used extensively (Salisu et al., 2021). Their study tested the safe-haven property of Gold against the downside risk of portfolios during the pandemic. Empirical results have also shown that Gold functions as a safe haven for only 15 trading days, meaning that holding Gold for longer than this period would result in losses to investors. This explains why investors buy Gold on days of negative returns and sell it when market prospects turn positive and volatility decreases (Baur & Lucey, 2010). In their study, Kumar et al. (2023) tried to analyse the trends in volume throughout futures contracts and investigate the connection between open interest, volume, and price for bullion and base metal futures in India. Liu et al. (2016) in their study found that there is no negative association between Gold and the US stock market during times of extremely low or high volatility. Because of this, it is not a strong safe haven for the US stock market (Hood & Malik, 2013). Post-COVID-19, studies have provided mixed evidence on the safe-haven properties of Gold (Bouri et al., 2020; Cheema et al., 2022; Ji et al., 2020). According to Kumar and Padakandla (2022), Gold continuously demonstrates safe-haven qualities for all markets, except the NSE, both in the short and long term. During the COVID-19 episode, Gold’s effectiveness as a hedge and safe-haven instrument has been impacted (Akhtaruzzaman et al., 2021). Al-Nassar (2024) conducted a study on the hedge effectiveness of Gold and found that it is a strong hedge in the long run. Bhattacharjee et al. (2023) in their paper examined the symmetrical and asymmetrical linkage between Gold price levels and the Indian stock market returns by employing linear autoregressive distributed lag and nonlinear autoregressive distributed lag models. The results exhibit that the Indian stock market returns and Gold prices are cointegrated. According to the most recent study by Kaczmarek et al. (2022), Gold has no potential as a safe haven, despite some studies on the COVID-19 pandemic showing contradictory results. The co-movements of Bitcoin and the Chinese stock market have also normalized as a result of this epidemic (Belhassine & Karamti, 2021). Widjaja and Havidz (2023) verified that Gold was a safe haven asset during the COVID-19 pandemic, confirming the Gold’s safe-haven characteristic. As previously pointed out, investors value safe-haven investments in times of risk. Investors panic at these times when asset prices fall and move from less liquid (risky) securities to more liquid (safe) ones, such as cash, Gold, and government bonds. An asset must be bought and sold rapidly, at a known price, and for a reasonably modest cost to be considered truly safe (Smales, 2019). Therefore, we need to properly re-examine the safe-haven qualities of Gold and Bitcoin due to the mixed evidences regarding their safe-haven qualities and the impact of COVID-19 and the war in Ukraine on financial markets. This work contributes to and deviates from the body of existing literature in the following ways. We propose a novel approach in this work to evaluate an asset’s time-varying safe haven, hedge, and diversifier characteristics. This research examines the safe haven, hedging, and diversifying qualities of Gold and Bitcoin against the equity indices; S&P 500, CAC 40, and NSE 50. Through the use of rolling window estimation, we extend the methodology of Ratner and Chiu (2013) by estimating the aforementioned properties of the assets. Comparing rolling window estimation to other conventional techniques, the former will provide a more accurate representation of an asset’s time-varying feature. This study explores the conventional asset Gold’s time-varying safe haven, hedging, and diversifying qualities during crises like the COVID-19 pandemic and the conflict in Ukraine. We use Bitcoin, an unconventional safe-haven asset, for comparison. Data and Methodology We use the daily returns of three major equity indices; S&P500, CAC 40, and NSE 50 from January 3, 2018, to October 15, 2022. The equity indices were selected to represent three large and diverse markets namely the United States, France, and India in terms of geography and economic development. We assess safe-haven assets using the daily returns of Gold and Bitcoin over the same time. Equity data was collected from Yahoo Finance, Bitcoin data from coinmarketcap.com, and Gold data from the World Gold Council website. Engle (2002) developed the DCC (Dynamic Conditional Correlation)-GARCH model, which is frequently used to assess contagion amid pandemic uncertainty or crises. Time-varying variations in the conditional correlation of asset pairings can be captured using the DCC-GARCH model. Through employing this model, we can analyse the dynamic behavior of volatility spillovers. Engle’s (2002) DCC-GARCH model contains two phases; 1. Univariate GARCH model estimation2. Estimation of time-varying conditional correlation. For its explanation, mathematical characteristics, and theoretical development, see here [insert the next link in “the word here” https://journals.sagepub.com/doi/10.1177/09711023251322578] Results and Discussion The outcomes of the parameters under the DCC-GARCH model for each of the asset pairs selected for the investigation are shown in Table 1.   First, we look at the dynamical conditional correlation coefficient, ρ.The rho value is negative and insignificant for NSE 50/Gold, NSE 50 /BTC, S&P500/Gold, and S&P500/BTC indicating a negative and insignificant correlation between these asset pairs, showing Gold and Bitcoin as potential hedges and safe havens. The fact that ρ is negative and significant for CAC 40/Gold suggests that Gold can be a safe haven against CAC 40 swings. The asset pair CAC/BTC, on the other hand, has possible diversifier behavior with ρ being positive but statistically insignificant. Next, we examine the behavior of the DCC-GARCH parameters; α and β. We find that αDCC is statistically insignificant for all the asset pairs, while βDCC is statistically significant for all asset pairs. βDCC quantifies the persistence feature of the correlation and the extent of the impact of volatility spillover in a particular market’s volatility dynamics. A higher βDCC value implies that a major part of the volatility dynamics can be explained by the respective market’s own past volatility. For instance, the NSE 50/Gold’s βDCC value of 0.971 shows that there is a high degree of volatility spillover between these two assets, with about 97% of market volatility being explained by the assets’ own historical values and the remainder coming from spillover. Thus, we see that the volatility spillover is highly persistent (~0.8) for all the asset pairs except NSE 50/BTC. The results above show that the nature of the dynamic correlation between the stock markets, Bitcoin and Gold is largely negative, pointing toward the possibility of Gold and Bitcoin being hedge/safe haven. However, a detailed analysis is needed to confirm the same by employing rolling window analysis, and we present the results in the forthcoming section. We present the rolling window results for S&P500 first. We present the regression results for Gold in Figure 1 and Bitcoin in Figure 2   Figure 1. Rolling Window Regression Results for S&P500 and Gold.Note: Areas shaded under factor 1 represent significant regression coefficients. In Figure 1, we examine the behavior of β0 (intercept term), β1, β2, and β3 (partial correlation coefficients). The intercept term β0 will give an idea about whether the asset is behaving as a diversifier or hedge. Here, the intercept term shows significance most of the time. However, during 2018, the intercept was negative and significant, showing that it could serve as a hedge during geopolitical tensions and volatilities in the global stock market. However, during the early stages of COVID-19, we show that the intercept is negative and showing statistical significance, suggesting that Gold could serve as a hedge during the initial shocks of the pandemic. These findings are contrary to the results in the study by Tarchella et al. (2024) where they found hold as a good diversifier. Later, we find the intercept to be positive and significant, indicating that Gold could act as a potential diversifier. But during the Russia-Ukraine War, Gold exhibited hedge ability again. Looking into the behavior of β1, which is the partial correlation coefficient for the tenth percentile of return distribution shows negative and insignificant during 2018. Later, it was again negative and significant during the initial phases of COVID-19, and then negative in the aftermath, indicating that Gold could act as a weak safe haven during the COVID-19 pandemic. Gold could serve as a strong safe haven for the SP500 against volatility in the markets brought on by the war in Ukraine, as we see the coefficient to be negative and large during this time. From β2 and β3, the partial correlation coefficients of the fifth and first percentile, respectively, show that Gold possesses weak safe haven properties during COVID-19 and strong safe haven behavior during the Ukraine crisis. Next, we examine the characteristics of Bitcoin as a hedge/diversifier/safe haven against the S&P500 returns. We present the results in Figure 2.   