The EU-India summit came at a pivotal moment with both powers concluding the largest trade agreement either has ever signed, paired with a new security and defence partnership, elevating the relationship to a new strategic level. This marks a major shift in how both sides think about economic resilience and security cooperation, especially in a time of rising global and transatlantic uncertainty.

On this episode of the #AtlanticDebrief, Jörn Fleck sits down with Senior Fellow with ORF’s Strategic Studies Programme Rachel Rizzo to debrief on the EU-India summit and the strategic rationale of increased bilateral cooperation.

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Jörn Fleck

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The post #AtlanticDebrief – What was the geopolitical significance of the EU-India summit?  | A Debrief from Rachel Rizzo appeared first on Atlantic Council.

For decades, Brussels and New Delhi circled each other with caution—too many regulatory barriers, too much agricultural protection, and too little urgency held them apart. What brought down the obstacles, a senior Indian official told me as their negotiations advanced, was above all US President Donald Trump and the upset on both sides about his tariffs.

“The EU-India trade deal is part of the European Commission’s diversification strategy, which is a direct response to increasing pressures from the United States and China on the global trading system,” writes Jörn Fleck, senior director of the Atlantic Council’s Europe Center, in a smart roundup of expert reaction.

Michael Kugelman, senior fellow for South Asia at the Atlantic Council, adds, “With all the strain and uncertainty that characterize India’s ties with Washington, the EU is a logical space to embrace.” Kugelman points to shared EU-Indian interests, including the need to counterbalance China, and the fact that France and Germany are already among India’s leading trade partners. 

The deal—covering trade, investment, digital rules, supply chains, climate standards, and technology—also reflects a shared EU-India conclusion: the United States may still be an indispensable economic and political partner for both of them, but it has at the same time become an increasingly unpredictable one. Both sides, for now, have given up on the notion that Washington can anchor the global trading system. It was time to look hard for alternatives.

Together, the EU and India are building something that looks less like old globalization and more like what comes next: large, values-adjacent economies knitting themselves together to hedge against volatility from all sides—China’s product-dumping scale, the United States’ tariff-tinged uncertainties, and, from Europe’s side, Russia’s geopolitical volatility.

What makes this moment an inflection point is that the gravitational center of global trade architecture, once greatly determined by the United States and its democratic allies, is shifting, but where it lands is uncertain. Today, the United States talks more about deal leverage than global leadership. Europe and India are adapting, having learned that excessive dependence invites risk and diversification breeds resilience.   

The Atlantic Council’s Mark Linscott, who served as assistant US trade representative for South and Central Asian Affairs, scoffs at talk about the “mother of all trade deals” as hyperbolic. “The results are incomplete and will require follow-up action,” he writes, noting that both sides set aside the most complicated issues to close the deal in time for von der Leyen’s visit on India’s Republic Day this week. His analysis is worth reading.

Still, concludes Linscott, “When two of the biggest economies of the world agree to eliminate a significant proportion of their trade barriers . . . governments and stakeholders around the world should take notice.” 

No one should take more notice than Trump, whose tariffs on Europe and India without any doubt have been the accelerator for this deal. It’s time to start tallying up the unintended consequences of Trump’s trade policies, and whether the result will be more or less American influence and revenues globally. 

Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on X @FredKempe.

This edition is part of Frederick Kempe’s Inflection Points newsletter, a column of dispatches from a world in transition. To receive this newsletter throughout the week, sign up here.

The post The ‘mother of all’ trade deals in the time of Trump appeared first on Atlantic Council.

Bottom lines up front

• The India–EU free trade agreement is a major diplomatic achievement, but it’s unlikely to transform global trade or economic growth.
• Several sensitive issues were deferred, and most benefits will emerge slowly through phased tariff reductions and regulatory certainty.
• The deal need not undermine US trade ties with India or the EU—and it could be a spur to finalize the US–India trade deal. 

WASHINGTON—References to the “mother of all deals” are a clear case of political hyperbole, but there should be no doubt that the India–European Union (EU) free trade agreement (FTA) warrants attention. When two of the biggest economies in the world agree to eliminate a significant proportion of their trade barriers, particularly at a time when almost any trade deal captures news headlines, governments and stakeholders around the world should take notice.

The EU and India have been at this negotiation for roughly two decades, although with several long pauses. This negotiating duration is the clearest indicator of how complex and difficult it was to conclude this agreement. The United States and the EU have their own failed experiment in the form of the Transatlantic Trade and Investment Partnership (TTIP), which collapsed after several years of negotiations during the Obama administration.

But observers also shouldn’t rush to conclusions about the deal redirecting global trade, speeding up economic integration, or jump-starting economic growth. In the end, the India–EU FTA may have only a modest impact using all these yardsticks. 

More to follow

First things first: The results are incomplete and will require follow-up action. Many of the early press reports breezily skip through this reality. As forecast by both sides in the closing months of negotiations, there will be unfinished business to attend to soon after the signing ink is dry. It’s always the most sensitive issues that take the longest, and India and the EU have conveniently set some of these aside in the rush to conclude an agreement in time for the bilateral summit and European Commission President Ursula von der Leyen’s visit on India’s Republic Day. 

For example, there are likely to be follow-up negotiations on agriculture, intellectual property rights, and the EU’s Carbon Border Adjustment Mechanism, among other issues. That said, the fact that there is unfinished business should not diminish the accomplishment of reaching agreement on preferential tariff schedules and a large number of detailed rules chapters, such as Technical Barriers to Trade. 

Additionally, each trading partner must jump through domestic approval hoops. In the case of the EU, that involves obtaining a “qualified majority” (essentially, a double majority of member states and the represented population) through the Council of the European Union and separate approval from the European Parliament.

Acknowledging the limits

The India–EU FTA will not significantly alter existing supply chains, although it can make the India–EU ones more resilient. Nor is it likely to result in trade diversion from other major trading partners. Although the FTA will include a number of new disciplines for persistent and difficult non-tariff barriers, the headline numbers from the announcement will be tariff reductions on both sides. In fact, EU tariffs are already low in general, and the benefits to India in those sectors where EU tariffs are high may be offset by the EU’s action earlier this month to eliminate preferential treatment for India under its Generalized System of Preferences (GSP) program. For example, the GSP program kept India competitive with the likes of Bangladesh in the EU market for textiles and apparel. Now, the FTA may simply replace a low GSP tariff with a new bilateral FTA tariff. 

For the EU, its benefits from tariff reductions are likely to emerge slowly, and transition periods for tariff reductions suggest that there will not be immediate substantial increases in exports. That said, an FTA provides a degree of certainty, stability, and predictability in market access that is absent with no trade agreement in place. Existing supply chains between the EU and India can be reinforced in the short term and even grow over the longer term.

The view from Washington

While the agreement may be interpreted as a response to the Trump administration’s tariffs and tariff threats, there is no reason it should undermine the US trade relationships with either the EU or India. Indian and EU trade negotiators have been pushed to their limits by the agendas of political leaders and responded impressively, even in orchestrating work-arounds in areas, such as geographical indications and sustainability commitments, that have long been part of the immutable template for EU FTAs with other countries. 

No doubt, journalists and many other commentators will pronounce cause and effect between the Trump administration’s tariffs and the India-EU FTA, but the history of the negotiation suggests otherwise. The current push to the finish line actually began during the Biden administration. While the Trump administration’s predictable unpredictability on tariffs has been important context for the accelerated timetable, the EU and India have long understood the economic and strategic value of striking a substantial trade deal between the two of them. 

The EU–India deal could even light a fire under efforts to conclude a US–India trade deal and help to move negotiations forward on a comprehensive bilateral trade agreement, as US President Donald Trump and Indian Prime Minister Narendra Modi discussed last year.

Time will tell how consequential this FTA will be. It seems unlikely that it will be as transformational as the US-Mexico-Canada Agreement and its predecessor, the North American Free Trade Agreement. However, that does not mean it won’t eventually be viewed as a game changer as the rules-based order, in the form of the World Trade Organization, continues to decline in relevance and new structures emerge to fill the vacuum. 

The post The India–EU trade deal is worth watching, but not overhyping appeared first on Atlantic Council.

Why is this deal happening now? 

The EU-India trade deal is part of the European Commission’s diversification strategy, which is a direct response to increasing pressures from the United States and China on the global trading system. The turmoil caused by the Trump administration’s tariff policies and China’s unfair trade practices have clearly sharpened minds, increased flexibility, and accelerated both sides’ push to come to a deal after years of stalled negotiations.

 —Jörn Fleck is the senior director of the Atlantic Council’s Europe Center. He previously served as chief of staff for a British member of the European Parliament.

***

This deal has been in negotiations, with pauses, for almost twenty years, and there have been several pushes to complete it. So, the agreement is not entirely a response to the Trump administration’s tariffs and trade threats. But clearly, they provided the immediate impetus to get it done now, so that both countries can diversify their trade relationships in response to uncertainty, if not antagonism, from the United States.  

The deal will not be entirely easy sledding, since there remain difficult areas to work out, including agricultural market access, geographical indications, and the EU’s Carbon Border Adjustment Mechanism (CBAM). Each side still also has domestic legal processes to complete. Getting major trade deals through the European Parliament has proven challenging, most recently with respect to the bloc’s trade deal with Mercosur. The full story is not yet over. 

Still, free trade agreements (FTAs) are difficult to negotiate, and the parties are to be commended for getting this one done.  

—L. Daniel Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center. He previously served as assistant US trade representative for Europe and the Middle East in the Office of the United States Trade Representative. 

***

The real question is: Why didn’t it happen earlier? The two sides have been at it for roughly two decades, and they’ve seen trade negotiators come and go during that period. The latest sprint to the finish actually started during the Biden administration. My take is that both sides have been motivated at top levels in recent years for a host of geopolitical and economic reasons, and the politicians pushed their negotiators to get it done, even if it meant cutting some corners. In the end, it’s truly a consequential FTA, even if I wouldn’t describe it as the “mother of all deals!” 

—Mark Linscott is an Atlantic Council nonresident senior fellow on India. He previously served as the assistant US trade representative for South and Central Asian Affairs. 

What impact will this have on Europe? 

The EU-India trade is first and foremost a strategic win for both partners, having come under increased US and Chinese pressure. The European Commission can clock another political win in its trade diversification strategy, while the Modi government can add to leverage against the US president’s 50 percent tariff punishment.  

Economically, the deal will have a modest impact at first. India accounted for only 2.4 percent of EU total goods trade in 2024, small change compared to the US share of 17.3 percent or China’s 14.6 percent. But Brussels hopes to double that piece of the trade pie over the next seven years of implementation, and India agreed to greater tariff reductions than many expected.  

India is not only seen as an important growth market for European sectors from autos to machinery and chemicals. Europe also sees the potential in building the softer connective tissue between the combined markets of two billion consumers. Brussels and Delhi are expected to agree to a framework affording greater access to Indian labor and expertise from healthcare to information technology services. European universities are keen to ride recent trendlines and attract more Indian students in science, technology, engineering, and mathematics. And intensifying defense tech and broader technology cooperation with India could reap not just economic but geopolitical benefits for Europe. 

—Jörn Fleck 

What impact will this have on India? 

The deal highlights two significant recent trends in Indian foreign policy. The first is New Delhi’s ongoing push for more trade deals, as India looks to shed its image as an overly protectionist economy. India has signed a series of trade accords in recent years, including with some non-EU European states.  

Second, the deal reflects an Indian inclination—at least for now—to pull back from the United States and push more toward Europe. With all the strain and uncertainty that characterize India’s ties with Washington, the EU is a logical space to embrace. They have a wealth of shared interests—from increasing trade to countering China—and the EU includes some of India’s closest partners, including France and Germany. These strong convergences can overcome areas of divergence—from relations with Russia to differences over intellectual property. In effect, this FTA could constitute the opening salvo of an Indian play to broaden its ties with one of its closest commercial and strategic partners, with the United States left on the outside looking in.  

—Michael Kugelman is a resident senior fellow for South Asia at the Atlantic Council. 

***

India is likely to benefit more concretely in the immediate term, when it starts to see increases in exports, particularly in labor-intensive industries, which were the Indian priority for cementing this deal. However, India just recently lost certain preferential tariff benefits under the EU’s Generalized System of Preferences (GSP) program, which affected important sectors, such as textiles and apparel. The FTA, then, may just substitute new low tariffs to replace the previous GSP ones. 

—Mark Linscott

What additional geopolitical implications are there?  

The geopolitical consequences of the EU-India free trade deal extend well past economics. During the Cold War, India led an initiative to create a “nonaligned movement” that refused to choose sides between the United States and the Soviet Union. In Davos last week, Canadian Prime Minister Carney sought to revive a similar coalition of “middle powers” that seek to strike pragmatic economic and political alliances with a range of strategic rivals to the United States, starting with China. The EU-India deal fits well within this geopolitical tradition. 

It is not clear whether the strategy will succeed. Whether for climate-related reasons (through the CBAM) or for geopolitical responses (through tightening economic sanctions), Europe will likely be just as dedicated as the United States is to weaning India off of Russian oil purchases. The trade deal announced this week suggests that the EU strategy will be to reward climate-friendly initiatives that increase India’s already significant shift to support rooftop solar and electric vehicles, rather than penalize India as the United States has done.  

If the positive economic incentives in the trade deal succeed in reducing India’s dependence on Russian oil, it will likely come at a cost: increased dependence on China to supply solar panels and other renewable energy equipment. Thus, over the medium term, the EU trade deal could benefit China and its export-led economy, potentially at the expense of US strategic interests in the Indo-Pacific region. 

—Barbara C. Matthews is a nonresident senior fellow at the GeoEconomics Center. She previously served as the first US Treasury attaché to the European Union. 

