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Abstract This paper examines the evolving concept of European Union Strategic Autonomy (EU-SA) within the context of contemporary geopolitical challenges, with a particular focus on EU-Russia and EU-China relations. EU-SA reflects the EU's aspiration to act independently in foreign policy, security, defence, and economic affairs, moving from a rule-taker to a rule-maker in global politics. The study outlines the historical development of EU-SA from 2013 to the present, highlighting key milestones such as the Strategic Compass and the impact of the Ukraine War, which accelerated efforts toward defence collaboration, energy independence, and economic resilience. It explores the transatlantic dynamics, noting growing uncertainties in the U.S. commitment to NATO and the resulting push for a more autonomous European defence posture. Additionally, it addresses the complex EU-China relationship, marked by both cooperation and competition, as well as the strained EU-Russia ties amid ongoing conflict. The paper concludes by questioning the economic feasibility and political risks of deeper EU strategic autonomy, especially regarding security centralisation and Germany's leadership role. Key Words: EU, Strategic Autonomy, Security, Geopolitics, U.S, China, Russia Introduction At the 2025 North Atlantic Treaty Organisation (NATO) Summit in The Hague, member states (Allies) committed to investing 5% of their Gross Domestic Product (GDP) annually in core defence requirements and defence- and security-related spending by 2035. They will allocate at least 3.5% of GDP annually, based on the agreed-upon definition of NATO defence expenditure, by 2035 to resource core defence requirements and meet the NATO Capability Targets. Allies agreed to submit annual plans that show a credible, incremental path to achieving this goal.[1] At the same time, Spain secured a special compromise, committing to meet core requirements with just 2.1% of GDP, making it the only exception to the broader 5% target. Previously, in 2014, NATO Heads of State and Government had agreed to commit 2% of their national GDP to defence spending, to help ensure the Alliance's continued military readiness. This decision was taken in response to Russia's illegal annexation of Crimea, and amid broader instability in the Middle East. The 2014 Defence Investment Pledge was built on an earlier commitment to meeting this 2% of GDP guideline, agreed in 2006 by NATO Defence Ministers. In light of the increase in defence spending, given that 23 out of 32 NATO Allies are EU member states, the idea of European Union strategic autonomy (EU-SA) comes to mind. This paper will explore the issue of EU-SA with a specific reference to EU-Russia and EU-China relations.[2] A Brief History of EU Strategic Autonomy European Union strategic autonomy is an evolving concept that reflects its ambition to act independently in strategically important policy areas, including foreign policy, security, defence, and economic relations. Strong strategic autonomy, according to Barbara Lippert, Nicolai von Ondarza and Volker Perthes, means being able to set, modify and enforce international rules, as opposed to (unwillingly) obeying rules set by others. The opposite of strategic autonomy is being a rule-taker, subject to strategic decisions made by others, such as the United States, China, or Russia.[3] The concept was first prominently discussed in the context of defence in 2013 and has since expanded to encompass a broader range of policy areas. Historically speaking, one can identify numerous phases during which EU-SA evolved. - 2013-2016: During this period, EU-SA focused on security and defence, with initiatives like the Permanent Structured Cooperation (PESCO) and the European Defence Fund, aiming to strengthen the EU's defence capabilities.[4]  - 2017-2019: During this period, the EU-SA shifted its focus to defending European interests in a hostile geopolitical environment, influenced by events such as Brexit, the Trump presidency, and China's growing assertiveness.- 2020: The COVID-19 pandemic highlighted economic vulnerabilities, prompting a focus on mitigating dependence on foreign supply chains, particularly in critical sectors like health and technology.- Since 2021: The scope widened to virtually all EU policy areas, including digital, energy, and values, with terminology evolving to include "open strategic autonomy," "strategic sovereignty," "capacity to act," and "resilience".