Figure 2. Rolling Window Regression Results for S&P500 and Bitcoin.Note: Areas shaded under factor 1 represent significant regression coefficients. Like in the previous case, we begin by analysing the behavior of the intercept coefficient, which is β0. As mentioned earlier the intercept term will give a clear picture of the asset’s hedging and diversifier property. In the period 2018–2019, the intercept term is positive but insignificant. This could be due to the large volatility in Bitcoin price movements during the period. It continues to be minimal (but positive) and insignificant during 2019–2020, indicating toward weak diversification possibility. Post-COVID-19 period, the coefficient shows the significance and positive value, displaying the diversification potential. We see that the coefficient remains positive throughout the analysis, confirming Bitcoin’s potential as a diversifier. Looking into the behavior of β1 (the partial correlation coefficient at tenth percentile), it is positive but insignificant during 2018. The coefficient is having negative sign and showing statistical significance in 2019, suggesting that Bitcoin could be a good safe haven in that year. This year was characterized by a long list of corporate scandals, uncertainties around Brexit, and tensions in global trade. We can observe that throughout the COVID-19 period, the coefficient is showing negative sign and negligible during the March 2020 market meltdown, suggesting inadequate safe-haven qualities. However, Bitcoin will regain its safe-haven property in the coming periods, as the coefficient is negative and significant in the coming months. The coefficient is negative and shows statistical significance during the Ukrainian crisis, suggesting strong safe-haven property. Only during the Ukrainian crisis could Bitcoin serve as a safe haven, according to the behavior of β2, which displays the partial correlation coefficient at the fifth percentile. Bitcoin was a weak safe haven during COVID-19 and the Ukrainian crisis, according to β3, the partial correlation coefficient for the first percentile (coefficient negative and insignificant). According to the overall findings, Gold is a stronger safe haven against the S&P 500’s swings. This result is consistent with the previous studies of Triki and Maatoug (2021), Shakil et al. (2018), Będowska-Sójka and Kliber (2021), Drake (2022), and Ghazali et al. (2020), etc. The same analysis was conducted for the CAC 40 and the NSE 50; the full analysis can be found here [insert the next link in “the word here” https://journals.sagepub.com/doi/10.1177/09711023251322578]. However, it is important to highlight the respective results: In general, we may say that Gold has weak safe-haven properties considering CAC40. We can conclude that Bitcoin’s safe-haven qualities for CAC40 are weak. We can say that Gold showed weak safe-haven characteristics during the Ukraine crisis and good safe-haven characteristics for the NSE50 during COVID-19. We may say that Bitcoin exhibits weak safe haven, but strong hedging abilities to NSE50. Concluding Remarks In this study, we suggested a new method to evaluate an asset’s time-varying hedge, diversifier, and safe-haven characteristics. We propose a rolling window estimation of the DCC-based regression of Ratner and Chiu (2013). Based on this, we estimate the conventional asset’s time-varying safe haven, hedging, and diversifying properties during crises like the COVID-19 pandemic and the conflict in Ukraine. For comparison purposes, we include Bitcoin, a nonconventional safe-haven asset. We evaluate Gold and Bitcoin’s safe haven, hedging, and diversifier properties to the S&P 500, CAC 40, and NSE 50 variations. We use a rolling window of length 60 to estimate the regression. From the results, we find that Gold can be considered as a better safe haven against the fluctuations of the S&P 500. In the case of CAC 40, Gold and Bitcoin have weak safe-haven properties. While Bitcoin demonstrated strong safe-haven characteristics during the Ukraine crisis, Gold exhibited strong safe-haven characteristics during COVID-19 for the NSE 50. Overall, the findings indicate that Gold is the better safe haven. This outcome is consistent with earlier research (Będowska-Sójka & Kliber, 2021; Drake, 2022; Ghazali et al., 2020; Shakil et al., 2018; Triki & Maatoug, 2021). When it comes to Bitcoin, its safe-haven feature is weak. Bitcoin, however, works well as a diversifier and hedge. Therefore, from a policy perspective, investing in safe-haven instruments is crucial to lower the risks associated with asset ownership. Policymakers aiming to enhance the stability of financial portfolios might encourage institutional investors and other market players to incorporate Gold into their asset allocations. Gold’s strong safe-haven qualities, proven across various market conditions, make it a reliable choice. Gold’s performance during crises like COVID-19 highlights its potential to mitigate systemic risks effectively. Further, Bitcoin could also play a complementary role as a hedge and diversifier, especially during periods of significant volatility such as the Ukraine crisis. While Bitcoin’s safe-haven characteristics are relatively weaker, its inclusion in a diversified portfolio offers notable value and hence it should not be overlooked. Further, policymakers may consider how crucial it is to monitor dynamic correlations and periodically rebalance portfolios to account for shifts in the safe haven and hedging characteristics of certain assets. Such measures could help reduce the risks of over-reliance on a single asset type and create more resilient portfolios that can better withstand global economic shocks. For future research, studies can be conducted on the estimation of the rolling window with different widths. This is important to understand how the safe-haven property changes across different holding periods. Further, more equity markets would be included to account for the differences in market capitalization and index constituents. This study can be extended by testing these properties for multi-asset portfolios as well. We intend to take up this study in these directions in the future. Data Availability StatementNot applicable.Declaration of Conflicting InterestsThe authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.FundingThe authors received no financial support for the research, authorship, and/or publication of this article.ReferencesAkhtaruzzaman M., Boubaker S., Lucey B. M., & Sensoy A. (2021). Is gold a hedge or a safe-haven asset in the COVID-19 crisis? Economic Modelling, 102, 105588. Crossref. Web of Science.Al-Nassar N. S. (2024). Can gold hedge against inflation in the UAE? A nonlinear ARDL analysis in the presence of structural breaks. PSU Research Review, 8(1), 151–166. Crossref.Barbu T. C., Boitan I. A., & Cepoi C. O. (2022). Are cryptocurrencies safe havens during the COVID-19 pandemic? A threshold regression perspective with pandemic-related benchmarks. Economics and Business Review, 8(2), 29–49. 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Defense & Security