What should the US take away from this deal? 

This deal is very consequential, a meaningful destination after a long road, and it will give both Europe and India confidence in their ability to deepen their trade integration outside of the United States.  

The United States should similarly take note of the impact of its policies on trading partners’ willingness and ability to deepen their ties with each other. Long term, this will ultimately reduce their reliance on the United States and diminish US leverage in negotiations. But there are also shorter-term consequences for the United States. This is especially true in some areas, like geographical indications, where EU agreements may have a negative impact on the United States’ ability to sell agricultural products abroad using their common names. Additionally, deals that align regulations, such as the EU’s agreement with the United Kingdom, can effectively export EU regulatory barriers to its trading partners.  

—L. Daniel Mullaney 

***

The United States should not see this agreement as a threat. It’s consequential but not a dramatic game changer—at least not yet. A more important takeaway is that big deals can be done with India as long as there’s some flexibility to accommodate New Delhi’s political sensitivities. India is a democracy, and what voters think about its trade agreements matters. This deal can also provide new momentum to US and Indian negotiators to get their deal done. They really are very close, and the stakes are high. 

—Mark Linscott 

The post The EU and India are creating a free trade area of two billion people. What’s next? appeared first on Atlantic Council.

Bottom lines up front

• Business and geopolitics collided at last week’s World Economic Forum in Davos, as leaders confronted how deeply markets, national security, and policy are now intertwined.
• US tariff policies forced a sober reassessment of global trade, while AI drew a mix of optimism and concern over risks, ethics, and regulation.
• Despite a US–Europe focus in Davos, other powers were active, too, with Canada’s prime minister warning that the rules-based order is rupturing.

DAVOS—This week Davos, Switzerland, returns to being a charming ski town. The shops and restaurants—temporarily rented by every major tech company on the planet to host events and receptions—return to their owners and will soon be filled with tourists on holiday.  

But what happened at the 2026 World Economic Forum won’t soon be forgotten. This was the year the forum changed policy. As one attendee told us on her way off the mountain, “Imagine what would have happened this week if Trump didn’t have to meet the Europeans face to face.” It’s an intriguing, if chilling, thought.

While Trump’s speech this past Wednesday and his subsequent decision to backtrack on Greenland threats drove the roller coaster news cycle of the week, there were several other notable moments that may have much longer term—and more important—policy repercussions. Here’s what we saw on the ground:

The two Davoses

Davos is always two different things at once. “Business Davos” is the place where executives huddle in Swiss office buildings negotiating deals far away from the TV cameras. This is, actually, what brings most people to the mountain year after year. That Davos traditionally operated independently from “geopolitical Davos.” That’s the Davos most people are familiar with—leaders from around the world speaking in the Congress Center, and academics, journalists, and think tankers debating on panels. 

Most years, those two Davoses can operate in their own spheres. But not this year. Last Monday, as markets swung sharply negative on the Greenland news, business Davos had its eyes glued to the Congress Center. Leaders of some of the largest companies in the world lined up and waited just like everyone else to get a seat. Suddenly, everyone was an expert on Nuuk, the Arctic, and whether military leases were a viable compromise. It was a reminder of a big lesson of the past few years—from the COVID-19 pandemic to Russia’s invasion of Ukraine—that finance and national security are deeply interconnected. In fact, there’s a good word for that—geoeconomics. 

The new reality of tariffs

One year ago Davos attendees watched Trump’s inaugural address and then listened to him virtually address the forum. He hardly said the word “tariffs” once between the two speeches, and the delegates decided that his threats during the campaign were just threats. What a difference a year makes. After twelve months of the biggest shock to the global trading system in decades, which left the world facing the long-term prospect of the US economy having a 10 percent or higher tariff rate, reality settled in on the mountain. Gone was the optimistic talk about how deregulation was going to lead to an investment boom. In its place was chatter about finding new trade arrangements with emerging markets, and forecasting what would happen if the Supreme Court rules against Trump in the tariff case. 

The risk and rewards of artificial intelligence

Few topics were more in the air in Davos than artificial intelligence (AI). Almost every billboard and storefront had a reference to AI—whether for supply-chain efficiency or content creation. On the surface, businesses wanted to project confidence, with AI positioned as the engine of future growth. But step inside these company events and a different picture emerged. Many featured chief risk officers or chief ethics officers, titles that barely existed a few years ago, grappling with questions around the different types of “risks,” whether those were geopolitical risks, economic risks, or climate risks. There was a stark contrast between the glossy AI optimism outside and the sober risk assessment on the inside of these conversations, and a reminder that for all the promise of growth, the industry knows the hard questions are just beginning.

More than a transatlantic affair

On the main stage and in the global news cycle, this Davos felt like a US–Europe affair. Tariffs announced and abandoned on European allies. French President Emmanuel Macron responding directly. US Treasury Secretary Scott Bessent outlining the health of the US economy. California Governor Gavin Newsom sparring rhetorically with Washington. For audiences watching from afar, it was easy to conclude this was a narrow, transatlantic Davos.

On the ground, however, the picture was far more global. Brazil House, India House, Indonesia House, and a dozen country pavilions were packed with programming all day. A large Pakistani delegation arrived on its own official shuttle bus. Philippines House ran cultural programs, including concerts featuring traditional music, alongside policy panels.

India, in particular, projected quiet confidence. Officials framed the country as a durable pillar of global growth, especially on AI. China maintained a low profile, with Chinese Vice Premier He Lifeng offering brief remarks about Beijing’s willingness to buy more foreign goods and services—a notably muted presence compared to previous years.

Yet the US footprint on the promenade was impossible to miss. The US delegation was one of the largest in Davos, anchored by a sprawling USA House with a dense schedule of events and receptions. From the number of officials and security on the ground to the symbolic bald eagle overlooking the promenade, the message was clear: US influence loomed over nearly every discussion. For all the activity in country pavilions, this remained a global forum shaped by great-power rivalry.

From Canada, a clarion call 

Canadian Prime Minister Mark Carney delivered one of the most consequential addresses during Davos, declaring that the post–Cold War rules-based international order is “in the midst of a rupture, not a transition.” Carney argued that great-power rivalry, economic coercion, and unilateral actions by dominant states (not mentioning Trump by name) have weakened longstanding global norms and institutions. He called on middle powers to work together to protect their interests and build new cooperative frameworks rooted in shared values. Simply going along to get along is no longer the answer, he argued. Whether other middle powers respond to that message may be the single most important question from this year’s forum. 

Descending the mountain

As delegates packed their bags and headed down the mountain, few were under any illusions. The convergence between business Davos and geopolitical Davos is the new reality. The tightrope that companies are walking is not getting any less precarious. And the question of whether economic cooperation can survive an era of rising geopolitics remains very much unanswered.

Next year’s forum may face these same tensions. The key question is whether the world will have found ways to navigate them successfully or whether the rupture Carney described will have deepened further.

The post Inside the biggest Davos debates (other than Greenland) appeared first on Atlantic Council.

Bottom lines up front

• Many Europeans view the Davos deal over Greenland as only a temporary reprieve from a crisis in transatlantic relations.
• Europe will now have to swiftly translate the lessons from the past few weeks into building greater resilience and sovereignty, if not strategic autonomy.
• Europeans will be well advised to do more contingency planning for how to resist economic coercion, even from their allies and partners.

WASHINGTON—Relief and exasperation may have been the initial reactions across European capitals as US President Donald Trump folded the cards on his Greenland gamble from Davos on Wednesday. NATO Secretary General Mark Rutte excelled once again as the unrivaled Trump whisperer, helped by a combination of financial market jitters and an unexpectedly united Europe holding its ground. Rutte’s framework deal with Trump, however scarce the details, seemed to vindicate those arguing for Europe to “engage, not escalate” with the US president.

But a day after the news of the Arctic deal from the Alps, the mood among European policymakers is shifting away from mere relief. It was Trump who threatened to remember if he didn’t get his way on Greenland, but it is the Europeans who will remember this dispute even as Trump moves on. Few are celebrating the de-escalation because of how pointless and reckless they view this latest test of the Alliance’s credibility and cohesion. And because they know it’s likely only a temporary reprieve and hardly the last transatlantic crisis they can expect from this US administration. As a result, a quiet yet dogged determination is emerging to strengthen Europe’s ability to withstand US pressure in any future scenarios brought on by a US president who is seen as unpredictable, if not erratic. In a sign of the impression the last few days and weeks have left, European Union (EU) leaders still met at a special summit in Brussels on Thursday despite the immediate issue having been defused.

Trump’s speech in Davos made an impression on European decision makers. The US president appeared to be setting the terms for negotiations, forcing Europe to choose between acquiescing on his acquisition of Greenland and maintaining US support for NATO. While doing away with any potential military action, Trump outlined a nebulous rationale of US control of Greenland: No one else could supposedly defend it, and the United States needed it to protect against adversaries. He reminded Europeans of their dependencies on the United States from energy and trade to security and Ukraine. It all looked like an attempt to boost his leverage in any of these areas. But by the evening Davos time, Trump had struck a preliminary deal with Rutte.

Europeans will want to better understand the details of that agreement and what it means for Greenland, Denmark, and Europe. As long as military options and tariffs are off the table, Nuuk’s and Copenhagen’s sovereignty are respected, and the White House’s sharp rhetoric and threats subside, then NATO and EU capitals will hold back on their criticism for now. Some may even be going back to the pretense of transatlantic dialogue, cooperation, and partnership.

But beyond the diplomatic protocol and time bought, Trump’s ready willingness to engage in brinkmanship with the alliance, Europe’s economy, and personal relationships with key leaders will have a lasting impact. Trump’s approach toward Greenland has destroyed much of the domestic political space for those arguing that Europe has a weak hand and therefore few options but to engage, assuage, and accommodate Trump. That same argument, which led the EU to accept a lopsided trade deal with the United States this past summer in pursuit of “stability and predictability” in the relationship, has taken a major hit, even if few European leaders say this out loud for now.

There are clear lessons here for Europe. Over the past few days, European resolve had been building to stand tall and stay united. Markets took note of the potential costs of that cohesion, including retaliatory tariffs and a “Sell America” turn away from US assets. Europe fared better than many expected in raising the complexity for Trump in Greenland, including by swiftly deploying even just small numbers of troops to prepare joint exercises. Denmark proved resilient and built more effective rapport with Greenlanders over historically difficult relations and, together with Europe, it made important commitments to the territory and Arctic security.

Whatever time the de-escalation over this latest rift has bought Europe, it better use that reprieve effectively. It likely won’t be the last such episode under this president. Europe will have to swiftly translate the lessons from the past few weeks into building greater resilience and sovereignty, if not strategic autonomy. Efforts to strengthen defense capabilities, defense industrial capacity, and long-term support for Ukraine are well underway. But much like Europe’s initiatives at boosting its competitiveness, intensifying trade diversification, and deepening its capital markets, these efforts require greater speed, ambition, and follow-through.

Europeans will be well advised to do even more contingency planning on how to resist economic coercion, even from partners, and make unwieldy tools such as the Anti-Coercion Instrument more effective politically. Other areas to watch in the coming months are progress on new trade and critical raw materials deals or breakthroughs on long-standing initiatives such as the savings and investment union. Front and center for European decision makers’ thinking will be the problem described in Canadian Prime Minister Mark Carney’s Davos speech of a “rupture, not a transition” in the world order. Whether they can act on his remedies of “strength at home [and] diversifying abroad” remains to be seen. 

The post Trump may move on from Greenland. Europe won’t. appeared first on Atlantic Council.

Today started with ice and ended with a thaw. Shortly after a speech at the World Economic Forum in Davos, Switzerland—in which he made his case for why the United States should own the “big, beautiful piece of ice” that is Greenland—Donald Trump announced that he had reached a “framework of a future deal” on the issue. The breakthrough came after Trump met with NATO Secretary General Mark Rutte, and led to the US president dropping his tariff threats against European nations that had opposed the US acquisition of the semiautonomous Danish territory. According to Trump, the deal will concern potential US rights over Greenland’s minerals, as well as the island’s involvement in his administration’s proposed “Golden Dome” missile defense system. Below, our experts shed light on all the transatlantic tumult. 

• Josh Lipsky (@joshualipsky): Chair of international economics at the Atlantic Council, senior director of the GeoEconomics Center, and former International Monetary Fund advisor  
• Matthew Kroenig (@MatthewKroenig): Vice president and senior director of the Scowcroft Center for Strategy and Security
• Tressa Guenov: Director for programs and operations and senior fellow at the Scowcroft Center for Strategy and Security, and former US principal deputy assistant secretary of defense for international security affairs 
• Jörn Fleck (@JornFleck): Senior director of the Europe Center and former European Parliament staffer

Tariff troubles

• Now that Trump appears to have backed down from both his military and economic threats, “Europe is breathing a sigh of relief,” Josh reports from the World Economic Forum, but it’s one that “will be short-lived.”
• Don’t expect Europe to jump back in to last year’s US-EU trade deal, which Brussels paused in recent days. European leaders “feel like they’ve been burned by the volatility, paid a political price at home, and want commitments that next weekend they don’t wake up to new tariff threats,” Josh tells us. “Businesses, many of which said as much privately to the Trump administration this week in Davos, want the same” sort of commitments. 
• “Markets had their say” as well, Josh writes, noting that fears of a US-EU trade war drove up bond yields in recent days. That’s “the exact kind of pressure point that made Trump relent” in April 2025 when he paused his “Liberation Day” tariffs. “With mortgage rates shooting up” in response to the volatility, says Josh, “Trump showed that he can be especially sensitive to the bond markets.”