- 2022: The Ukraine War and Accelerated Implementation. Russia's invasion of Ukraine catalysed concrete actions toward EU-SA, notably in defence, energy independence, and economic resilience. The European Council's Versailles Declaration (March 2022) expressed strong political will to increase EU-SA, calling for collaborative investments in defence, phasing out dependency on Russian energy, and reducing reliance on critical raw materials, semiconductors, health, digital technologies, and food imports.[5] - The Strategic Compass for security and defence policy (endorsed March 2022) outlines a roadmap to 2030, emphasising strengthened EU defence capacities. Among others, it includes: o   Establishment of a strong EU Rapid Deployment Capacity of up to 5000 troops for different types of crises.o   Ready to deploy 200 fully equipped Common Security and Defence Policy (CSDP) mission experts within 30 days, including in complex environments.[6]o   Conducting regular live exercises on land and at sea.o   Enhanced military mobility.o   Reinforcement of the EU's civilian and military CSDP missions and operations by promoting a rapid and more flexible decision-making process, acting more robustly and ensuring greater financial solidarity.o   Making full use of the European Peace Facility to support partners.[7] According to the EU itself, the EU-SA is not a zero-sum game, but rather a sliding scale between complete autonomy and full dependency, with different results for different policy areas. What is more, when compared to the famous Maslow's hierarchy of needs (European Parliament briefing's language), the EU is not only perceived as an economic power, but it is also seen as a normative power. Therefore, the EU is recognised for its core values of democracy, human rights and the rule of law. Ultimately, Maslow's “self-actualisation” could mean the achievement of an EU in which citizens recognise their European identity and which has realised its full autonomous policy potential.[8]   As if this is not enough, the same source introduces the concept of the 360° strategic autonomy wheel, which reportedly illustrates policy areas in which the EU aims for greater strategic autonomy, as well as the connections between them. Mutual influence between policy areas can happen across the wheel, but is particularly strong in adjacent areas. Military action, for example, can cause migration, health is linked to food quality, energy policy influences the climate, and misinformation undermines democracy. The wheel can help to understand links, set priorities and view potential conflicts. More autonomy in the digital green economy will, for example, require vast quantities of “rare earth” materials, making the EU more (instead of less) dependent on imports. Reductions in energy consumption achieved through the digitalisation of the economy (for example, by reducing transport) will be partly offset by the increase in energy consumption by electronic devices and data centres.   Global Context The significance of EU-SA lies in ensuring the EU's political survival and global influence in a multipolar world where its relative power is diminishing. The EU's long-term economic outlook is bleak: its share of global GDP, now at 17% (at current prices), could nearly halve by 2050. According to the World Economic Forum, this economic backsliding not only threatens Europe's ability to fund its social model but also risks weighing on the bloc's global influence, leaving it even more dependent on the U.S. and China.[9] Moreover, the COVID-19 pandemic highlighted the conflictual nature of economic interdependence, as reliance on foreign supply chains for critical goods exposed vulnerabilities. Soft power has become an instrument of hard power, necessitating autonomy in trade, finance, and investment.  The U.S.'s strategic pivot to Asia, the exclusion of Europe in conflicts like Nagorno-Karabakh, Libya, and Syria (termed Astanisation[10], which favours Russia and Turkey), the sidelining of the EU in EU-Russia negotiations regarding the war in Ukraine, and China's state-led economic model have all pushed the EU towards the sidelines. Transatlantic divide Security is a critical dimension, with significant uncertainty surrounding the U.S. commitment to NATO under the Trump administration. Reports indicate Trump has questioned NATO's Article 5 guarantees, with actions like withdrawing military personnel from a Ukraine aid hub in Poland on April 8, 2025, and proposing to stand down 10,000 light infantry troops in Poland, Romania, and the Baltic states by 2025.