Chess made from USA, EU and China flags on a white background. Chess made from China, Europe Union and United States of America flags. Trade, tariffs, duty and customs war

Europe’s transatlantic China challenge

by Gesine Weber

Abstract European states currently lack a clear joint strategy on China and a coordinated approach to US–China competition. This article offers a novel perspective on the challenges for European approaches to this issue due to an omnipresent transatlantic component and the risk of an alliance dilemma. Illustratively focusing on France, Germany and the UK, it demonstrates that Europeans are facing a transatlantic alliance dilemma with the risks of abandonment and entrapment. It argues that Europe needs to strike a balance between its dependence on Washington, especially with regard to European security, while fearing entrapment by the US approach towards Beijing as it aims to maintain economic ties with China. The article concludes that the ramifications of this dilemma can be mitigated through a distinctly European approach to China, strengthening European coordination on China and bolstering European strategic autonomy. As a conceptual piece rather than a full empirical analysis, this article therefore unpacks the strategic challenge and lays the groundwork for further empirical works on the topic. Introduction Strategic competition between the US and China plays out in many realms of international affairs, ranging from global trade to security in the Indo-Pacific. European states are directly affected by this dynamic as they maintain critical ties with both sides. Albeit allies of the US through NATO, Europeans have been reluctant to align with the US on its approach to the Indo-Pacific and China, which is currently characterised by the quest to win the strategic competition with Beijing in all areas of international affairs (see Leoni 2023). Furthermore, Europe maintains close economic ties with Beijing, and imports from China to the EU have most recently increased (Lovely and Yan 2024). European governments certainly do not pursue an approach of maintaining equidistance between the US and China: not only do they regularly emphasise their strategic proximity to Washington, but more recent events, such as the willingness of European allies to publicly adopt the wording of the communiqué from NATO’s Washington summit (NATO 2024) describing China as an ‘enabler of Russia’s war effort in Ukraine’, clearly demonstrate that the tone is changing in European capitals (Politi 2023). However, Europeans still tend to emphasise China’s role in global affairs and the importance of including it in multilateral cooperation formats. With the re-election of Donald Trump as US president, European policy on China and its approach to US–China competition will increasingly be a focus of the US administration. While the exact approach of the new US government still remains to be defined, there are good reasons to anticipate a more hawkish China policy from Washington, through which the US might seek not only to further compete with China, but to actually win this competition (see Pottinger and Gallagher 2023). When designing their approaches towards China—which, among the key European states, only Germany has done so far, with the publication of its China strategy in 2023—Europeans always face a transatlantic elephant in the room. US–China competition, a structuring feature of international relations shaping the global order today through the increasing emergence of geopolitical blocs (see Leoni and Tzinieris 2024), and China’s rising global influence in almost all areas of international affairs—ranging from climate to economics, the rules-based order and security—are forcing European states to reflect on their approach vis-à-vis Beijing (for a full discussion, see Oertel 2023; García-Herrero and Vasselier 2024). As NATO members, European states also need to adapt their strategy in light of the partnership with the US as their key ally. This article argues that European approaches towards China, as shown in the examples of France, Germany and the UK, have a distinctly transatlantic component. It illustrates how these three European states find themselves in an alliance dilemma with the US, and how the risks associated with alliances also define European approaches to China and US–China competition more broadly. As the US administration regularly refers to China as a ‘challenge’ (US Department of Defense 2022), this article alludes to this formulation through the coining of the term ‘transatlantic China challenge’ to describe the strategic challenges Europeans are facing with regard to defining their approach vis-à-vis China and US–China competition more broadly. It offers a conceptual understanding of the strategic challenges for Europe in this context and thereby constitutes a basis for a more thorough empirical analysis. The alliance dilemma and European strategy in US–China competition Originating in realist international relations theory, the alliance dilemma generally describes a situation in which states face risks resulting from joining an alliance. As demonstrated by Snyder (1984), smaller allies especially face a parallel risk of abandonment and entrapment by a hegemon, that is, the dominating power, after joining an alliance. Abandonment, in these circumstances, implies that the hegemon has no further interest in defending or supporting the smaller allies, whereas entrapment refers to a situation in which a state is ‘dragged into a conflict over an ally’s interests that [it] does not share, or shares only partially’ (see Snyder 1984, 466–8). In the context of alliances, a small state is ‘the weaker part in an asymmetric relationship, which is unable to change the nature or functioning of the relationship on its own’ (Wivel et al. 2014, 9), and hence has more limited space for action than the great powers (Wivel and Thorhallsson 2018, 267). This definition arguably applies to Europe in its partnership with the US, as demonstrated by the excessive military and economic dominance of the US as compared to the European states (see Stockholm International Peace Research Institute n.d.; International Monetary Fund 2025). The re-election of Trump as US president now presents the risk of an increased alliance dilemma for Europeans. On the one hand, Trump has announced several times that he does not value the alliance commitments within NATO and potentially would not defend European allies (Sullivan 2024), threatening Europe with abandonment. This scenario is being taken seriously in European capitals, and reflections on how ‘defending Europe with less America’ (Grand 2024) could shape up have gained traction, especially in 2024. Similarly, defence initiatives within the EU to enhance the European contribution to the continent’s security have leapt forward in recent years (see Scazzieri 2025). On the other hand, even the Biden administration had pushed Europe to align with the US approach on China (see Lynch et al. 2023). However, France and Germany in particular, as the big EU member states, have been hesitant to do so, as reflected in France’s opposition to the opening of a NATO liaison office in Tokyo (McCurry 2023) and Germany’s vote against tariffs on Chinese electric vehicles, fearing reprisals from Beijing (Demarais 2024). Trump’s foreign policy might be strongly characterised by issue linkage, which means that policies in one area will be linked to those in another area. Through this strategy, the new US administration might force Europeans into alignment and thereby entrap them, making them accept policies they are not eager to support (see Barkin and Kratz 2025). The exact policies of the Trump administration vis-à-vis European allies remain to be seen, but it is not hard to imagine a scenario in which abandonment and entrapment could emerge or increase, namely when the threat of abandonment is used to entrap allies and force them to support