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NATO’s next steps

• “The idea that Trump would attack a NATO ally was always hard to imagine,” says Matt, who argues that “Trump’s threats were clearly part of his now-trademark style of building leverage to force a negotiation.”
• Matt now expects a future deal to include “increased military presence in Greenland from Denmark and other NATO allies and increased access and basing for the United States.”
• The “hard work” ahead for negotiators, he explains, will be “hammering out an agreement that addresses Trump’s legitimate security concerns while also respecting the sovereignty of NATO allies.”
• Matt identifies several cases that could provide “creative solutions,” including “the United Kingdom’s ‘sovereign base area’ in Cyprus, the bishop of Urgell and the president of France’s ‘shared sovereignty’ over Andorra, and the United States’ possession of a perpetual lease in Guantanamo Bay, Cuba.”

The bigger picture

• But even if a deal gets done, says Tressa, Trump’s pressure campaign against Europe over Greenland could have consequences for security issues that must be solved on both sides of the Atlantic: “A sustained atmosphere of crisis has the potential to detract from Trump’s own success in getting NATO countries to spend 5 percent of gross domestic product on defense and, he hopes, buy American products.” She points out that “many of the countries that he threatened with tariffs are the ones who have stepped up defense spending the most.” 
• Jörn agrees on the lasting impact of “Trump’s willingness to engage in brinkmanship with the Alliance, Europe’s economy, and personal relationships with key leaders.” The approach “has destroyed much of the domestic political space in Europe for those arguing that Europe has a weak hand and therefore few options but to engage, assuage, and accommodate” the US president, “even if few European leaders will say this out loud for now.”  
• Still, while “Davos is sometimes criticized for a lot of talk but little action, this year no one can doubt the forum mattered,” Josh adds. “Having Trump meet in person with leaders—privately—is where the US-European alliance was, at least temporarily, put back on track.”

The post The future of Greenland and NATO after Trump’s Davos deal appeared first on Atlantic Council.

Bottom lines up front

• The Trump Route for International Peace and Prosperity (TRIPP)—a planned rail and road route through southern Armenia—is poised to reshape Eurasian trade.
• While the TRIPP itself is less than thirty miles, it will be critical in connecting Central Asia to Turkey and Europe while bypassing Russia and Iran.
• TRIPP is also part of larger efforts by the Armenian prime minister to reduce Russian influence over his country—efforts the US should support.

WASHINGTON—A twenty-seven-mile stretch of land running through southern Armenia is poised to reshape the geopolitics of the South Caucasus. On January 13, US Secretary of State Marco Rubio and Armenian Minister of Foreign Affairs Ararat Mirzoyan announced a detailed framework to implement the Trump Route for International Peace and Prosperity (TRIPP). This US-brokered corridor, which promises to become a vital connectivity link between Europe and Asia, could go down as one of US President Donald Trump’s most impressive foreign policy achievements of his second term.

TRIPP’s connectivity potential

The idea for a US-brokered transport route in southern Armenia that would link the main part of Azerbaijan to Baku’s Nakhchivan exclave grew out of 2025 peace talks between the two countries coordinated by US officials. Azerbaijan wanted to implement a crucial element of its 2020 cease-fire agreement with Armenia—unfettered transport access to Nakhchivan. At the same time, Armenia sought to maintain control over its sovereign territory along the proposed twenty-seven-mile route across its land.

In stepped Trump and his team with a creative solution: a US-led consortium would construct and manage the route, in concert with Armenian authorities, that would in turn safeguard Azerbaijani access to Nakhchivan. At a summit at the White House this past August, Armenian Prime Minister Nikol Pashinyan, Azerbaijani President Ilham Aliyev, and Trump agreed to implement TRIPP with a view toward a comprehensive Armenia-Azerbaijan peace deal. This was a significant achievement: Armenia and Azerbaijan had clashed for more than thirty years, and they had fought a handful of wars in that time that killed tens of thousands.

But no details about how TRIPP would be built and managed were made public officially until this past week. In a joint statement, Rubio and Mirzoyan announced a new TRIPP Development Company (TDC) to construct the initial rail and road elements of the project, with the United States taking a 74 percent controlling stake for forty-nine years, which will revert to a 51 percent stake for the following fifty years. The agreement envisions the United States government providing upfront capital to develop the route and making a financial return via the TDC over the life of the project through transit fees and commercial opportunities along the route, in addition to construction contracts to US companies. Armenia will earn revenue based on its minority stake in the TDC, plus taxes and customs duties along TRIPP.

It’s an arrangement that should work well for both parties. The White House can tell Americans that they are getting an economic return for US diplomatic engagement in the South Caucasus and opening new opportunities for US companies. At the same time, Pashinyan can sell the agreement as a means of attracting high-quality Western infrastructure investment—something he had pursued through his Crossroads of Peace initiative—that can help position Armenia as a regional transport hub, all while maintaining control over Armenian territory.

TRIPP could provide spillover benefits to Washington, Yerevan, and the broader Caspian region, as well. The US government has been quietly supportive of the Middle Corridor, a multi-modal trade route that connects Central Asia to Turkey and Europe via the Caspian Sea and infrastructure chokepoints in Azerbaijan and Georgia. Washington and its European partners see the Middle Corridor as a way for overland trade with Asia to bypass Russia, including the potential export of critical minerals and rare earths from Central Asia. The South Caucasus and Central Asian countries seek prosperity through better integration with global markets. TRIPP provides another route across the Caucasus, increasing transport volume capacity as Azerbaijan and Kazakhstan work to build port capacity to meet trade demand.

The successful implementation of TRIPP would make it cheaper and faster to ship products and critical raw materials from Central Asia to Europe and beyond.

But cheaper, faster, better connectivity also carries some risks. The South Caucasus has at times swelled into a hotbed for sanctions evasion to both Russia and Iran, and possibly even evasion schemes between Moscow and Tehran. TRIPP can be a success as a regional trade route, but realizing its full potential relies on demand for trade between Europe and Asia. High transport costs along the Middle Corridor due to geopolitical instability or project economics—or an unforeseen increase in willingness to ship goods via Russia or Iran—could derail TRIPP’s prospects.

Pashinyan looks west

The finalization of TRIPP is not only an achievement of the Trump administration, but also a new peak of Pashinyan’s shift away from Russia. For thirty years, Armenia relied solely on Moscow for its security, leading to Russian domination of the country’s internal and foreign politics. When Russia failed to intervene during the 2020 Karabakh War, Pashinyan made a change. Understanding that a peace deal with Azerbaijan was the only way to remove Russian leverage and therefore achieve true independence, the Armenian prime minister staked his political future on such a deal. Simultaneously, he inked major defense deals with India, France, Greece, and Cyprus, among others.

But the United States is the only power capable of truly offering Armenia an exit ramp from Russian domination. By conducting peace negotiations under US auspices and placing US interests directly over TRIPP, Pashinyan and Aliyev have protected the most sensitive part of the deal with a US deterrent. But more than that, they tied the success of the peace process to closer relations with Washington. As Aliyev attested at the peace summit, “If any of us—Prime Minister Pashinyan or myself—had in mind to step back, we wouldn’t have come here.”

Yet Russia is not the only neighbor disturbed by a growing US presence in the South Caucasus. Iran has consistently called any change of the status quo to its northern border with Armenia a “red line.” In 2022, Tehran even staged large-scale military exercises on the Azerbaijani border when it thought Baku may try to take over the area by force. Recently, Ali Velayati, a senior advisor to Ayatollah Ali Khamenei, threatened to turn the South Caucasus into a “graveyard for the mercenaries of Donald Trump.” However, Iran is weaker than it has been in decades, and Pashinyan has taken advantage. As protests threaten the stability of the Iranian regime, Tehran weakly voiced concern that Washington could use TRIPP “within the framework of its security policy,” a far cry from red lines, graveyards, and military exercises. 

Last month, Pashinyan sent Deputy Foreign Minister Vahan Kostanyan, responsible for TRIPP coordination with Washington, to Israel to discuss the corridor. Kostanyan’s visit showed that Pashinyan would not make the same mistake with Iran as it did with Russia, instead choosing to align with the US-backed regional order.

Such moves come at a key time. With parliamentary elections set for 2026, Pashinyan needs to show that his pursuit of peace and ties with the West have been successful. Already, there are some signs. Azerbaijan has begun to ship oil and gas to Armenia, driving fuel prices down by 15 percent. Meanwhile, incoming stability and regional integration with Azerbaijan and Turkey have the potential of transforming Armenia into a transit country and providing easy access to the European market.

Russia has organized against Pashinyan ahead of the elections in the way it knows best—information operations. Last month, Armenian outlet Civilnet reported a spike in fake news targeting Armenian authorities, often spreading through anonymous social media accounts and Russian-language Telegram channels. Moscow will almost certainly seek to expand these efforts ahead of the election.

Nonetheless, the coming implementation of the TRIPP route looks like a major success in the Trump administration’s commercially focused foreign policy, and it is a model of constructive partnership that the White House should use elsewhere around the world. The project promises openings for American companies to build a small but crucial link to knitting the Middle Corridor together, a boon for the United States, as well as its partners in the South Caucasus and Central Asia. Sidelining Russia and Iran in the process may also decrease their ability to exert economic pressure in the region, giving leaders such as Pashinyan and Aliyev a freer hand to exercise their sovereignty and pursue their countries’ best interests.

The post How Trump’s ‘TRIPP’ triumph can advance US interests in the South Caucasus appeared first on Atlantic Council.

Bottom lines up front

• Relations between Washington and Brussels were upended this weekend after Trump threatened tariffs on several European nations until the United States can acquire Greenland.
• Many European leaders would still prefer to avoid an open confrontation or rupture with the Trump administration, but the Greenland dispute is testing the limits of this strategy.
• With no obvious off-ramp that would satisfy both sides, escalation is more likely than at any other time since Trump’s return to the White House. 

DAVOS and WASHINGTON—In Davos, where Josh recently landed, preparations are underway to welcome US President Donald Trump, French President Emmanuel Macron, German Chancellor Friedrich Merz, European Commission President Ursula von der Leyen, and dozens of other global leaders under this year’s theme: “A Spirit of Dialogue.”

But the truth is there is very little spirit—and even less dialogue—between Trump and his European counterparts right now.

Relations between Washington and Brussels were upended this weekend after Trump said on social media Saturday morning that he would impose a 10 percent tariff on France, the Netherlands, Denmark, Norway, Sweden, France, and the United Kingdom—presumably on top of the existing tariffs— “until such time as a Deal is reached for the Complete and Total purchase of Greenland.” In the same post, which targeted countries that recently sent troops to Greenland, Trump threatened to raise these tariffs to 25 percent if such a deal has not been agreed to by June 1. For all the Wall Street analysts who argued that the second year of Trump’s term would bring more stability on the tariff front, Saturday morning should have been a wake-up call. Trump is not abandoning his favorite economic weapon anytime soon—unless, that is, the Supreme Court forces him to, as the court is set to rule on the legality of many of the administration’s tariffs as soon as this week.

This all adds up to an incredibly volatile situation: a US president seemingly willing to seize the territory of a NATO ally or force its sale, a Supreme Court that may dramatically alter the tools the president has to levy tariffs, and a European Union (EU) asking itself whether it made a mistake by agreeing to a lopsided trade deal just six months ago in Scotland—and increasingly questioning the future of the US-European alliance.

Below, we break down each of these dimensions—and how they could escalate or deescalate in the week ahead.

Europe’s scramble for a united response

If Wall Street underestimated the president’s use of tariffs, so did Europe. Fresh off the successful signing of the EU-Mercosur trade deal on Saturday in Paraguay, the new threats brought von der Leyen and European Council President António Costa back to the harsh realities of Trump-era power politics. 

Their initial reaction in true Brussels style: coordinate a European response among the twenty-seven EU countries. 

Macron went further, declaring the tariffs “unacceptable” and calling for the EU to deploy its so-called “big bazooka” against economic blackmail: the much-touted but never-used Anti-Coercion Instrument (ACI). This stood in contrast with the response from Italian Prime Minister Giorgia Meloni, a Trump ally. She said that the US tariffs would be a mistake but characterized the dispute over Greenland as a misunderstanding and called for dialogue and de-escalation. 

To equip European leaders with greater leverage, the Commission is dusting off a €93 billion package of retaliatory tariffs that it prepared during the trade negotiations following Trump’s “Liberation Day” global tariff announcement but suspended after the bloc brokered the Turnberry trade deal with Washington last July. The threat of these tariffs, however, will hardly strike fear into the US president. This White House knows full well that it has the upper hand in pressuring a low-growth EU with a a $236 billion trade surplus with the United States and divergent member state interests.

The ACI also is likely disappearing into back pockets in Brussels, despite bluster from Paris and the European Parliament. Designed to counter economic coercion from China and give the EU more flexibility and leverage in trade talks, its potential use has generated strong reservations from member states that are more dependent on the United States for security and trade. Much depends too on what position Germany will take and whether Berlin and Paris can align on the use of the instrument.         

Another missed opportunity for Europe is the absence of a done deal on US-EU trade. While Washington and Brussels agreed the Turnberry deal last July, the EU has yet to fully ratify the framework agreement. Opposition to the deal in the European Parliament has been building for months. But it reached a boiling point on Saturday when the largest political group in the European Parliament, von der Leyen’s center-right European People’s Party, announced that it will not vote to approve the deal in the face of Trump’s threats. 

Without the Turnberry deal implemented, the EU will have a harder time countering Trump’s punitive Greenland tariffs and preventing him from reopening a trade dispute that many hoped had been closed.