[11] This has led to fears of a "NATO-minus" scenario, where the EU must fill security gaps without full U.S. backing. In response, the EU is pushing for greater strategic autonomy in defence. Initiatives like ReArm EU are mentioned, with calls for the EU to develop a stand-alone, integrated military capacity to stabilise the global economy. As Jean-Pierre Maulny, Deputy Director of the French Institute for International and Strategic Affairs (IRIS), adequately observes "The risk is now clear: a form of bilateral agreement between the United States and Russia, benefiting the interests of both countries, could leave Ukraine severely weakened and an easy prey for Moscow, thereby weakening other European countries consequently. As a consolation prize, we will have to ensure Europe's conventional security, as U.S. Secretary of Defence Pete Hegseth announced to Europeans at the opening of the NATO ministerial meeting held in Brussels on 12–13 February 2025. This situation will place Europeans in a terrible dilemma: Either they do not wish to provide security guarantees to Ukraine and risk completely discrediting themselves in the eyes of powers such as the United States, Russia, and China, as Europeans will have demonstrated that they are unable to defend the continent, while also creating a significant long-term risk to Europe's security. Alternatively, they could provide security guarantees to Ukraine, accepting the financial burden that would impact the European Union's long-term competitiveness. In light of this situation, some advocate for the establishment of a European pillar within NATO. If one considers that the United States is negotiating peace in Europe without and against the Europeans, and that they no longer wish to defend Europe with conventional military means (will they respect the NATO Defence Planning Process?), Europeans should take on Europe's security fully. This would mean taking control of NATO. It will also be easier to make NATO and the European Union work together with a more Europeanised organisation".[12] Economically, there are several issues that contemporary demand addresses, but the most pressing is, of course, the Tariffs. The U.S. and European Union are running out of time to strike a deal on trade tariffs. Negotiations have been slow since both the U.S. and EU temporarily cut duties on each other until July 9. If an agreement is not achieved by then, full reciprocal import tariffs of 50% on EU goods, and the bloc's wide-spanning countermeasures are set to come into effect.[13] According to Almut Möller, Director for European and Global Affairs and head of the Europe in the World programme (European Policy Centre), "for the first time in decades, Europeans can no longer rely on a benign partner on the other side of the Atlantic, leaving them dangerously exposed and acutely vulnerable, including on the very foundations of liberal democracy. Until recently, the U.S. dominated a world order that provided a favourable environment for the EU to extend its membership, further develop, and leverage its strengths, particularly as a trading power, without having to worry much about geopolitics. Suddenly, liberal Europe looks very lonely, and is struggling to keep up with a world of change".[14] Other problems arguably include digital regulation and data protection, antitrust policy and digital taxation, fiscal policy and social protection, geopolitical rivalries, China's rise, and competition and trade policy. EU–China conundrum Both the EU and the U.S. are concerned about China's growing economic and technological influence, but they have differing approaches to addressing this challenge. The EU has sought to maintain a balance between cooperation and competition with China, while the U.S. has adopted a more confrontational approach.[15] These differences have led to tensions in areas such as trade policy and technology regulation. For example, the EU has been critical of the U.S.'s unilateral approach to addressing China's trade practices, while the U.S. has accused the EU of being too lenient towards China. These disagreements have made it difficult to achieve a coordinated transatlantic response to China's rise.[16] According to German experts, the balance of power between China and the EU and its member states is developing increasingly asymmetrically to Europe's disadvantage. Only in trade policy – and partially in investment – can the EU maintain its position in a manner respected by China.