certain policy decisions. The alliance dilemma could play out for Europeans specifically when designing their approaches towards China (see Barkin and Kratz 2025) and formulating their response to US–China competition more generally. As noted above, among the big European states, only Germany has formally adopted a strategy on China, in 2023 (The Federal Government of Germany 2023). However, China and the response to US–China competition takes a prominent place in France’s Indo-Pacific Strategy and its strategy review (Government of France 2021; Secrétariat général de la défense et de la sécurité nationale 2022), and the UK systematically included the dimension of strategic competition in its Integrated Review and its refresh (Government of the United Kingdom 2021, 2023) and has announced an ‘audit’ of its China policy under the new government (Taylor 2024). While these strategies emphasise their individual approaches towards China and the risks stemming from US–China competition, the US has increasingly pressured Europe to align with its approach (Lynch et al. 2023) and can be expected to continue this pressure (Barkin and Kratz 2025). Through the potential issue linkage of security (openly questioned by President Trump) and China policy, Europe therefore finds itself in a new form of alliance security dilemma. European approaches to US–China competition: strategic hedging How can Europe respond to the alliance dilemma of the risks of abandonment and entrapment when it comes to its approaches to China? Reviewing the theoretical literature on the alliance dilemma, one can imagine different strategies. According to Snyder, members of alliances can choose between strategies that strengthen or weaken their commitment to the alliance. To demonstrate commitment, actions could include reassurances for the ally or demonstrations of loyalty, whereas actions to weaken the commitment to the alliance could consist of restraining the ally (mostly to reduce the risk of entrapment in a conflict), increasing bargaining power over the ally or preserving options for realignment outside the existing alliance (for a full discussion, see Snyder 1984, 466–9). Alternative strategies include hiding from cooperation, that is, ‘seeking to maximize autonomy by opting out of specific aspects of the cooperation or by setting up “bastions” in the cooperation’, or bandwagoning, through which states pursue strategies of adaptation ‘to the more powerful actors in the cooperation’ (Pedersen 2023, 442). At the moment, it seems that France, Germany and the UK ‘drive on sight’ rather than approaching the question holistically. The following analysis aims to unpack how the three European states see US–China competition, the risk of the alliance dilemma and how these reflections have played out so far in their strategies. The strategies of France, Germany and the UK on China demonstrate that their approaches are influenced by a distinctly transatlantic component and reflect the transatlantic alliance dilemma. This is visible in their (1) high awareness of the risks stemming from great power competition, (2) approaches to managing the risk of short-term abandonment, and (3) hedging to mitigate the medium- and long-term risks of abandonment and entrapment. The empirical evidence for this analysis was gathered through a qualitative analysis of European strategic documents, statements and policy decisions taken mostly during the period of the Biden administration. However, in light of the risk of a scaling-up of the alliance dilemma under the Trump administration, sources and evidence accessible by the end of January 2025 were included to illustrate the European approaches. In addition to publicly available documents and the sources mentioned above, this paper draws on conversations with policymakers and experts under the Chatham House rule. Mitigating risks from US–China competition: multilateralism instead of alignment That France, Germany and the UK are close allies with the US is clearly visible in their respective strategies on China, not least because of references they make to the importance of the alliance and their descriptions of their own positions between the two great powers. Overall, France, Germany and the UK share the perception of US–China competition and the emergence of blocs as potentially harmful to their interests. As a consequence, all three call for an inclusive multilateral order instead of falling into a logic of blocs, as the increasing competition is seen as a risk for Europe (Secrétariat général de la défense et de la sécurité nationale 2022, 9–15; The Federal Government of Germany 2020, 24–6; Government of the United Kingdom 2023, 22–6). The response of all three European powers to the emergence of blocs is multilateralism: instead of clearly aligning with the US, the French, German and British strategies call for building broader multilateral coalitions, which should, eventually, also include China (The Federal Government of Germany 2020, 23–6; Government of the United Kingdom 2023). The tone in Paris, Berlin and London towards Beijing has clearly changed over recent years; accordingly, the European capitals were also willing to support strong wording on China in the 2024 NATO summit declaration, which describes China as a ‘critical enabler’ of Russia’s ongoing war against Ukraine (NATO 2024). Albeit also recognised as a critical partner for key issues such as climate policy and trade, European states openly describe China as a ‘systemic rival’ and occasionally call out China’s behaviour, as they did, for example, in the case of a note verbale on the South China Sea (UN 2020). Nevertheless, Europe has not (yet) given in to US pressure to align with Washington’s more confrontational approach towards China (Etienne 2024). Even if European states and Washington have moved closer to each other, especially on economic security (Meyers and Reinsch 2023), the European positions on US–China competition demonstrate that Europeans are not willing to fully endorse or follow Washington’s approach—not least because European imports from China have increased in recent years (Lovely and Yan 2024). Managing the risk of short-term abandonment Since Trump’s election, the risk of abandonment by the US has been seen as increasingly high in Paris, Berlin and London.1 This is not least because Trump has openly questioned his willingness to adhere to Article 5 of the North Atlantic Treaty in the case of an armed attack on Europeans (Sullivan 2024). Europeans are especially concerned about issue linkage in this context, meaning that demands in a policy area other than security could be used as a condition. Concretely, Trump could use the threat of abandonment as leverage to compel Europe to align with the US on China policy.2 Barkin and Kratz (2025) suggest that Europe adopt a ‘carrot and stick’ approach, whereby Europe could start with an offer to the US: buying more liquified natural gas, defence goods and agricultural products from the US could mitigate the risk of abandonment. However, there is awareness among European states that coercion from the US to align on US–China policy, especially when linked to the threat of abandonment, might best be mitigated through enhancing European military capabilities—which would still leave the continent exposed to these threats, though to a lesser extent.3 Addressing the risk of medium- and long-term abandonment and entrapment: transatlantic hedging However, the risk of at least partial abandonment is not a new challenge for European strategy, and had already infused earlier strategic thinking. The shift of US strategic priorities away from Europe and to the Indo-Pacific has already been demonstrated in the allocation of resources to the different theatres. Moreover, European states have increasingly become aware that US forces will be withdrawn from their territories in the future and have concluded that they will have to step up their own commitment to European security (see Grand 2024). In parallel, there is an awareness in European capitals that showing more interest in the Indo-Pacific and giving