Many leaders in Europe would still prefer to avoid an open confrontation or rupture with the Trump administration. But the US president’s more brazen approach on Greenland is testing the limits of Europe’s hugging-the-bear strategy–efforts to continue engagement with the US president amid volatility and manifest disagreements while avoiding open confrontation. Trump’s aggressive push risks robbing European leaders of what political space is left at home to maintain their carefully calibrated balancing act vis-à-vis the United States. Geopolitical sparring over Greenland alone will not push Europe into collective opposition to the United States. But with the Trump administration refusing to rule out military options and levying economic threats over the president’s personal ambitions for the Arctic island, that dynamic might just change.

The Supreme Court, tariffs, and Trump’s next move

All of the above assumes that the US Supreme Court does not tell the president—possibly as soon as Tuesday—that he can no longer use the International Emergency Economic Powers Act to impose tariffs. The threat issued against Europe would almost certainly rely on that authority if Trump were to follow through with it.

If the court ends up siding with the president, expect Trump to double down. The last meaningful check on his tariff authority would be gone, and there is little chance Congress would muster the support needed to rein him in.

The more likely scenario, however, is that the court either rejects or sharply limits his powers. In that case, Trump will need a Plan B.

That plan has been contemplated before—with Europe in mind. While Trump has been surprisingly disciplined in dealing with the European Commission rather than individual member states, he has previously threatened specific countries, including Spain, with sector-specific tariffs. If the court rules against him, expect to see a wave of French, Dutch, and Danish agricultural and industrial products being targeted under Section 232 and Section 301 authorities. Regardless of the court’s ruling, those authorities will remain firmly in the president’s power. 

Trump also would likely turn to Section 122 authority, which allows tariffs of up to 15 percent for 150 days. But that would merely replace existing EU tariff levels—not add to them—which appears insufficient for the kind of leverage he wants to exert.

The deeper problem: no deal space

The larger issue—to use the favorite buzzword in Davos—is the lack of deal space between Trump and Europe.

On trade, the path to a deal for the two sides has been much clearer. As both the United Kingdom and the EU have shown, an agreement can be reached with Trump if the other side is willing to cut tariffs on US goods and pledge hundreds of billions of dollars in investment in the United States. It’s a model that has been followed around the world. 

But Greenland is different. It is unclear what compromises Europe could offer—military, security, economic, or otherwise—that would satisfy Trump. It is even less clear whether he will be satisfied by anything short of Greenland coming into US possession. This is the most troubling dimension of the threat. Among the people Josh has spoken with on the ground in Davos so far, few see an obvious off-ramp. And that is what makes escalation more likely than at any other time since Trump’s return to the White House. 

In Davos, the “spirit of dialogue” may quickly give way to a moment of decision. European leaders will try to “engage, not escalate” one more time—an approach that helped stabilize US support for NATO and Ukraine and got them a truce on trade. But political space on their hugging-the-bear strategy is running out fast. Leaders may face difficult strategic and tactical decisions about whether to pursue a deal based on the practical realities of what Trump wants out of Greenland or opt for economic confrontation with the United States and draw a hard line on sovereignty, international law, and, ultimately, Europe’s credibility. The approach they take will, in turn, inform Trump’s response—and the future direction of transatlantic relations.

The post Greenland, Davos, and a week that could redefine the transatlantic alliance appeared first on Atlantic Council.

Bottom lines up front

• Beijing’s recent request to dock a navy hospital ship in Rio de Janeiro has puzzled—and unsettled—Brazilian authorities.
• Yet, Brasília granted the ship access to the port, coincidentally at the same time that a US research vessel will also be docked there.
• By welcoming the Chinese vessel with little fanfare, Brasília is proving it isn’t yet ready to tilt one way or the other in its geopolitical balancing act.

BRASÍLIA—Brazil’s decision to allow a Chinese military hospital ship to dock in Rio de Janeiro could provide a case study of how Beijing is expanding its naval presence in the Western Hemisphere. It also demonstrates how regional powers are dealing with the pressures arising from the intensifying competition between the United States and China.

This past fall, China requested authorization from the Brazilian government for the People’s Liberation Army Navy hospital ship Ark Silk Road to dock in Rio de Janeiro from January 8 to 15. The request seemed, at first glance, to be just another routine stop on a humanitarian mission. 

But in Brasília, the request triggered unusual discomfort. The Chinese diplomatic note, sent on September 15 last year, omitted any reference to Harmony Mission 2025, Beijing’s first global humanitarian naval operation. And it offered few details beyond a statement that no research activities were planned in Brazilian waters and that the vessel would not use any radio equipment. In fact, the note did not explain why the ship wanted to dock in Rio de Janeiro at all.

The lack of clarity raised concerns within Brazil’s Ministry of Foreign Affairs and among some Brazilian Navy officers who spoke with me on the condition of anonymity. These officials were especially concerned because of the geopolitical context that served as the visit’s backdrop: China’s growing presence in a region traditionally perceived by Washington as part of its security sphere, just as the Trump administration is prioritizing Latin America and asserting itself with military force to impose its interests there.

Brazilian officials’ concerns over the Ark Silk Road, which have so far been raised only behind the scenes, highlight a structural tension in the country’s foreign policy: Brazil is economically dependent on China but has maintained a solid security partnership with the United States for decades. This duality is currently on full display. The US oceanographic vessel Ronald H. Brown is scheduled to dock at the Port of Suape, in northeastern Brazil, from January 14 to 21, for a scientific mission approved by the Navy General Staff. This means the US Navy mission will overlap with that of the Ark Silk Road, which arrived in Rio de Janeiro on January 8 as scheduled.

The coincidence of these maritime visits makes Brazil a reluctant arena for US-China competition. But it also offers Brazil an opportunity to demonstrate that the country wishes to act as a partner to both powers, without allowing itself to be instrumentalized by either of them.

Instrument of power projection

The Ark Silk Road is the second-largest ocean-going hospital ship designed and built by China. Weighing ten thousand tons and equipped with fourteen clinical departments, seven diagnostic units, and the capacity to perform more than sixty types of medical procedures, the ship is among the most visible faces of Chinese “smart power”: the deliberate combination of soft power and hard power that China’s defense doctrine increasingly relies on.

The humanitarian results so far, according to statistics publicized by Chinese officials, are impressive:

• 3,330 patients treated in Fiji, with 426 surgeries in just one week;
• 3,995 local patients treated, 679 surgical procedures, and 2,718 medical tests in Tonga;
• 771 consultations and 177 surgeries in Montego Bay, Jamaica, weeks after Hurricane Melissa devastated the country;
• 2,769 local patients treated and 207 surgeries completed in only three days in Kingston, Jamaica.

The Ark Silk Road, or the “ship of hope and envoy of peace” as Chinese authorities describe it, represents smart power in its purest form: It projects benevolence and technical capability, but this humanitarian narrative coexists with clear strategic calculations.

When I spoke with Rafael Almeida, a retired Brazilian Army colonel and defense and strategy analyst who holds a master’s degree from the National Defence University of China, he suggested that the Ark Silk Road’s capabilities extend well beyond medical functions for a hospital ship. For instance, he pointed to the ship’s unusually large number of sensors, antennas, and radar systems.

The ship’s itinerary included stops in need of humanitarian assistance, but it was also carefully designed with diplomacy in mind: With the exception of Mexico and Brazil, all of the Latin American countries included in the mission are part of China’s Belt and Road Initiative. In some countries, such as Nicaragua, the ship was received with military honors. The Nicaraguan National Assembly formally approved the ship’s visit as part of an exchange with its national army, marking the first time the People’s Liberation Army Navy has docked in the country.

The implicit message is unequivocal: China is gradually expanding its naval presence in the Western Hemisphere, and it is doing so under the banner of a humanitarian ship.

The South Atlantic enters the geopolitical arena

The Ark Silk Road’s passage along the Brazilian coast is occurring in an increasingly disputed region. In recent months, Washington has reinforced its presence in the Caribbean, following the resurgence of tensions between the United States and the regime of Venezuelan leader Nicolás Maduro, which culminated in Maduro’s extraction and arrest on January 3.

But the United States’ maritime military actions have gone beyond its policy toward Venezuela. Since September 2, the United States has destroyed more than thirty vessels in dozens of attacks carried out in the Caribbean and the Pacific Ocean against ships that, according to the White House, were transporting narcotics, though the administration has not presented any conclusive evidence linking these boats to drug trafficking.

Meanwhile, the Chinese humanitarian mission in the South Atlantic highlights the region’s growing strategic importance. The Ark Silk Road normalizes the Chinese navy’s presence in areas it was seen as unlikely to operate in until recently. Additionally, China has invested in ports in these areas for years, especially the mega-port of Chancay in Peru. This investment reinforces Beijing’s logistical capacity on the Pacific coast of South America. With Beijing’s humanitarian missions now reaching the Caribbean and the Atlantic, an arc of Chinese strategic infrastructure, naval diplomacy, and political influence is emerging.

It is no coincidence that China released an official document explaining its policy toward Latin America and the Caribbean less than a week after the United States unveiled its latest National Security Strategy, which places Latin America at the center of US foreign policy concerns. 

Brazil’s discomfort

China’s request for the Ark Silk Road to visit Brazil thus comes at a sensitive moment for Brazilian foreign policy. This timing, as well as the opaque nature of the request, have caused discomfort in Brasília.

When I reached out to Mauricio Santoro, a political scientist who specializes in Sino-Brazilian relations and collaborates with the Brazilian Navy’s Center for Political-Strategic Studies, he told me that Brazil does not require the kind of humanitarian support that China is offering to other countries with its mission. The Brazilian Navy has its own disaster response capabilities, Santoro noted, including the Multipurpose Atlantic Aircraft Carrier, the largest warship in Latin America. Moreover, Brazil’s United Health System is recognized as the largest public health system in the world. Free and universal, it serves a population of more than 200 million Brazilians. 

But rejecting the Chinese request would have been politically and perhaps economically costly. China is Brazil’s largest trading partner and a significant investor in the country’s infrastructure. An explicit “no” could have been interpreted as a pro-Washington geopolitical signal.

Given these factors, Brazil opted to buy time for a few months, but in November authorized the Ark Silk Road to dock in Rio de Janeiro on the requested dates. The announcement was made with little fanfare. Unlike in other countries in which the Ark Silk Road has operated, the Brazilian government has not yet issued a public statement on the matter and has refused to answer questions about the visit. 

When I reached out to ask questions about the Ark Silk Roads’s visit, the Brazilian government passed the buck. The Ministry of Foreign Affairs recommended that questions be directed to the Brazilian Navy and the Chinese embassy in Brazil. The Navy stated that it is only responsible for the technical and logistical aspects of the request. The Chinese embassy did not respond. I also contacted the Brazilian Ministry of Defense, which pointed me back to the Foreign Ministry. Documents obtained through the Access to Information Act confirm that official messages were exchanged only between the Ministry of Foreign Affairs and the Navy.

Even after the Ark Silk Road docked in Rio de Janeiro on January 8, the Brazilian government has not commented on the matter, in contrast to the Chinese Embassy in Brazil and the Chinese Consulate in Rio de Janeiro.

Meanwhile, the Regional Medical Council of Rio de Janeiro (CREMERJ) formally notified the state health department, requesting clarification as to whether the ship would be providing medical services to the local population. Citing Brazilian law and Federal Medical Council regulations, the CREMERJ emphasized that any medical act performed within Brazilian territory—even during humanitarian or diplomatic missions—must be subject to oversight. However, there is no official authorization for the Ark Silk Road to provide medical care to Brazilians.

An ‘embarrassing’ situation

On January 10, a Brazilian Navy delegation, led by Captain Gustavo Sant’anna Coutinho, chief of staff of the 1st Naval District Command, met with People’s Liberation Army Navy officers aboard the Ark Silk Road. Brazilian Navy musicians also performed on the ship’s deck. According to a senior Brazilian military officer I spoke with, the visit was accompanied by a series of confidence-building activities, including courtesy calls, invitations to tour the vessel, and a friendly football match at the Navy’s Physical Education Center. Beyond these engagements, the same officer told me, there was little substantive interaction, and the agenda remained largely routine—consistent with standard naval diplomacy.

However, this routine contrasted sharply with the level of control surrounding access to the vessel. Spontaneous visitors were not permitted. According to multiple sources I spoke with, entry required prior authorization from the Chinese consulate, and visitor lists closed in December. The Chinese Consulate General in Rio de Janeiro did not respond when I contacted it.

Despite these restrictions, the ship’s arrival was met with a visible public reception. Chinese citizens gathered at Pier Mauá to welcome the vessel, waving Brazilian and Chinese flags—scenes reminiscent of organized demonstrations during the 2025 BRICS summit in Rio de Janeiro. Brazilian media outlets have reported that similar groups at previous events were coordinated by intermediaries and accompanied by private security.

The tightly controlled access and carefully managed optics have fueled unease among some Brazilian military analysts and officers. Speaking on condition of anonymity, several of them described the visit to me as “embarrassing.” A Brazilian Navy officer told me that there had been pressure from Brazilian diplomats to ensure the Chinese were well received. However, the military did not know how to proceed since the visit had not been properly publicized.

Port visits routinely allow foreign navies to update their knowledge of port infrastructure, logistics, and coastal conditions. Such practices are common among long-established naval powers operating under bilateral frameworks. But according to Almeida, the retired Brazilian Army colonel, this marked the first time a Chinese military vessel conducted such an exercise in Brazil without a formal defense agreement in place.

Against this backdrop, Brasília’s refusal to provide more detail or otherwise draw attention to the Ark Silk Road’s docking, unlike several other countries on the itinerary, demonstrates that it is seeking maximum discretion to prevent any unwelcome geopolitical interpretations.

At the same time, this posture reflects an awareness that the convergence of Chinese and US naval presence creates a limited but significant opportunity for Brazil to reaffirm its longstanding preference for strategic autonomy. This means engaging both powers as partners, while making clear that such engagement does not amount to alignment and that Brazil does not intend to be instrumentalized in a dispute it did not choose.