[17] Europe holds significant importance for China across various dimensions: economically, as its top supplier and second-largest export destination; technologically, as a source of advanced technology; institutionally, as a model to emulate; politically, to advance its objectives concerning other nations, particularly the United States; and selectively, as a collaborator in areas like global health and regional stabilisation. Unlike Russia and the United States, China perceives a vital interest in the EU's continued existence and unity within a multipolar world; yet, it employs a "divide and rule" strategy. China selectively rewards or penalises individual EU countries based on their political and economic significance and their compliance with China's expectations on key issues. These issues include arms sales to Taiwan, meetings with the Tibetan Dalai Lama, and positions on the Uighurs, human rights in China, and the South China Sea. China engages with Europe on multiple levels — political, economic, technological, cultural, and academic — using various political channels (such as strategic partnerships with the EU and individual EU member states), dialogue formats (like the 16+1 format with sixteen Central and Eastern European countries), and high-level bilateral intergovernmental consultations with Germany, France, and the United Kingdom. China's hopes that the European Union would emerge as an independent and comprehensive player in global politics, serving as a counterbalance to the United States, have diminished. However, China would be supportive of any European efforts towards achieving strategic autonomy, provided it does not translate into a confrontational approach towards China itself. In contrast, Europe's political priorities—such as ensuring peace and stability in East Asia, China's role in global stability, development, environmental issues, climate change, and non-proliferation, as well as improving human rights in China — are often considered secondary and are not actively pursued by all EU member states. Europe lacks a unified and assertive foreign policy stance regarding the geopolitical rivalry between the United States and China for dominance in the Asia-Pacific region. There is also an absence of a clear position on China's authoritarian vision of order. Even in trade and investment disputes, Europe struggles to establish a unified approach to resolving these issues. The EU member states are too diverse in terms of size, profiles, and interests in their dealings with China: Economically, there is a divide between countries that are appealing industrial and technological partners for China and those that compete for favour in Beijing. Some nations have a clear interest in global governance. Additionally, the United Kingdom and France maintain their respective military presences in the Asia region. In this context, ReArm EU and its financial instrument SAFE (analysed here https://worldnewworld.com/page/content.php?no=5384 ) have the potential to provide the EU with meaningful strategic autonomy and invite genuine geopolitical actorness. EU–Russia conundrum Since Donald Trump took office as the U.S. president, the coordination of transatlantic policies regarding Russia has largely disintegrated. The White House's openness to a comprehensive "deal" with Russian President Vladimir Putin contrasts with Congress's attempts to limit Trump's foreign policy options with Russia, resulting in the marginalisation of coordination with European allies. This situation is further complicated by Washington's increasing reliance on extraterritorial sanctions, a trend that began before Trump's presidency. Consequently, according to European foreign and security experts, Europe must achieve greater strategic autonomy in its dealings with Russia. However, this relationship is particularly strained by significant conflicts of interest. Russia's invasion of Ukraine significantly disrupted the previously peaceful and liberal democratic relations among European nations. Putin's "special military operation" compelled the EU to introduce seventeen (so far) escalating economic sanction packages aimed at undermining the Russian economy and ultimately limiting Russia's capacity to continue the war. In a gesture of solidarity with Ukraine, the EU has also allocated billions of euros to both EU member states and Ukraine to avert a humanitarian disaster and ensure the provision of essential needs for Ukrainians fleeing the conflict.