more importance to policy on China is also a way for Europeans to demonstrate an understanding of their ally’s strategic priorities.4 Accordingly, the approaches of France, Germany and the UK to China and the Indo-Pacific also have to be understood as a commitment to the priorities of the US in order to keep this ally engaged in the European theatre and mitigate the risk of abandonment; however, European states abstain from fully aligning with the US approach, as their capabilities and strategic goals are perceived as diverging from those of the US. In this way, Europe aims to avoid entrapment over the medium term through slightly distancing itself from US policy. While all three European states also call for de-risking from China and diversification of their supply chains, maintaining strong economic ties with Beijing is a key component of their respective approaches—which contrasts with the US calls for decoupling. Furthermore, these states have never formally endorsed the US policy on China (Etienne 2024). Nevertheless, enhancing European capabilities would not only send a signal to Washington, but also qualify as hedging, understood as an ‘insurance policy’ to avoid a deterioration in US–Europe relations if the US opted for abandonment, or even as part of a move towards emancipation to reduce strategic dependencies on Washington (see Fiott 2018, 4–6). Conclusion: a transatlantic China challenge Designing their approaches to China and to US–China competition more broadly constitutes a complex strategic dilemma for European states. Paris, Berlin and London do not fully align with Washington’s approach, and it remains to be seen whether they will be willing to do so under the second Trump administration. To manage the risk of abandonment and entrapment, European states pursue different individual approaches to strategic hedging: their strategies on China and US–China competition are designed in a way that allows them to mitigate the risk of abandonment which might stem from significant transatlantic divergence, and to avoid automatic entrapment through their slight distancing from the US approach. From a theoretical perspective, this article has demonstrated that the alliance dilemma, along with the parallel fear of abandonment and entrapment by the US, is a major factor accounting for Europe’s limited strategies on China and its hedging behaviour. This article offers a conceptual analysis of the structural forces explaining European strategies, but other strategic cultures and relationships with the US could offer important complementary insights. To further analyse how individual European states design their strategies vis-à-vis China in light of the alliance dilemma and potential domestic constraints and specificities, neoclassical realism could offer an interesting analytical concept. This approach posits that structural forces set the parameters for foreign policy and treats domestic factors, including strategic culture, as intervening variables (see Rose 1998). Accordingly, it appears well suited for foreign policy analysis, and has indeed gained popularity in the field in recent years (see, for example, Martill and Sus 2024; Meibauer et al. 2021; Weber 2024). Empirically, this article constitutes a conceptual starting point rather than an exhaustive analysis of the strategy-making processes of European states with regard to China and US–China competition and makes a more comprehensive assessment desirable. The findings of this article have broader implications for policymaking. First, they demonstrate the necessity for Europe to determine its place in the increasing US–China competition. European coordination on the respective approaches vis-à-vis the US—especially in light of potential coercion to align—and China is of paramount importance to ensure that foreign policy strategies are mutually reinforcing and not undermining European objectives. Second, the article demonstrates that Europe currently responds to the ‘transatlantic China challenge’ through transatlantic hedging: while this strategy seems to be promising in the short term, it is questionable to what extent the strategy is sustainable and could help European states to navigate the parallel challenges of abandonment and entrapment. Unless Europe decides to fully align with the US—and it is questionable whether this decision would be in its interest—European states would be well advised to develop a sustainable long-term approach to China. A transatlantic dialogue on China, in which Europe and the US openly discuss synergies and divergences, could help prevent misunderstandings and decrease the risk of coercion or issue linkage due to a misreading of European approaches in Washington. Third, as the risks of (at least partial) abandonment and entrapment are systemic challenges due to the current composition of the transatlantic alliance, a logical step for European states to decrease their dependence on the US as the hegemon in the alliance would be to significantly strengthen European capabilities. Stronger military capabilities could help mitigate the ramifications of abandonment, and the aforementioned distinctly European strategy could allow Europe to avoid strategic entrapment in relation to China imposed by Washington. As Europe remains the junior partner in the transatlantic alliance, the parallel risks of abandonment and entrapment, as well as issue linkage, are highly likely to influence its approaches towards China in the long term, but there are certainly ways to render this ‘transatlantic China challenge’ less challenging. ORCID iDGesine Weber https://orcid.org/0009-0008-2643-0400Footnotes1. Conversation with French, German and British experts in Berlin, January 2025.2. Conversation with French, German and British experts in Berlin, January 2025.3. Conversation with French, German and British experts in Berlin, January 2025; conversation with European experts and officials in Paris, January 2025.4. Conversation with officials from Germany and France in Paris, November 2024; conversation with French, German and British experts in Berlin, January 2025.ReferencesBarkin N., Kratz A. (2025). Trump and the Europe–US–China Triangle. Rhodium Group, 16 January. https://rhg.com/research/trump-and-the-europe-us-china-triangle/. Accessed 18 January 2025.Demarais A. (2024). Divided we stand: The EU votes on Chinese electric vehicle tariffs. European Council on Foreign Relations, 9 October. https://ecfr.eu/article/divided-we-stand-the-eu-votes-on-chinese-electric-vehicle-tariffs/. Accessed 25 January 2025.Etienne P. (2024). 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Energy & Economics
tsmc is a Taiwanese collective circuit manufacturing company with advanced manufacturing processes

US Semiconductor Reindustrialization: Implications for the World

by Anastasia Tolstukhina

In recent years, US leadership has embraced techno-nationalism amid geopolitical and technological rivalry with China, aiming to minimise reliance on imported chips from Asia. These components are crucial for producing consumer goods, military hardware, and AI systems. The United States set the ambitious goal of developing a self-sufficient semiconductor supply chain during Donald Trump’s first term, and continued under Joe Biden. There is consensus in the United States on the critical role of unfettered access to chips when it comes to ensuring economic and national security. It is unlikely that this technological policy dynamic will undergo significant shifts in the foreseeable future. Despite a shared objective among both Republicans and Democrats to revive the US semiconductor industry, their approaches diverge significantly. Donald Trump has his own vision for advancing this sector, one that contrasts sharply with Joe Biden’s strategy. For instance, Trump has criticised aspects of Biden-era initiatives, including the 2022 CHIPS and Science Act, which he has called counterproductive. Trump, on the other hand, favours a more aggressive tariff policy and a reduction in federal spending, arguing that major tech companies can do well without additional government support. The future balance of power—both technological and geopolitical—among the key global actors will be shaped by the development trajectory of the US semiconductor industry. Biden’s semiconductor legacy The United States holds a dominant position in chip design, but maintains a relatively modest share in global semiconductor manufacturing—just 10 percent according to SIA data in 2022, and slightly up to 11 percent according to 2025 data provided by TrendForce research firm. Major US tech giants like Nvidia or Qualcomm remain heavily reliant on chips produced in Taiwan. This dependency has increasingly been seen as unacceptable by US leadership, especially in the context of the ongoing tech war with China. Washington now views such reliance as a significant national security risk. During Donald Trump’s first presidential term, the decision was made to attract leading chip manufacturers—most notably Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker—to set up operations in the United States. This initiative proved successful: in 2020, TSMC agreed to invest $12 billion to build a chip fabrication plant in Arizona (Fab 21).   