The post China’s latest naval moves in the Western Hemisphere put Brazil in the diplomatic spotlight appeared first on Atlantic Council.

Bottom lines up front

• Despite several shocks in the past year, the global economy saw strong growth in 2025, raising hopes for market forecasters about what 2026 has in store.
• However, markets may be confusing resilience for immunity.
• The global economy faces major challenges in the year ahead, from the AI surge to the global response to new US tariffs.

WASHINGTON—US President Donald Trump shocked—and re-shocked—the global economy in 2025, but growth powered through. Thanks to the surge in artificial-intelligence (AI) investment and limited inflation from tariffs, it’s clear that many economists’ doomsday predictions never materialized.

By the end of 2025, forecasts across Wall Street predicted “all-time highs” for the S&P 500 in 2026. Many investors believe that the AI train won’t slow down, central banks will continue cutting rates, and US tariffs will cool down in a midterm year.

But markets may be confusing resilience for immunity.

The reality is that several daunting challenges lie ahead in 2026. Advanced economies are piling up the highest debt levels in a century, with many showing little appetite for fiscal restraint. At the same time, protectionism is surging, not just in the United States but around the world. And lurking in the background is a tenuous détente between the United States and China.

It’s a dangerous mix, one that markets feel far too comfortable overlooking.

Here are five overlooked trends that will matter for the global economy in 2026.

The real AI bubble

Throughout 2025, stocks of Chinese tech companies listed in Hong Kong skyrocketed. For example, the Chinese chipmaker Semiconductor Manufacturing International Corporation (known as SMIC) briefly hit gains of 200 percent in October, compared to 2024. The data shows that the AI boom has become global.

Everyone has been talking about the flip side of an AI surge, including the risk of an AI bubble popping in the United States. But that doesn’t seem to concern Beijing. Alibaba recently announced a $52 billion investment in AI over the next three years. Compare that with a single project led by OpenAI, which is planning to invest $500 billion over the next four years. So the Chinese commitment to AI isn’t all-encompassing for their economy.

Of course, much of the excitement around Chinese tech—and the confidence in its AI development—was driven this past year by the January 2025 release of the DeepSeek-R1 reasoning model. Still, there is a limit to how much Beijing can capitalize on rising tech stocks to draw foreign investment back into China. There’s also the fact that 2024 was such a down year that a 2025 rebound was destined to look strong.

It’s worth looking at AI beyond the United States. If an AI bubble does burst or deflate in 2026, China may be insulated. It bears some similarities to what happened during the global financial crisis, when US and European banks suffered, but China’s banks, because of their lack of reliance on Western finance, emerged relatively unscathed. 

The trade tango

In 2026, the most important signal on the future of the global trading order will come from abroad. US tariffs will continue to rise with added Section 232 tariffs on critical industries such as semiconductor equipment and critical minerals, but that’s predictable.

But it will be worth watching whether the other major economic players follow suit or stick with the open system of the past decades. As the United States imports less from China, but Chinese cheap exports continue to flow, will China’s other major export partners add tariffs? The answer is likely yes.

US imports from China decreased this past year, while imports by the Association of Southeast Asian Nations (ASEAN) and European Union (EU) increased. In ASEAN, trade agreements, rapid growth, and interconnected supply chains mean that imports from China will continue to flow uninhibited except for select critical industries.

But for the EU, 2025 is the only year when the bloc’s purchases of China’s exports do not closely resemble the United States’ purchases. In previous years, they moved in lockstep. In 2026, expect the EU to respond with higher tariffs on advanced manufacturing products and pharmaceuticals from China, since that would be the only way to protect the EU market.

The debtor’s dilemma

One of the biggest issues facing the global economy in 2026 is who owns public debt.

In the aftermaths of the global financial crisis and the COVID-19 pandemic, the global economy needed a hero. Central banks swooped in to save the day and bought up public debt. Now, central banks are “unwinding,” or selling public debt, and resetting their balance sheets. While the US Federal Reserve and the Bank of England have indicated their intention to slow down the process, other big players, such as the Bank of Japan and the European Central Bank, are going to keep pushing forward with the unwinding in 2026. This begs the question: If central banks are not buying bonds, who will?

The answer is private investors. The shift will translate into yields higher than anyone, including Trump and US Treasury Secretary Scott Bessent, want. Ultimately, it is Treasury yields, rather than the Federal Reserve’s policy rate, that dictate the interest on mortgages. So while all eyes will be on the next Federal Reserve chair’s rate-cut plans, look instead at how the new chair—as well as counterparts in Europe, the United Kingdom, and Japan—handles the balance sheet.

Wallet wars

By mid-2026, nearly three-quarters of the Group of Twenty (G20) will have tokenized cross-border payment systems, providing a new way to move money between countries using digital tokens. Currently, when you send money internationally, it can go through multiple banks, with each taking a cut and adding delays. With tokenized rails, money is converted into digital tokens (like digital certificates representing real dollars or euros) that can move across borders much faster on modern digital networks.

As the map below shows, the fastest movers are outside the North Atlantic: China and India are going live with their systems, while Brazil, Russia, Australia, and others are building or testing tokenized cross-border rails.

That timing collides with the United States taking over the G20 presidency and attempting to refresh a set of technical objectives known among wonks as the “cross-border payments roadmap.” But instead of converging on a faster, shared system, finance ministers are now staring at a patchwork of competing networks—each tied to different currencies and political blocs.

Think of it like the 5G wars, in which the United States pushed to restrict Huawei’s expansion. But this one is coming for wallets instead of phones.

For China and the BRICS group of countries in particular, these cross-border payments platforms could also lend a hand in their de-dollarization strategies: new rails for trade, energy payments, and remittances that do not have to run through dollar-based correspondent banking. This could further erode the dollar’s international dominance.

The question facing the US Treasury and its G20 partners is whether they can still set common rules for this emerging architecture—or whether they will instead be forced to respond to fragmented alternatives, where non-dollar systems are already ahead of the game.

Big spenders

From Trump’s proposal to send two-thousand-dollar checks to US citizens (thanks to tariff revenue) to Germany’s aim to ramp up defense spending, major economies across the G20 have big plans for additional stimulus in 2026. That’s the case even though debt levels are already at record highs. Many countries are putting off the tough decisions until at least 2027.

This chart shows G20 countries with stimulus plans, comparing their projected gross domestic product (GDP) growth rates for 2026 with their estimated fiscal deficits as a percentage of GDP. It’s a rough metric, but it gives a sense of how countries are thinking about spending relative to growth and debt in the year ahead. Countries below the line are planning to loosen fiscal taps.

Of course, not all stimulus plans are created equal. Ottawa, for example, is spending more on defense and investments aimed at improving the competitiveness of the Canadian economy, while keeping its estimated fiscal deficit at around 1 percentage point of projected 2026 GDP growth. US growth isn’t bad, coming in at a little over 2 percent, but the government plans to run a fiscal deficit of at least 5.5 percent. Russia is attempting to prop up a wartime economy, while China is pursuing ambitious industrial policies and pushing off its local debt problems. And on China, while the chart above shows International Monetary Fund and other official estimates for China’s GDP growth, some economists, including ones from Rhodium Group, argue that China’s real GDP growth could be as low as 2.5 percent for 2026, which would push China below the line displayed.

Within this group, emerging economies are experiencing stronger growth and may have more room to run deficits next year. For advanced economies, that spending tradeoff is much harder to justify.

When Trump captured Nicolás Maduro on the first Saturday of the year, there was speculation that when markets opened the following Monday, they might react negatively given a possible geopolitical shock or positively in anticipation that new oil would be coming online. But markets were muted, and they took the news in stride. That has been the modus operandi of markets ever since Trump took office—trying to see past the immediate news and ask what actually matters for economic growth. In 2025, that strategy paid off. But 2026 may look very different.

The post Five trends to watch in the global economy in 2026 appeared first on Atlantic Council.

Bottom lines up front

• Unlike many of its neighbors, Argentina relies heavily on export taxes to raise revenue for its often overstretched government finances.
• Argentina’s export tariffs are so high that they have discouraged production and exports, reducing the overall tax base.
• The Milei government has taken some steps in the past year to reduce export taxes. It should accelerate these efforts, while working to replace some of the lost revenue with other sources.

The midterm victory for Argentine President Javier Milei’s ruling party in October expanded its legislative authority and provided a renewed mandate from voters to continue the country’s transformative economic reforms. Since the election, headlines have largely focused on how the Milei administration will approach much-needed fiscal and labor reforms. But Argentina should also focus on further liberalizing its foreign trade. As part of the Milei administration’s efforts to optimize efficiency and broaden the domestic tax base while lowering tax pressure on the economy, Argentina should reduce its unusually burdensome taxes on exports, known as the retenciones.

Over the past few months, the Milei administration has taken some steps on the right track. On December 9, for instance, the administration lowered the export tax on soybeans from 26 percent to 24 percent. This and other recent steps are welcome, but further reforms of the export tax are needed. Failing to reduce these taxes further could cost Argentina a sizable share of its export potential in key sectors, trapping the economy in a disequilibrium. 

The history of distortive fiscal dependence

Argentina’s current system of taxes on exports is the result of a tumultuous history of measures imposed to fill fiscal shortfalls. The problem is that these export taxes uniquely punish the country’s most efficient, globally competitive industries by forcing capital and labor away from competitive sectors—a problem economists around the world have long recognized. These taxes have been imposed, adjusted, rescinded, and reintroduced time and again, particularly targeting Argentina’s highly competitive agribusiness products in a recurrent dynamic that has discouraged production and overseas sales. The loss of overseas sales creates further problems: it limits the inflow of foreign currency, primarily US dollars, into the economy, making it more difficult for Argentina to meet its foreign currency debt obligations.

Tellingly, several Argentine administrations have altered or canceled these taxes altogether to boost languishing production and sales. Argentina has also been an outlier in charging these export tariffs, with almost none of its regional peers charging these except for very limited and targeted exemptions.

The distortive effects that these taxes have had on Argentina’s exports are clear: Comparing export volumes (rather than export values, which are subject to price fluctuations in commodities) shows that Argentina’s exports have stagnated in recent years. At the same time, its peers in the Mercosur trade agreement (Brazil, Paraguay, and Uruguay) saw their export volumes grow considerably in the same period while charging only limited duties on certain exports. This loss of potential exports costs Argentina economic growth and stifles its agricultural sector.

Although the problem is clear, solving it is not as simple as it sounds. Argentina’s duties on agricultural exports, which had been mostly eliminated in 1992, were reintroduced in 2002 as an emergency fiscal stopgap measure following the country’s historic 2001 debt crisis and subsequent default. No government since then has been able to remove all of these taxes because of how important they have become for the country’s often overstretched finances.

Famously, Argentina has run budget deficits through most of the past two decades, as well as the better part of the twentieth century. Once these duties are imposed, they then experience fiscal inertia—the fiscal cost of removing them prevents governments from doing so. Argentina relies on taxes on international trade (both imports and exports) for over 10 percent—and sometimes as much as 20 percent—of its federal government revenue. As our research shows, this makes it an outlier among its peers. The 2022 average for Latin America, for example, was slightly under 4 percent, while the upper-middle income country average stood at around 3.5 percent.

Since coming into office in December 2023, the Milei administration has made great strides to bring government spending back under control. In its first year in office, it achieved and sustained a consolidated fiscal surplus for the first time in almost two decades. The government achieved this by implementing spending cuts and freezes, as well as eliminating several subsidies, all measures that were politically costly. At the same time, the government has eliminated other distorting taxes, including the PAIS tax on foreign currency purchases.

There has been some progress on export taxes. In 2025, the administration reduced and eliminated export duties on certain agricultural products, as well as several import duties. In September, the government approved a temporary suspension of duties on grain exports as part of a drive to accrue much-needed foreign currency reserves. In October, it temporarily suspended export duties on aluminum and steel to assist the sector following the United States’ imposition of universal tariffs on these products earlier in the year.

Nevertheless, the latest available data show that Argentina still relies on taxes on taxes on international trade (6 percent of total federal government income comes from export taxes, while at least 4 percent comes from duties on imports). Any major reduction of taxes on international trade could have serious implications for the government’s goal of keeping its deficit under control. According to the latest International Monetary Fund projections, which are largely based on Argentina’s current tax system, the government is expected effectively to break even fiscally in 2026, with little, if any, surplus space left after accounting for upcoming debt repayments.

The case for accelerating the reduction of export taxes

Reducing these taxes should be a priority for Argentina because of two well-known challenges. First, Argentina’s export tariffs are so high that they have discouraged production and exports, in turn reducing the size of the taxable export base, which reduces the tax’s efficacy. That is why an export duty reduction is likely to yield a greater increase in exports. However, to do this responsibly the government would need to work in stages, steadily replacing taxes from exports with other fiscal income sources, even as it continues to rein in overall spending. Some of the replacement tax revenue could come, for example, by increasing tax collection efficiency and broadening the tax base by including larger shares of the informal economy into the mainstream.

Second, Argentina operates on a tight currency band and has debt obligations denominated in US dollars that are due early this year and next year. This means that to maintain economic stability, the country needs dollar reserves, which have become increasingly scarce. Indeed, the lack of dollar reserves necessitated the US-Argentina swap line that the Trump administration instituted in October.

Argentina generates reserves through a conversion system that requires exporters to repatriate and sell dollar earnings to the central bank at the official rate. However, this mechanism, which would otherwise mechanically generate reserves, is undermined by the high export duties’ stifling effect on overseas sales.