[18] After three and a half years from the outset of the war, Russia continues to pose a complex challenge that the EU and European nations cannot address independently in the foreseeable future. If the U.S. security guarantee weakens before Europe can bolster its own capabilities, the EU could face new vulnerabilities that Russia might exploit along its external borders, such as in the Baltic states, and elsewhere. Currently, the EU and its member states lack sufficient means to deter Russia from pursuing its interests aggressively and recklessly in the shared neighbourhood.[19] Critics, on the other hand, argue that calls for EU strategic autonomy, particularly the creation of a European Army and a significant increase in military spending, are a double-edged sword. First, the primary official rationale is that the EU must prepare itself for a possible attack on EU member states by Russia. The legacy media are full of European leaders claiming that Russia will sooner or later attack Europe.[20] Yet, this claim is not substantiated with much evidence. The proponents of the European army completely disregard numerous doubts surrounding the 2013/2014 "Euromaidan" and the role of the CIA in the events.[21] Second, according to the Office of the High Commissioner for Human Rights (OHCHR) 's estimations, the total number of conflict-related casualties in Ukraine from April 14, 2014, to December 31, 2021, stood at 51,000 – 54,000. These numbers are broken down as follows: 14,200 - 14,400 killed (at least 3,404 civilians, estimated 4,400 Ukrainian forces, and estimated 6,500 members of armed groups), and 37,000 - 39,000 injured (7,000 – 9,000 civilians, 13,800 – 14,200 Ukrainian forces and 15,800 - 16,200 members of armed groups).[22] In short, the situation was chaotic, with many casualties among civilians. Third, it was allegedly Europeans who torpedoed a first chance of peace negotiations as early as April 2014 in Istanbul.[23] Fourth, many European leaders seem to be utterly oblivious to the fact that the prolongation of the war adds to the destruction of Ukraine and Ukrainian society, deaths and emigration. Last but not least, given the fact that it is Germany that calls for both the European Army and the federalisation of Europe (with some assistance from France), one should be extra careful given the role of Germans during the WWII and the fact that neither has there been any official peace treaty with Germany nor have they recompensated countries such as Poland. Conclusion Strategic autonomy may be a necessity for Europe, given the dynamics of transatlantic relationships. The questions, however, that have to be pondered (and it does not seem that anyone in the legacy media or mainstream academia is ready to ask them) are numerous. Who will pay for that? Can Europeans afford such expenses under the current economic circumstances, and even worse economic prospects? Is the centralisation of security and military a Pandora's box? Should Europeans allow Germany (of all EU member states) to take special responsibility for this project? Isn't the pro-war rhetoric of Western political leaders making relations with Russia even more tense and dangerous, in other words, leading to escalation? History has solemnly proven that when left to their own devices, the Europeans inevitably create disastrous conflicts that have lasting consequences for generations. The American pivot to Asia and the consequent withdrawal from Europe may therefore have tragic ramifications for the European continent. References[1] Defence expenditures and NATO’s 5% commitment. (2025, June 27). North Atlantic Treaty Organization. https://www.nato.int/cps/en/natohq/topics_49198.htm[2] NATO and the EU have 23 members in common: Belgium, Bulgaria, Croatia, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden. See more at: https://www.consilium.europa.eu/en/policies/eu-nato-cooperation/#0[3] Lippert, B., von Ondarza, N., & Perthes, V. (2019, March). European Strategic Autonomy. Actors, Issues, Conflicts of Interests. Stiftung Wissenschaft Un Politic. Deutches Institut für Politik Und Sicherheit. https://www.swp-berlin.org/ doi:10.18449/2019RP04/#hd-d14204e263[4] Damen, M. (2022, July). EU strategic autonomy 2013-2023: From concept to capacity (EU Strategic Autonomy Monitor). European Parliamentary Research Service. https://www.eprs.ep.parl.union.eu[5] Informal meeting of the Heads of State or Government Versailles Declaration. (2022, March 10–11). Stiftung Wissenschaft Un Politic. Deutches Institut Fur Politik Und Sicherheit. https://www.consilium.europa.eu/media/54773/20220311-versailles-declaration-en.pdf[6] See more at: https://www.eeas.europa.eu/eeas/csdp-structure-instruments-and-agencies_en[7] See more at: https://fpi.ec.europa.eu/what-we-do/european-peace-facility_en[8] Damen, M. (2022, July). EU strategic autonomy 2013-2023: From concept to capacity (EU Strategic Autonomy Monitor). European Parliamentary Research Service. https://www.eprs.ep.parl.union.eu[9] Open but Secure:  Europe’s Path to Strategic Interdependence. INSIGHT REPORT. (2025). World Economic Forum. https://reports.weforum.org/docs/WEF_Open_but_Secure_Europe%E2%80%99s_Path_to_Strategic_Interdependence_2025.pdf[10] In reference to the Astana format on Syria) which leads to the exclusion of Europe from the settlement of regional conflicts in favour of Russia and Turkey. See more: https://www.eeas.europa.eu/eeas/why-european-strategic-autonomy-matters_en[11] Tilles, D. (2025, April 8). US to withdraw military from Ukraine aid hub in Poland. Notes from Poland. https://notesfrompoland.com/2025/04/08/us-to-withdraw-military-from-ukraine-aid-hub-in-poland/[12] Maulny, J.-P. (2025, February 13). United States – Europe: Our Paths Are Splitting. The French Institute for International and Strategic Affairs (IRIS). https://www.iris-france.org/en/united-states-europe-our-paths-are-splitting/[13] Kiderlin, S. (2025, June 18). These are the sticking points holding up a U.S.-EU trade deal. CNBC. https://www.cnbc.com/2025/06/18/these-are-the-sticking-points-holding-up-a-us-eu-trade-deal.html#:~:text=The%20EU%20and%20US%20flags,Poland%20on%20March%206%2C%202025.&text=Afp%20%7C%20Getty%20Images-,The%20U.S.%20and%20European%20Union%20are%20running%20out%20of%20time,($1.93%20trillion)%20in%202024?[14] Möller, A. (2025, February 26). Europe in the World in 2025: Navigating a perilous world with realism and ambition. European Policy Centre. https://www.epc.eu/publication/Europe-in-the-World-in-2025-Navigating-a-perilous-world-with-realism-625da4/#:~:text=2025%20will%20be%20a%20year,with%20a%20world%20of%20change[15] Bradford, A. (2023). When Rights, Markets, and Security Collide (pp. 221–254). Oxford University Press. https://doi.org/10.1093/oso/9780197649268.003.0007[16] Portanskiy, A. (2023). UE - US: new barriers to trade. Современная Европа. https://doi.org/10.31857/s020170832304006x[17] Lippert, B., von Ondarza, N., & Perthes, V. (2019, March). European Strategic Autonomy. Actors, Issues, Conflicts of Interests. Stiftung Wissenschaft Un Politic. Deutches Institut für Politik Und Sicherheit. https://www.swp-berlin.org/ doi:10.18449/2019RP04/#hd-d14204e263 [18] Klüver, L. (2025, April 18). Putin’s War on Ukraine: What can the EU actually do? European Careers Association. https://ecamaastricht.org/blueandyellow-knowyourunion/putins-war-on-ukraine-what-can-the-eu-actually-do#:~:text=Similarly%2C%20the%20Strategic%20Compass%2C%20the%20most%20recent,its%20interests%20and%20promote%20its%20values%20internationally.[19] Lippert, B., von Ondarza, N., & Perthes, V. (2019, March). European Strategic Autonomy. Actors, Issues, Conflicts of Interests. Stiftung Wissenschaft Un Politic. Deutches Institut für Politik Und Sicherheit. https://www.swp-berlin.org/ doi:10.18449/2019RP04/#hd-d14204e263 [20] ochecová, K. (2025, February 11). Russia could start a major war in Europe within 5 years, Danish intelligence warns. Politico. https://www.politico.eu/article/russia-war-threat-europe-within-5-years-danish-intelligence-ddis-warns/[21] Katchanovski, I. (2024). The Maidan Massacre in Ukraine The Mass Killing that Changed the World. Palgrave Macmillan. https://doi.org/https://doi.org/10.1007/978-3-031-67121-0[22] Office of the United Nations High Commissioner for Human Rights. (2022, January 27). Conflict-related civilian casualties in Ukraine: December 2021 update. United Nations Human Rights Monitoring Mission in Ukraine. https://ohchr.org[23] Johnson, J. (2022, May 6). Boris Johnson Pressured Zelenskyy to Ditch Peace Talks With Russia: Ukrainian Paper. Common Dreams. https://www.commondreams.org/news/2022/05/06/boris-johnson-pressured-zelenskyy-ditch-peace-talks-russia-ukrainian-paper

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. 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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. 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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.

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.  

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.

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. 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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). 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