The Biden administration continued Trump’s push to revitalise the semiconductor industry. In August 2022, the CHIPS and Science Act was passed, allocating about $53 billion in government subsidies for the semiconductor sector, along with tax incentives to encourage both foreign and domestic firms to establish chip manufacturing operations on US soil. Additionally, the CHIPS for America programme was introduced to address several key goals, namely, to secure a stable supply chain for both cutting-edge and legacy semiconductors, to reinforce US leadership in R&D, and to boost employment, as investment in the chip industry was expected to generate hundreds of thousands of new jobs in microelectronics-related fields. Biden’s programme has borne fruit. Major chipmakers have launched large-scale construction of fabs across the United States. In 2022, Intel started building a $28 billion facility in Ohio; Samsung initiated two plants in Texas worth about $40 billion; and TSMC decided to expand its Arizona site to three modules, increasing its total investment from $12 billion to $65 billion. According to TSMC CEO C.C. Wei, the Arizona facility began mass production in the fourth quarter of 2024 using its N4 (4nm class) process technology, with performance comparable to its fabs in Taiwan. This marks the most advanced semiconductor production facility currently operating in the United States. Plans are in place to launch a second module for 3nm chip production by 2028, followed by a third module by 2030, which will manufacture 2nm and 1.6nm chips and their variants. The Biden team aimed for the United States to capture 20 percent of global advanced chip manufacturing by 2030. Democrats have adopted a comprehensive approach to rebuilding the semiconductor industry not just focusing on building advanced fabs, but also investing in support areas such as chip testing and packaging, materials production, and R&D. A substantial $13 billion in federal funds has been earmarked for these purposes. For instance, grants and loans were used to support GlobalFoundries’ plans to build an advanced packaging and photonics centre in New York State. Arizona State University also received significant support from the US Department of Commerce, including a $100 million allocation for research and development in next-generation chip packaging technologies. Wide geographic distribution is a striking feature of the emerging US semiconductor supply chain (Figure 1). Key activities are being established across numerous states: Oregon (semiconductor manufacturing), Idaho (semiconductor and material manufacturing), Utah (semiconductor manufacturing), Montana (equipment manufacturing), Colorado (semiconductor and material manufacturing), New Mexico (packaging), Kansas (semiconductor manufacturing and packaging), Louisiana (equipment manufacturing), Missouri (materials), Minnesota (semiconductor manufacturing),Michigan (materials),Indiana (packaging and semiconductor manufacturing), Ohio (materials and semiconductor manufacturing), Vermont (semiconductor R&D and manufacturing), Pennsylvania (materials), North Carolina (semiconductor manufacturing), Georgia (materials and semiconductor manufacturing), and Florida (materials and semiconductor manufacturing). Among these, several states stand out for their significance and comprehensive involvement: California (semiconductor manufacturing and R&D), Arizona (semiconductor, equipment, and material manufacturing, packaging, R&D), Texas (semiconductor and material manufacturing, packaging, R&D), and New York (materials, semiconductor manufacturing, and R&D).   According to a 2024 study by the Boston Consulting Group commissioned by the Semiconductor Industry Association (SIA), over 90 projects have been launched in 28 states since the CHIPS Act was passed, totalling nearly $450 billion in private investment. However, the Biden administration did not pursue full semiconductor self-sufficiency as a goal. There was recognition that recreating the entire supply chain domestically would, even at the initial stage, require a vast amount of time and financial resourcesНадпись: MichiganНадпись: IndianaНадпись: Pennsylvania estimated at around $1 trillion. Therefore, US policymakers have advocated for a collective semiconductor supply chain among allies and partners by building international alliances. In 2022, the Unite States proposed creating the CHIP 4 alliance (United States, South Korea, Japan, and Taiwan), which, with coordinated efforts, could have become a dominant force in the semiconductor industry capable of influencing nearly every segment of the global value chain, with the exception of assembly and testing, where mainland China currently plays a leading role. In this way, Trump’s initiative to revive the semiconductor industry has not only continued under Biden, but evolved into a more ambitious and costly programme. The SIA, in its above report, painted an optimistic picture for the future of the US semiconductor sector. It projects that chip manufacturing capacity in the United States will triple over the next decade (2022–2032), growing by 203 percent. This expansion is expected to require $646 billion in investment, or 28 percent of global capital spending in the semiconductor industry. As a result, the United States could increase its share of global chip production from the current 10 percent to 14 percent by 2032. Additionally, experts estimate that the new projects will create over 58,000 new jobs in the semiconductor sector and hundreds of thousands more in related industries.   Despite its ambitious nature, the initial phase of Biden’s semiconductor programme has revealed several challenges. The industry has run into numerous internal obstacles slowing the construction of manufacturing facilities, including a shortage of skilled labour, high labour and construction material costs, bureaucratic hurdles (e.g., obtaining environmental permits), slow disbursement of promised subsidies by the US authorities, union-related delays, cultural differences, and more. These issues have caused delays in launching chip fabrication plants, thereby slowing the pace at which the US can achieve relative technological autonomy in the rapidly evolving semiconductor field. For example, TSMC postponed the start of mass production at the first module of Fab 21 from 2024 to 2025, and delayed the second module from 2026 to 2027–2028. Intel’s costly attempt to reclaim leadership in advanced chip manufacturing has strained its budget, forcing the company to delay its Ohio fab launch from 2025 to 2030. Samsung, initially planning to start production in Texas in the second half of 2024, pushed the timeline to 2025. These delays in fab construction also impacted the schedules of launching supplier plants, including chemical and material producers like LCY Chemical, Solvay, Chang Chun Group, KPPC Advanced Chemicals (Kanto-PPC), and Topco Scientific. The external component of the Biden administration’s