Additional reforms are needed

As the Milei administration goes into the second half of its term, it should double down on its reform agenda, accelerating the pace of the country’s incremental liberalization. This means committing unambiguously to a liberal program that anchors expectations for, and delivers on, gradual export and import duty reductions that give room for the economy to grow—but also to adjust—in the process. The reduction of export duties should be gradual to account for the country’s tightly kept and necessary budget surplus. Import duties, which also generate revenues, should be reduced in a gradual process that eases the purchase of goods, especially those that are needed for Argentina’s own productive sectors. However, Argentina’s import duties are governed in part by Mercosur, so this will need to be done in close coordination with the country’s partners in the bloc. 

To further boost exports as an engine of growth, Argentina needs to move toward a more orthodox economic and fiscal model that does not punish exports and does not rely on export duties for an inordinately large share of its total tax revenues. 

The moment to move in that direction is now. The next general election will take place in October 2027. Any signal that the Milei administration’s fiscal consolidation agenda is stalling, that currency reserve issues persist, or that productivity is static may reignite capital flight once again. For its economic reform agenda to succeed, the Milei government must achieve what previous administrations could not: fiscal discipline with a sustainable export-driven growth model.

The post To unlock growth, Argentina should reduce its export taxes appeared first on Atlantic Council.

What impact will this deal have on European competitiveness and South American export markets? And what details remain to be ironed out as the deal moves onto the European Parliament for final approval? Our experts provide their insights into this decades-in-the-making trade pact below. 

1. Why is the EU-Mercosur deal happening now?

Those European farmers and others opposed to the EU-Mercosur deal can blame US President Donald Trump for the conclusion of this significant free trade agreement. Negotiations between the EU and Mercosur were essentially on hold after the basic agreement, finalized in 2019, was met with serious opposition by key EU member states. During 2024 and 2025, the European Commission and Mercosur negotiated an “additional instrument” with protections on labor, human rights, and environmental issues. With Trump’s tariffs in effect by summer 2025, pressure mounted for the EU to diversify its trading partners. Last year, the EU finalized a new trade agreement with Indonesia and updated an existing agreement with Mexico. The bloc also made significant progress on an EU-India trade deal.

Nevertheless, the Mercosur deal still faced near-fatal opposition until it received two final pushes: First, the European Commission proposed safeguards to protect agricultural interests from import surges. Second, the new US National Security Strategy made clear for the EU that trade relations with Latin America were a geopolitical imperative. Nevertheless, Italian Prime Minister Giorgia Meloni refused to provide her country’s needed vote until the European Commission promised additional agricultural support in the next EU budget. With Italy’s support today—and in the wake of a US operation in Venezuela that left Europe on edge about Greenland—the EU-Mercosur agreement finally made it over the finish line. 

—Frances Burwell is a distinguished fellow at the Atlantic Council’s Europe Center.

***

The EU–Mercosur trade deal comes at a moment of growing pressure to diversify export markets and trade partners amid heightened geopolitical uncertainty, particularly in light of US tensions with China and the imposition of US tariffs. For Mercosur, this urgency has been especially acute for Brazil, the bloc’s largest economy, which has faced an additional 40 percent US tariff on top of baseline duties and whose number one trading partner is China.

—Valentina Sader is a director at the Atlantic Council’s Adrienne Arsht Latin America Center, where she leads the Center’s work on Brazil, gender equality and diversity, and manages the Center’s Advisory Council.

***

The European Commission has sought to expand the EU’s network of trade relations to compensate for pressures from US tariffs, aggressive challenges from China, and the need to secure access to critical materials. Whether that diversification strategy is credible hinged in no small part on this trade deal—not just on the substance of market access and comparative advantages but also on the geopolitical feasibility of such a major agreement. The shifts in US trade policy under Trump, the challenges to the global trading system that Europe’s export-oriented economies depend on, and the demonstration of China’s stranglehold on critical resources clearly accelerated the decadeslong negotiations between the EU and Mercosur, which first opened in 1999 and were only finalized in 2024.

Last-minute additions were made by the EU in 2025 to provide more protections for European farmers. European Commission President Ursula von der Leyen hoped to sign the deal in Brasília in December 2025 after the initial safeguards were agreed upon in September, but Italy threw an unexpected wrench in those plans until further guarantees were made to protect domestic producers. Dramatic protests by farmers in Brussels in December solidified the momentum against signing the deal before Christmas.

On Wednesday, the safeguards Italy wanted were agreed upon by the EU’s agricultural minister and Rome lifted its veto. This paved the way for the European Council to vote in favor of the deal today by qualified majority—despite France voting against it, amid fresh farmer protests in Paris and increased political pressure on French President Emmanuel Macron—and for von der Leyen to officially sign the deal with Mercosur leaders in Paraguay as soon as January 12.

—Jörn Fleck is the senior director of the Atlantic Council’s Europe Center.

2. What impact will this have on Europe?

Europe worked hard to reach consensus on how to assuage doubts from European farmers about any negative impacts on their livelihoods. The additional measures added to the deal include “safeguards” for sensitive agricultural sectors, such as poultry, beef, eggs, citrus, and sugar, which would “suspend tariff preferences” in the case of “serious injury” to EU farmers. Serious injury is defined as an increase in import volume or a decrease in prices by more than 8 percent compared to the three-year average. The European Commission also introduced a slew of regular monitoring instruments, which will have to report to the European Council and European Parliament for increased accountability on enforcement. The Commission will be able to suspend imports from Mercosur in sensitive sectors if it deems this to be necessary. The final concessions agreed this week to bring Italy on board also include a revision to the 2028-2034 EU budget to allow farmers early access to roughly €45 billion in subsidies, as well as lowering import duties on fertilizers, the unaffordability of which was a major sticking point for protesters.

Economically, the agreement will remove approximately four billion euros worth of tariffs between the two trading blocs, which is significant for several key EU sectors that were previously subject to high tariffs when exporting to Mercosur. European exporters will no longer face 35 percent tariffs on car parts, 28 percent tariffs on dairy, and 27 percent tariffs on wine. The Commission estimates that the agreement could increase EU exports to Mercosur by 39 percent each year and support more than 440,000 jobs in Europe. However, not everyone shares this rosy assessment. Macron, in his announcement that France would not support the deal, stated that the economic gains would be minimal and that the agreement is “from another age.”

—Jörn Fleck

***

Despite the very visible and sometimes violent protests by European farmers, the Mercosur pact is likely to make a positive contribution to the European economy. The agreement removes most Mercosur tariffs for industrial goods (currently set at rates ranging from 15-35 percent), opening the market for European machine tools, cars, pharmaceuticals, and other products. Mercosur tariffs on most food and agriculture products (ranging from 20-35 percent) will also be removed.

While EU farmers have expressed concerns about Mercosur agricultural products, especially meat, flooding the EU market, that is very unlikely in reality. The agreement includes limited tariff-free quotas for Mercosur products, and once those quotas are reached, current tariffs are reimposed. For beef, the quota allows in only an additional 1.5 percent of total EU production, and for poultry, only 1.3 percent. Moreover, if there are sudden, sharp rises in imports, the EU can impose measures to limit them. Despite the rhetoric, agriculture remains a well-protected sector under the EU-Mercosur accord. And for European industry, this agreement opens an important new market.

—Frances Burwell

3. What impact will this have on South America?

Covering countries with a combined population of more than 700 million people, the trade deal promises to expand South American access to the European market, boosting exports and attracting greater EU investment. At the same time, it will pressure Mercosur industries to modernize, digitize, and improve efficiency to remain competitive amid increased exposure to European manufactured goods. 

Politically, the deal strengthens Mercosur’s credibility and cohesion at a moment of internal fragmentation, signaling that the bloc remains a viable platform for collective trade policy and diplomacy despite ideological differences among its members. As the bloc turns thirty-five this year, it is reasserting its strategic purpose, having finalized a deal with the European Free Trade Association, restarted negotiations with Canada, and now locked in a landmark agreement with the European Union.

—Valentina Sader

4. What should the US take away from this?

The Trump administration is unlikely to provide any public support for this agreement, but it is also unlikely to make it a significant issue in the US-EU relationship, despite its current emphasis on Latin America as its sphere of influence. This is a serious underappreciation of the importance of this accord. The EU will now have free-trade agreements with close to eighty countries, while the United States has free trade agreements with only twenty. While Trump has signed additional “deals” with many countries, they have generally raised trade barriers, rather than opening markets, and US demands for inward investment and other conditions have left many trading partners bruised and resentful. 

The EU is certainly a tough negotiator, and the Mercosur accord will make some constituencies on both sides unhappy, but it is likely to raise trade levels between two significant economic blocs. The reduction in high Mercosur tariffs for EU goods will mean more exports for European industries, luxury goods, and other products. EU companies will be able to bid on public tenders in Mercosur countries on an equal basis with local firms. The agreement also safeguards the branding of more than three hundred traditional EU food products, such as champagne and parmesan cheese, meaning that US products with those same names must be rebranded to enter the Mercosur market. This is not only an economic loss for the United States, but a geopolitical one as well. EU and Mercosur businesses will generate more partnerships, and these growing economic ties are likely to lead to more political alignment at a time when many in the Southern Hemisphere are balancing their interests between China and the United States. 

For Mercosur leaders and their citizens, the contrast could not be starker: In the same week that the United States conducted a military operation against a neighbor, the EU has finally agreed to a significant trade pact based on the rule of law.

—Frances Burwell

***

As the EU and Mercosur double down on a multilateral, rules-based free trade geopolitical reality, the United States appears to be moving in the opposite direction. Given the current geopolitical context and in the wake of a new US National Security Strategy that places the Western Hemisphere at the center of US foreign policy, this deal is an opportunity for Mercosur member countries to reduce their economic reliance on the United States.

—Valentina Sader

***

On a symbolic level, and perhaps most importantly, the deal demonstrates Europe’s willingness to adapt to an increasingly volatile global economy, the headwinds from US tariffs, and a new China challenge in critical sectors. For those in Brussels who call for the EU to stand more on its own footing economically, this is a strategic win. Moreover, if EU leaders had once again failed to reach internal consensus on the deal, it could very well have closed the door to any future deal with Mercosur and proven correct Washington’s doubts about Europe’s ability to act decisively on the world stage.

—Jörn Fleck

The post The EU and Mercosur are creating one of the world’s largest free trade areas. What’s next? appeared first on Atlantic Council.

How US trade with Brazil is evolving

In April 2025, US President Donald Trump imposed a 10 percent tariff on Brazil as part of the administration’s “Liberation Day” tariffs on nearly every country in the world. Then in July 2025, Trump imposed an additional 40 percent tariff on Brazil specifically, which further raised tariffs on products not affected by the Trump administration’s other Section 232 duties on certain industrial goods. Our analysis of both US and Brazilian trade data shows that initially, since the implementation of these new tariffs, US imports of Brazilian products have deviated significantly from the pre-tariff trend line. At the same time, US exports to Brazil have remained consistent with the pre-tariff trend line

US purchases of products in which Brazil plays a key role as a supplier have also decreased significantly since the imposition of the new tariffs. Brazil supplied at least 20 percent of US imports for a number of goods in 2024, including coffee, orange juice, cane sugar, iron ore, aluminum oxides and hydroxides, vanadium products, various tropical woods, pig iron, fuel ethanol, meat, and a range of agricultural byproducts.

Our analysis shows that US imports of these products declined dramatically through September 2025; however, as of November 13, 2025, several categories, including coffee, orange juice, and meats, were granted exemptions from both the reciprocal and Brazil-specific tariffs, and we await the release of new trade data to assess the impact of these measures.

What these evolving trade dynamics look like in practice

This section analyzes a subset of specific products for which Brazil is a key supplier to the US market.

The bigger picture

How Brazil’s international trade partners are changing

Since the imposition of new US tariffs on Brazil, Brazil’s export markets have changed significantly, while the source of its imports, particularly from the United States, has remained relatively stable.

The US export market share declined 5.3 percent in October 2025 compared to October 2024, while China’s rose by 5.2 percent. Meanwhile, the US market share of Brazil’s imports grew 1.2 percent year over year in October 2025.

Authors: Ignacio Albe, assistant director, and Valentina Sader, Brazil lead, from the Adrienne Arsht Latin America Center.

Data: All data used in this dashboard can be found here.

The research team would like to thank Apex Brazil, the Brazilian Trade and Investment Agency, for its support for this research project.

New Atlanticist Jul 17, 2025

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The post US-Brazil trade dashboard appeared first on Atlantic Council.

As 2026 opens, the most significant question facing the United States and its global partners is not what Trump has accomplished thus far, up to and including the Maduro ouster. The year ahead will be about something more consequential: What sticks? What actions get lasting traction, and what historic legacy will this peripatetic man of action leave behind?

Today’s action is not always tomorrow’s legacy

The first year of Trump’s second term was tumultuous by his own design. It stretched presidential authority, challenged constitutional norms, unsettled many allies, drove global market volatility, and dominated news cycles with a relentlessness that none of the other forty-four US presidents ventured. 

Trump’s first year back dramatically altered the weather, but 2026 will indicate whether Trumpism marks a climactic shift that permanently changes the nature of US leadership both domestically and abroad. What’s at stake isn’t just whether the United States, working alongside partners and allies, will build on its global leadership of the past eighty years. It’s what sort of America will celebrate the 250th anniversary of its independence. 

Trump likes to show important visitors around the White House, comparing himself to the greats in the portraits that decorate its walls and wondering where he will rank among them. Where he may pay too little attention, write professors Sam Abrams and Jeremi Suri in a must-read Wall Street Journal op-ed, is to the fact that “Presidents are assessed by their legacy: institutions they create, coalitions they form and governing assumptions they stamp on America. By that standard, Mr. Trump’s second term remains unsettled at best.”