technology policy has also failed to develop as envisioned. After several years of existence, the CHIP 4 has failed to become a multilateral coordination mechanism, and its potential members have not assumed any binding commitments. Only one virtual meeting was held in 2023. The reason lies in internal disagreements within the alliance and concerns about various risks, including geopolitical ones. Under the Biden administration, the United States made a strong start in the semiconductor sector, launching a wide range of fab construction projects and attracting billions of dollars in public and private investment. However, the process of reviving the US semiconductor industry has proven slower than anticipated. Government subsidies have been disbursed sluggishly, with some companies yet to receive their funding, and the construction of many high-tech industrial facilities has been postponed. Moreover, Biden overestimated the willingness of US allies and partners to join formal technological alliances. Trump’s radical approach To encourage both domestic and foreign chip suppliers to set up manufacturing in the United States, Donald Trump, in contrast to Joe Biden, chose coercion (tariffs) over incentives (government subsidies). Criticising his predecessor’s CHIPS Act, Trump argued that companies didn’t need money, but rather motivation in the form of import tariffs ranging from 25 percent to 100 percent. In his view, such measures would compel businesses to invest in US chip manufacturing, especially since these companies have the financial capacity and, therefore, don’t need to rely on government funding. Almost immediately after taking office, Trump threatened chip manufacturers with higher tariffs. At first glance, this move might seem economically illogical. Why, for instance, punish TSMC—a key partner of major US fabless companies like Nvidia, Apple, and Qualcomm—especially when there is no comparable alternative, either in the United States or globally? Even Intel, despite its struggles, depends on wafers from the Taiwanese firm (its import dependency is about 30 percent). Yet despite apparent lack of logic, the “stick” approach proved effective. In early March 2025, TSMC announced plans to invest approximately $100 billion to build three new fabs for high-performance semiconductor wafers, two advanced chip packaging plants, and one R&D centre. This raises the question: did the world’s largest chipmaker really get spooked by Trump’s tariff threats and, therefore, decide to make an unprecedented investment in the US economy? In theory, TSMC—sitting in the centre of the global microelectronics industry—could have passed tariff-related costs on to its American clients, who would have had little choice but to continue purchasing its products due to the lack of viable alternatives. Furthermore, a significant share of TSMC’s semiconductors is not shipped directly to the United States, but instead follows a supply chain tour through Asia, where the bulk of chip packaging, testing, and electronics assembly occurs (this infrastructure is only just beginning to take shape in the United States, and that process is anything but fast). Analysts at Bernstein suggest that political pressure, rather than tariffs themselves, drove TSMC’s decision. That assessment holds some merit, but it appears that a combination of factors was at play. First, TSMC itself is interested in expanding its global presence. Taiwan’s Minister of Economic Affairs Kuo Jyh-Huei commented on TSMC’s $100 billion investment in the US semiconductor sector by saying, “TSMC already has plants in the United States and Japan, and is now building a new one in Germany. This has nothing to do with tariffs. TSMC’s global expansion is a major development.” Similarly, in 2020 during Trump’s first term, company representatives said that the decision to build a plant in Arizona was “based on business needs.” Indeed, the move offers several benefits to TSMC, including increased company capitalisation and minimised risks in the event of conflict with mainland China or natural disasters (earthquakes are not uncommon in Taiwan). Second, the United States remains TSMC’s primary market, and the tariff threat did play its part. In Taiwan, there’s an understanding that when Trump talks about higher tariffs, he isn’t bluffing, because his seriousness was evident during his first term and was experienced first-hand by Canada and Mexico. On April 2, 2025, nearly the entire rest of the world—including Taiwan—faced a new wave of tariffs, with Taiwanese exports to the United States hit by a 32 percent duty (though semiconductors were not yet affected). A 100-percent tariff on semiconductors is unlikely, as it would significantly damage the market value of US tech firms. Still, protective barriers on semiconductors are expected—Trump’s administration has promised to implement them in the coming months. These measures aim to level the production cost of chips between the United States and Taiwan, thereby enhancing the competitiveness of US-made semiconductors. And finally, TSMC, together with the Taiwanese authorities, is not willing to mar relations with the United States for political reasons. This became evident from TSMC’s earlier decision to support US sanctions against mainland China by refusing to supply its most advanced chips manufactured using 7nm and more sophisticated process technologies even though that market had been a significant source of profit. After TSMC announced plans to expand its presence in the United States, the Trump administration decided to take more radical action and to scrap the CHIPS and Science Act, a signature achievement of the Biden administration. However, some Republican members of Congress are calling for the law to be preserved, albeit with certain amendments. Trump’s hands are not completely untied in this regard, so it is unlikely he can ignore Congress’s position. Even if the legislation gets amended, the process will likely be drawn out, as the CHIPS and Science Act received bipartisan support and has many supporters among Republicans. Another strategically important issue for the Trump administration is the competitiveness of domestic manufacturers. According to the Taiwanese leadership, TSMC will continue to expand operations in Taiwan, and the most advanced semiconductor technologies will not leave the country. For “the most powerful AI chips in the world to be made right here in America” efforts will be needed on the part of national champions—and soon. In 2025, the leader in producing the most advanced 2nm chips will be determined. The main contenders in this race are TSMC, Samsung, and Intel. Intel, however, finds itself in a difficult position. The company has been facing serious financial troubles for several years and lags behind competitors in mastering cutting-edge production processes. The year 2024 was one of Intel’s most challenging: it underwent a major restructuring (creating a separate chip manufacturing unit, Intel Foundry), posted record losses of $18 billion, and saw a significant drop in its stock price. As a result, about 15 percent of the workforce, including CEO Pat Gelsinger, was laid off; dividend payments were suspended; and a sweeping cost-cutting plan was launched, including deep cuts in capital expenditures over the coming years and a scaling back of global expansion plans. According to Intel Products CEO Michelle Johnston Holthaus, the company failed to capitalise effectively on the artificial intelligence boom and continues to fall behind its competitors technologically. Although Intel plans to begin 18A (2nm) chip production in 2025, there are no guarantees of competitiveness in power efficiency, performance, yield rate, cost, or timely mass production. In March, media reported that Nvidia and Broadcom began testing certain chip components, but such testing, of course, does not guarantee Intel will secure orders. Apparently, the Trump administration itself has doubts about the US company’s capabilities, as it has proposed that TSMC acquire shares in Intel Foundry. Negotiations with the Asian manufacturer began only in February 2025, meaning they are still at a very early stage.   