Here’s a sampling of what Trump’s leadership has brought the world in the past year: NATO allies agreed to a record increase in defense spending. Iranian despots suffered direct US attacks on three nuclear sites. Gaza has a peace plan (albeit a fragile one) endorsed by the United Nations Security Council. US tariff rates reached their highest level in a century. A new US National Security Strategy warned Europe of “civilizational erasure.” And the United States removed a Venezuelan dictator, while Russian despot Vladimir Putin continued his murderous war on Ukraine with relative impunity. 

A scan of recent news, however, reveals Trump’s unfinished business: Trump has said the United States will “run” Venezuela, but details regarding what that means are few. Shortly before the new year, Ukrainian President Volodymyr Zelenskyy paid Trump a visit at Mar-a-Lago to ensure US peace efforts don’t reward Putin’s criminal revanchism. Around the same time, Chinese President Xi Jinping mobilized his naval, air, and missile forces around Taiwan, in a live-fire drill showing off Beijing’s growing ability to encircle the free and democratic island after the announcement of an eleven-billion-dollar US arms package to Taipei. And Iranian students joined expanding anti-regime protests, with Trump promising to protect them if shot upon (“We’re locked and loaded and ready to go”). 

Trump is “the most ubiquitous president ever,” historian Douglas Brinkley recently noted. “He plays to win the day, every day.” Yet history remembers presidencies not by that measure, but rather by what outlasts them. If Trumpism proves more personal than institutional, then its effects may fade over time. If Trumpism embeds itself in how the United States defines its interests, exercises its leverage, and understands its obligations, then allies and adversaries alike will further correct course to adjust for a permanently altered America.

So will Trumpism endure or fade? There are signs pointing in both directions. Here’s what I’ll be watching over the next twelve months to sort the noise from the signal.

Venezuela and the Western Hemisphere

No US commander-in-chief has paid more attention to the daily choreography of leadership and the political theater of the presidency than Trump has. So it is fitting that he would launch the second year of his second term with his most audacious foreign policy decision yet—something The Washington Post editorial board called “one of the boldest moves a president has made in years”—though one executed as a domestic judicial matter based on a criminal indictment.

Before the 2003 Iraq War, then-US Secretary of State Colin Powell popularized the “Pottery Barn rule” that “if you break it, you own it”—a warning about the long-term costs and obligations of military intervention. Trump’s convictions against democracy promotion and nation-building suggest he’ll want to stabilize Venezuela and deliver on US interests without doing either of those things.

How he does that will do much to define US foreign policy in 2026. Can he deliver in Venezuela in a manner that advances the country’s freedom and stability without signaling to China and Russia an endorsement of “spheres of influence” that would encourage their own regional ambitions?

The early hours show how complicated the Venezuela effort will be. Trump appears to be relying on Delcy Rodríguez, Maduro’s vice president who became the country’s de facto leader on Saturday, rather than turning to the opposition, which is widely recognized to have won Venezuela’s 2024 election before it was stolen by the Maduro regime. For her part, however, Rodríguez shot back, “Never again will we be slaves, never again will we be a colony of any empire. We’re ready to defend Venezuela.”

And what other actions might the Trump administration take to deliver on the vision set out in its National Security Strategy to restore preeminence in the Western Hemisphere through a “Trump corollary” to the Monroe Doctrine? Its stated aims, among others, are to prevent and discourage mass migration, ensure governments cooperate with the United States against transnational criminal activity, maintain a hemisphere “that remains free of hostile foreign incursion of ownership of key assets,” and protect “continued access to key strategic locations.” 

Alliances, Ukraine, and Taiwan

Trump has strengthened and weakened US alliances simultaneously. He’s prompted allies to spend more on defense and accept more of their own security burdens, but he’s also left them hedging against US unpredictability. Meanwhile, Russia and China have emerged from 2025 more confident that they can achieve their geopolitical goals: in the case of Moscow, to expand its sphere of influence by reversing its setbacks after the Cold War, starting with Ukraine; and in the case of Beijing, to gain greater control over its own region with an emphasis on Taiwan and a bid to assume the mantle of global leadership.

Trump could take steps in 2026 that reinforce US alliances, or he could give autocratic adversaries even more reason to test US resolve. Through his interactions with Russian and Chinese leaders—Trump talks with Putin frequently and at length, and he is scheduled to meet with Xi at least twice in 2026—he could inadvertently encourage them to press for whatever gains are possible during his remaining three years in office, introducing a period of increased geopolitical volatility. 

Trump inherited a global situation where a group of aggressors—China, Russia, Iran, and North Korea—have been working more closely together than any group of autocratic countries since Nazi Germany, Fascist Italy, and Imperial Japan ahead of World War II. Trump’s advisers blame previous presidents for allowing the unnatural bond between China and Russia to deepen, and they still seem to hope that they can draw Moscow away from Beijing. Thus far, however, Trump has emboldened both Putin and Xi. Their countries’ military and intelligence coordination has deepened, allowing Russia’s war on Ukraine to continue.

Global trade, markets, and economics

In 2025, Trump transformed tariffs from a last resort to a preferred economic weapon with multiple aims: gaining trade leverage, raising federal revenues, incentivizing domestic manufacturing, and punishing miscellaneous misbehavior. Economic nationalism crossed from taboo to mainstream, and protectionism became modern mercantilism. 

In a recent Wall Street Journal op-ed, titled “Prepare for More Tariffs in 2026,” the Atlantic Council’s Josh Lipsky argued that Trump is more likely to continue his current approach than to amend it, even if Supreme Court decisions expected early this year temporarily set him back. “The second year of the second Trump administration is likely to look much like the first in trade policy,” Lipsky wrote, laying out several reasons why.

Perhaps, but global markets and American voters will also have a say, and they are likely to push back. I’m less sanguine than others are that the inflationary aspects of Trump’s tariff approach and the market response will continue to be muted. In particular, look for signs of eroding US dollar dominance. (You can access our own Atlantic Council tracker on that matter here.) 

No one quite knows when global investors and sovereigns will tire of financing US debt, which now stands at more than $38 trillion, or nearly 125 percent of US gross domestic product, with roughly $6 billion added every day. Even at current financing levels, the United States is paying more in interest on its debt than it spends on defense. Something must give—but how and when? 

It’s true that the US stock market held up fine in 2025, with the S&P 500 up an impressive 16 percent. Still, that outcome far undershot the 32 percent gain for the MSCI All-Country World ex-US index, the widest such margin since the global financial crisis in 2009. The S&P 500 also trailed both the DAX (Germany) and the FTSE 100 (United Kingdom), in addition to many emerging market indices. In a front-page report in The Financial Times, journalist Emily Herbert wrote that this rare year of Wall Street underperformance came due to “worries about high valuations, a Chinese artificial intelligence breakthrough and Donald Trump’s radical economic policies.”

It’s true that even a Democratic president in 2029 is unlikely to roll back Trump’s tariffs dramatically, given that both parties currently lack a free-trade consensus. But it’s also unlikely that the trade system going into the future will be so driven by one individual and his preferences. 

Watch to see whether Trump can continue to press US economic advantage in the coming year without greater economic or political blowback than he has experienced thus far. Will rising investments in artificial intelligence continue to buoy markets? Or will slowing growth, consumer concerns about affordability, and global worries about US debt levels weigh the economy down? Expect 2026 to be a year of continued economic and market volatility—but not necessarily the lasting, wholesale change of the international trading system some are forecasting, as other actors advance trade deals.

The president and his Republican Party

Perhaps the most important “What sticks?” question of 2026 is whether Trump will move toward more strategic consistency or instead double down on the improvisational approach that he believes served him so well in 2025.

His unpredictability, which his son Don Jr. praised in Doha late last year, wins him leverage at key moments, and he certainly caught Maduro off guard over the weekend. But there’s no indication that he has built a governing system or a sustainable national security strategy around that unpredictability. Durable legacies require repetition, delegation, and follow-through by a cadre of intellectual and ideological acolytes. 

“Successful political movements outlive their founders,” Abrams and Suri wrote in the Wall Street Journal. “New Deal liberalism outlasted Roosevelt. Postwar conservatism survived Reagan. Trumpism appears to be dependent on Mr. Trump’s personal authority, media dominance and capacity for conflict.” The president, who is confronting actuarial tables as he turns eighty this year, could face a starkly different Congress a year from now. That means the next several months could present a major test of both Trump and Trumpism. 

Watch in 2026 to see whether any Republican leaders translate Trump’s instincts into a more lasting doctrine—on alliances, on relations with autocratic adversaries, and on trade. Potential Republican presidential candidates such as Vice President JD Vance, Secretary of State Marco Rubio, and Senator Ted Cruz of Texas will have to gauge whether Trumpism is a winning ideology for the future.

One recent cautionary sign for Trump acolytes was the decision by more than a dozen employees of the Heritage Foundation think tank to jump ship to the previously little-noticed Advancing American Freedom (AAF), which former US Vice President Mike Pence set up in 2021. “The debate over the direction of the post-Trump right is underway,” the Wall Street Journal editorial board wrote, with Pence explaining that what attracted the individuals to AAF was finding “a consistent, reliable home for Reagan conservatism.”

In the year ahead, I will be seeking to sort spectacle from substance regarding the actions and reactions of US adversaries and allies, global markets, and Trump himself. The president changed the political and geopolitical weather in 2025—dramatically but not irreversibly. Not every shock becomes a structure, and not every provocation determines an enduring policy change. When it comes to what sticks, the stakes are both global and generational.

Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on X @FredKempe.

This edition is part of Frederick Kempe’s Inflection Points newsletter, a column of dispatches from a world in transition. To receive this newsletter throughout the week, sign up here.

The post The most significant question for Trump’s America in 2026: What sticks? appeared first on Atlantic Council.

The past year reshaped Latin America and the Caribbean in ways that will echo into 2026. The return of Donald Trump to the White House introduced new US priorities and a greater regional focus, as the administration imposed new tariffs and elevated the Western Hemisphere as a top priority.

Elections brought mixed outcomes. Argentina handed President Javier Milei a legislative boost in the midterms. In Bolivia, voters rejected the ruling party’s candidate. Honduras held presidential elections November 30 after logistical challenges and institutional disputes. (No winner had been announced as of this writing in mid-December.)

In Venezuela, increased US military operations in the Caribbean added pressure on the Maduro regime amid a renewed focus on countering drug trafficking. Across the Caribbean, countries continued calling for more support to strengthen resilience after Hurricane Melissa caused widespread damage.

The year ahead will test the region on multiple fronts, from the long-anticipated review of the US-Mexico-Canada Agreement (USMCA) trade pact to high-stakes elections in Colombia, Brazil, and elsewhere—as well as an exciting summer marked by the World Cup.

What might be in store for Latin America and the Caribbean in 2026? Read on for our annual ten questions about the year ahead. 

Will Nicolas Maduro still be in power at the end of the year?

Hopefully not. 

Maduro’s dictatorship has been devastating for the Venezuelan people, the country’s institutions, and the Latin American region at large. Eight million Venezuelans have been forced to flee their homes as his repressive and parasitic regime exacerbates hyperinflation and poverty and erodes democratic processes in the country. 

When Maduro stole the presidential election from the democratically elected Edmundo González in July 2024, Venezuelan authorities carried out brutal systematic repression campaigns to suppress any political dissent. 

The US military positioning in the Caribbean—which includes the world’s largest aircraft carrier, the USS Gerald R. Ford—adds pressure on Maduro’s regime, as does the recent announcement of a blockade of all sanctioned oil tankers. Illegal oil revenue that comes through a shadow fleet of tankers helps to prop up Maduro. The Trump administration has yet to show its cards regarding whether it will attempt to negotiate an exit deal with Maduro, if it will seek to remove him through military action, or pursue another option. The US military deployment, which began in late August 2025, is one of the largest to take place in the Caribbean. But pressure will escalate for it to deliver results, and Maduro must come face to face with his increasingly limited options. There are many factors at play when it comes to the possibility of Maduro leaving power in Venezuela. The real goal should be not just for Maduro to leave power, as he could be replaced by a similarly repressive ally, but a real, long-awaited democratic transition.

After Colombia elects a new president, will Bogota and Washington return to a closer partnership? 

Yes.

The next year is bound to be an important one for US-Colombia relations, as a presidential election will be an opportunity to begin forging closer ties. Colombia has historically been one of the United States’ closest partners in the hemisphere, designated a major non-NATO ally and seen as central to preserving regional stability. In 2025 the relationship hit lows it hasn’t seen in decades. Tensions have largely been tied to clashes over the last few years between President Gustavo Petro and his American counterparts, however, rather than changes in the overall relationship at a subnational or people-to-people level. 

With approximately ninety presidential pre-candidates and more than one-quarter of voters telling pollsters they are undecided, the election’s outcome is anyone’s guess. Regardless of who wins, the next Colombian administration will inherit a complex security landscape marked by rising violence and increasingly fragmented criminal organizations, making a partnership with Washington essential. Bilateral ties are unlikely to bounce back immediately or to revert to the way they were. But both sides will have strong incentives to rebuild trust, with Bogota focused on securing US support for counternarcotics efforts and Washington aiming to control the threats of transnational organized crime.

It will be important for the next Colombian president to show early willingness to cooperate with Washington, set a pragmatic tone, and restore predictable channels of communication. Doing so, despite any political or ideological differences, will be key to rebuilding a new type of partnership that may be more focused in scope, especially at the outset.

Will the left regain ground across Latin America in the 2026 elections?

No.

Over the last two years, voters across the region have rewarded candidates running on hard security, market-friendly, and anti-establishment platforms (think José Antonio Kast in Chile, Milei in Argentina, Nayib Bukele in El Salvador, and Daniel Noboa in Ecuador). The trend is similar at the subnational level. Chile’s 2023 constitutional council was decisively conservative, though it was rejected by voters. Brazil’s 2024 municipal races strengthened Jair Bolsonaro-aligned forces, and Colombia’s 2023 local elections punished Petro’s left coalition. 