What short-term challenges does the Trump administration face in revitalising the US semiconductor industry? Technological lag There is a high likelihood that the United States will continue to lag behind Taiwan for several years in the production of advanced semiconductors. TSMC plans to begin producing chips using a 1.4nm process by 2028, while on US soil—if deadlines aren’t pushed back again—the Taiwanese firm will only be producing 3nm chips by that time. Although some hope is being placed on Intel, there is no guarantee that the American champion will be able to compete with TSMC, or that a potential collaboration with TSMC (if it acquires a stake in Intel Foundry) will be successful. Inadequate production capacity Experts estimate that the output capacity of TSMC’s factories under construction in Arizona is less than one-fifth of the company’s 5nm and 3nm capacity in Taiwan. According to analysts at Bernstein Research, with the deployment of additional production in Arizona, the United States could raise its self-sufficiency in advanced chip production to 40-50 percent between 2030 and 2032. In the near term, this would only cover about half of the chip demand from US tech giants. Moreover, TSMC has not specified clear timelines or technologies for its US expansion. Intel could partly close the gap, but that depends on how competitive its chips are and how quickly it can overcome its financial difficulties. Slow rollout of production facilities TrendForce forecasts that the US share of global advanced chip production could grow from 11 percent to 22 percent by 2030. However, the construction of TSMC’s first Arizona plant took nearly five years, and there are no guarantees that future factories will be built fast enough to double US chip output by 2030. Labour shortage Developing a relatively self-sufficient microelectronics ecosystem requires a highly skilled workforce. However, the United States is facing severe staff shortages. By 2030, estimates suggest a shortfall of 67,000 to 90,000 professionals in the semiconductor field. China’s response to US sanctions The United States is not the only country leveraging interdependence in the semiconductor industry as a tool of pressure. China is responding in kind, though currently in a relatively restrained manner. In 2024, the Chinese government decided to completely ban exports of gallium, germanium, antimony, and ultra-hard materials to the United States even though the restrictions apply only to direct shipments. These actions not only drive up raw material prices (e.g., antimony prices more than tripled since early 2024), but also force US authorities to consider domestic mining and search for alternative suppliers abroad. High production costs According to the SIA, building and operating chip fabs in the United States is 30 to 50 percent more expensive than in Asia. Unofficial reports suggest that chips made at Fab 21 in Arizona cost 10 percent to 30 percent more than their Taiwanese counterparts (more precise figures are not publicly available). The high cost is attributed to expensive construction of facilities, high salaries (US engineers earn three times more than their Taiwanese counterparts, incomplete domestic semiconductor supply chains (some materials must still be imported)—TSMC CEO has complained about it—and complex logistics (finished wafers often need to be sent back to Taiwan or elsewhere for packaging).70 Even if tariffs eventually equalise chip pricing, US fabless companies like Apple or Nvidia may still find it more economical to source chips from Asia, where a properly functioning semiconductor ecosystem already exists—unlike in the United States, where such infrastructure is still in its infancy. Trump’s current tariff policy Imposing tariffs could lead to a significant increase in prices for components, equipment, and materials, while also injecting uncertainty into the semiconductor industry. For instance, it remains unclear how semiconductor manufacturers will operate under new tariffs on imported chip-making equipment sourced from the EU, Japan, South Korea, and Taiwan. The cost of such equipment can reach hundreds of millions of dollars—for example, the latest Low-NA EUV lithography machine from Dutch company ASML is priced at $235 million. If Intel, TSMC, and other firms are required to pay import duties of 20 percent or more, chip manufacturing in the United States will become prohibitively expensive, undermining investment plans of the manufacturers that have committed to building advanced fabs on American soil. Naturally, US officials understand that sharp moves in semiconductor policy—such as an aggressive tariff regime—carry significant risk and could spark a true technological crisis. In April 2025, the US Department of Commerce’s Bureau of Industry and Security (BIS) launched an investigation under Section 232 of the Trade Expansion Act of 1962 to determine the impact of semiconductor imports and related equipment on national security. Interested parties submitted comments, many urging extreme caution in this highly sensitive sector, which depends on a complex global supply chain split across multiple phases and countries. Thus, SIA recommended that any tariffs be phased in gradually to allow the US industry to continue functioning efficiently until domestic production capabilities are fully established. The US Chamber of Commerce called for restraint, warning that comprehensive tariffs on the semiconductor supply chain could damage US industry and undermine cooperation with allies and partners in achieving key national security goals. The Chamber also noted that foreign semiconductor companies have made long-term investment commitments to build capacity in the United States, and that political uncertainty and instability could jeopardise the stated goal of re-shoring semiconductor supply chains. *** As TSMC founder Morris Chang once said, America’s effort to ramp up its own chip production may well prove to be “a very expensive exercise in futility.” Microelectronics is one of the most complex industries in the world requiring not only massive financial investment, but also time. For decades, the industry developed within the framework of global division of labour. Now, building a relatively self-sufficient supply chain within a single country could take just as long. Yet, in the medium and long term, America’s push to revive its semiconductor industry may prove justified. The United States holds a strong position in the sector, and US companies control about 50 percent of the global semiconductor market. Furthermore, the United States remains a powerful magnet for talent, and possesses vast financial and political resources. Some experts believe that over time, the United States could weaken Taiwan’s dominance as the global hub of advanced chip manufacturing. The resurgence of the US semiconductor industry will reshape the global technological order in three key ways. First, it will trigger a transformation of the global semiconductor supply chain. Second, it will lead to greater US independence from imports of critical technologies, which means erosion of importance of some players in the industry, weakening their “technological shield”. Finally, it will cement US technological superiority in many critical industries, from AI to military systems, accelerating a global technological divide with profound geopolitical consequences. Indeed, America has the potential to become one of the world’s leading semiconductor production centres, provided that several key conditions are met, such as a favourable geopolitical environment, domestic political stability, and the absence of disruptive black swan events. However, Trump’s risky tariff policy could trigger unpredictable cascading effects, both domestically (e.g., higher prices for electronics and microelectronics products) and internationally (e.g., retaliatory tariffs by US trade partners), posing serious threats for the US semiconductor industry. First published in the Valdai Discussion Club.