Considering the regional pendulum swung left earlier in the decade and produced a crowded “pink” map, it would be simplistic or misleading to say that a conservative wave is now sweeping over the region. Voters seem to be driven more by anti-incumbent sentiment and security fears than by any left or right ideology. 

Heading into 2026, right-leaning forces are well positioned in Costa Rica, Brazil, Colombia, and Peru, where crime, migration, and the state of the economy dominate voter concerns. Trends and leading candidates in Costa Rica, for example, suggest that voters are backing more personalistic candidates from nontraditional parties rather than more traditional and conservative parties. So, while we could expect at least a few of the aforementioned countries to lean right, security, anti-corruption, and economic competence might matter more than left-right labels.

Will the review of the US-Mexico-Canada Agreement reshape North American trade? 

Maybe.

The review comes at a moment when all three countries face economic and political pressures. The United States might push for stronger enforcement of labor and environmental standards, and a baseline of protections for the US to prevent countries such as China from shipping their goods through USMCA countries and then trying to claim “rules of origin” benefits.

And while US Trade Representative Jamieson Greer noted December 10 at the Atlantic Council that he continues to meet separately with Mexico and Canada, the United States’ USMCA partners may also seek additional updates. Mexico could press for more flexibility in energy and automotive rules. Canada might seek updates on digital trade, dairy market access, and environmental cooperation. These issues matter but expect governments to act cautiously, with the possibility of separate bilateral protocols in the final agreement. Reopening too many chapters could create uncertainty for businesses and supply chains that depend on stable and predictable rules.

Because North America’s economies are so interconnected in autos, agriculture, and energy, even small changes could have large effects. For this reason, the most likely outcome is an integral review that keeps at least the core benefits of the USMCA intact. The three governments might add clarifications, strengthen enforcement tools, or expand cooperation without fundamentally rewriting the deal.

USMCA review can provide a pragmatic roadmap for reshaping North America’s trade, if parties are open to discussing the fundamentals to be strengthened at this point. These include enforcing clear rules of origin, transparent technical frameworks, customs modernization, interoperability, and the rule of law to protect investment and provide overall security to businesses. 

Will Milei’s economic reform agenda gain momentum? 

Yes.

Argentina has long needed sizable structural revamps across key areas including tax, labor, and pension systems to unlock sustained growth, strengthen competitiveness, and ease pressures on businesses and consumers alike. While Milei has advanced parts of his agenda through executive action, the country has now reached the point at which deeper and more transformative changes require congressional approval. The challenge is that, although the government will enter next year with a sizable minority in congress, its caucus will still need to work with moderate opposition legislators to pass key legislation. 

Many legislators appear willing to engage in dialogue to allow meaningful progress, and securing their support would both make these measures viable and send a powerful signal to markets that Argentina’s political class is broadly committed to long-term stability and modernization. That is why progress is likely, particularly when it comes to tax and labor reform. But the ultimate outcome will depend heavily on the administration’s ability to negotiate with provincial governors, whose delegations form a majority of the moderate opposition bloc. Watch out for early successes in the first months of 2026, which might set the tone for the legislative agenda throughout the year, defining the scale of the administration’s ability to pass reforms. 

Will Latin America and the Caribbean surpass their growth projections for 2026? 

Yes.

Although Latin America is expected to continue experiencing relatively slow growth in 2026 compared to other emerging-market regions, progress in US-Latin America economic engagement and improvements across several key macroeconomic variables create a credible pathway for the region to exceed current projections.

Economic forecasts suggest that 2026 will not be a transformative year for most countries. Argentina and Guyana are the primary exceptions, with Guyana standing out as the only Caribbean country among the world’s thirty fastest-growing economies. Even so, the region has meaningful upside potential on trade. Stronger-than-expected export performance could lift regional growth, especially if recent announcements on commodities lead to further reductions in trade barriers with the United States. A pickup in demand from major markets, including China, could provide an additional boost. These improvements would help offset the decline in the region’s overall trade surplus projected by the International Monetary Fund (IMF).

At the same time, a gradual easing of monetary policy in the European Union (EU) and the United States could help revive foreign direct investment flows, which have slowed since the post-pandemic surge. When combined with country-specific recoveries such as Argentina’s stabilization process and continued gains from energy and mineral projects across the region, these factors create a realistic opening for Latin America and the Caribbean (LAC) to surpass the current IMF growth projection of 2.3 percent for 2026.

Will the United States counter Chinese investment more aggressively in Latin America? 

Yes.

The Trump administration’s sharp rhetoric toward governments seen as aligning with Beijing has already signaled a tougher stance, and this pressure will grow as Washington confronts the strategic nature of China’s investments in the region. While US companies invest far more than Chinese firms in overall volume, much of that investment in the region goes to low-risk service sectors. 

China, meanwhile, is expanding its influence through targeted bets on critical minerals, energy, infrastructure, and transport, which shape long-term supply chains and political leverage. For the United States to remain competitive, it will need to shift its policies to encourage more strategic investment. This means reducing costs and risks for US firms, expanding development finance tools, and partnering more closely with multilateral banks to help US companies enter the sectors in which China currently dominates. 

The US International Development Finance Corporation (DFC) is due to be reauthorized and recapitalized in 2026. This will help to provide some of the capital necessary to lower the barrier of entry to US companies engaging in capital-intensive projects such as infrastructure and extractives—two sectors in which China has had stronger influence in LAC. The unveiling of a holistic economic diplomacy initiative by the White House, such as America Crece 2.0 (a more comprehensive version of its predecessor during Trump’s first term), could further support US efforts in the region.

Will the Caribbean improve hurricane response and coordination? 

Maybe.

Better coordination will require stronger regional planning and risk management, but past storms have shown the severity of the challenge. Partnerships with the Inter-American Development Bank and programs such as One Caribbean can help prepare projects, support public-private partnerships, and manage political risk. 

Local participation in risk mitigation remains essential because many Caribbean firms operate as family businesses with deep community ties. If countries and investors work together by expanding financing tools, strengthening regional institutions, and supporting resilient infrastructure, the Caribbean can recover more quickly and prepare for stronger storms.

Jamaica is an example of the daunting challenge ahead. For more than a decade, Jamaica kept a primary surplus above 3 percent of gross domestic product (GDP) and reduced its debt, earning US bipartisan recognition for steady governance. In September 2025, Standard and Poor’s (S&P) Global Ratings upgraded Jamaica to BB minus with a positive outlook. But Hurricane Melissa caused almost $8 billion in damage, nearly half of Jamaica’s annual GDP. The country’s $250-million catastrophe bond will likely pay out in full. Yet that amount cannot cover losses of Melissa’s scale. 

Across the region, Caribbean Community (CARICOM) countries lose an estimated 2 percent of their infrastructure capital stock each year to climate-related damage. The growing frequency of severe storms raises insurance costs and stretches already limited public budgets.

Will security remain the top voter priority across upcoming elections? 

Yes.

Voters across Costa Rica, Peru, Colombia, and Brazil will head to the polls with security top of mind. 

In Costa Rica, concern over rising violence jumped from 30.3 percent to 43.7 percent between November 2024 and April 2025. Fifteen of the twenty presidential candidates have placed security at the center of their agendas, with many proposing education reform and youth-focused opportunities to tackle the roots of violence.

Peru has seen one of its most violent years since 2017. Homicides are up 12.8 percent and extortion complaints 27.4 percent compared to 2024. Instability peaked after the attempted assassination of a cumbia band triggered President Dina Boluarte’s impeachment and the swearing in of Jose Jeri as her successor. With protests, unrest, and a surge in criminal extortion targeting informal workers and small businesses, voters will demand immediate solutions.

In Colombia, “total peace” efforts fell short, deepening the security crisis and straining relations with the United States, the country’s long-standing security ally. Armed groups expanded control, coca cultivation reached record highs, and violence surged. This included large-scale displacement in Catatumbo, an attack on a police helicopter that killed thirteen officers, and a bombing in Cali. Nearly one-third of Colombians now see security as the country’s top problem.

In Brazil, security will compete with economic concerns, but October’s Operação Contenção in Rio de Janeiro, the deadliest police raid in the country’s history with 120 victims, has pushed violence to the center of public debate. Gangs continue to control neighborhoods and challenge state authority. While economic pressures remain significant, security is poised to drive the political conversation in 2026. 

Will the United States lift the additional 40 percent tariffs on Brazilian goods? 

Yes.

The additional 40 percent tariffs on Brazilian goods are likely to be lifted or significantly reduced in 2026. Trump and Brazilian President Luiz Inácio Lula da Silva had a positive meeting in Malaysia in late October, and trade negotiations have been ongoing and a priority ever since. The United States and Brazil share a long-standing diplomatic relationship, and the United States has historically enjoyed a trade surplus with Brazil. Many imports from Brazil supply US demand for products that are not produced domestically, such as coffee and bananas; others are imported as input for US manufacturing, such as wood panels and airplane parts.

The Trump administration has already begun rolling back some of the additional duties. On November 20, several Brazilian products were removed from the list of those subject to the additional 40 percent tariffs, including beef and coffee, for which Brazil is the United States’ top supplier. A Supreme Court decision on the legality of International Emergency Economic Powers Act (IEEPA)-based tariffs—expected soon—would also impact Brazilian and global tariffs: Because the administration cited IEEPA to levy the tariffs, a ruling against the use of IEEPA in this way could put all of the administration’s added tariffs on Brazil at risk. Together, the diplomatic momentum, economic reasoning, and legal backdrop all point toward favorable conditions under which many of these tariffs could be lifted in 2026. 

Bonus question: Will Argentina repeat its World Cup title?

Maybe.

Argentina will enter the 2026 tournament with its eyes firmly on back-to-back glory, but the biggest wildcard is Lionel Messi. The captain has given no guarantees that he will lead the team next summer, leaving fans wondering whether “La Pulga” will take one more shot at the world’s biggest stage. Even without certainty about his presence, Argentina remains one of the strongest contenders, backed by a talented roster.

But the region will not make it easy. Colombia returns to the World Cup after eight years with a revitalized team eager to prove it can compete with the best. Brazil will arrive hungry to reclaim its historic position in the World Cup hierarchy, with pressure mounting after more than two decades since it last lifted the trophy. Mexico will face the added pressure of competing as a host nation. Ecuador, Paraguay, and Panama will all look to make their mark and test regional rivals.

The tournament will unfold across the United States, Mexico, and Canada, setting the scene for an unforgettable summer. Argentina is well positioned, but the path to glory will be anything but simple. There is no certain answer for now.

This publication was updated December 17 to reflect news developments.

Issue Brief Nov 19, 2025

Why modernizing CAFTA-DR matters for the United States, and options for updating the trade pact

By Enrique Millán-Mejía, Antonio Ortiz Mena, and Rocío Rivera Barradas

Central America and the Dominican Republic are emerging as key partners for US economic security. The United States has a unique opportunity to reform its free trade agreement with the region—CAFTA-DR—to strengthen these ties.

Americas Economy & Business

New Atlanticist Nov 7, 2025

Hurricane Melissa left $8 billion in damage. Jamaica needs US support to get back on its feet.

By Patricia R. Francis, Maite Gonzalez Latorre

After the devastation caused by Hurricane Melissa, Jamaica needs the United States to invest in the country’s resilience and economic recovery.

Caribbean Climate Change & Climate Action

New Atlanticist Nov 6, 2025

The expert conversation: What’s Trump’s endgame in Venezuela?

By Matthew Kroenig, Jason Marczak

We spoke to Matthew Kroenig and Jason Marczak to shed light on the US campaign of attacks on alleged drug boats and lay out what’s next.

Conflict Human Rights

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

Learn more

The post Latin America and the Caribbean in 2026: Ten defining questions for the year ahead appeared first on Atlantic Council.

• Introduction
• Pivot to the East: How China has come to Russia’s rescue
• Guns over butter
• Regions
• Conclusions and recommendations
• About the authors

In the three and a half years since Russia launched its full-scale invasion of Ukraine, its economy has continued to grow, supported by increased militarization. This resilience is a far cry from Western governments’ prognosis in the early days of the war that sanctions would crash the Russian economy. Sky-high energy prices and hesitation on the part of Western leaders to push for stronger enforcement of sanctions kept the Russian economy afloat in 2022. Meanwhile, deepening economic integration with China has helped supplant the void left by the loss of the European Union (EU) as a market. Overall growth, however, is slowing markedly in 2025 as Russia is increasingly feeling the pressure of “guns versus butter,” the inherent tension between military and social spending. 

Fortunately for Ukraine and its Western partners, topline gross domestic product (GDP) figures tell only part of the story. The Russian economy has been overheating—demand is outpacing supply and economic activity is growing at an unsustainable rate—since late 2023. Stubbornly high inflation has forced the Central Bank of Russia (CBR) to raise interest rates to a peak of 21 percent.¹ In part, higher inflation (and growth) figures have been driven by Moscow’s wartime spending spree, often described as military Keynesianism. This has been exacerbated by an exceptionally tight labor market by Russia’s standards. The unemployment rate sits at just above 2 percent, less than half of its pre-pandemic levels—which, in addition to boosting inflation even higher, betrays the economy’s limited room left to grow. Demand has been pushed up by government spending beyond the point at which supply can keep up, whether through investment, labor, or productivity gains.

The sanctions landscape has, rather unsurprisingly, become more fractured since President Donald Trump’s return to the White House in 2025. While Ukraine’s partners in Brussels and London have applied additional economic pressure on Moscow, Washington had entirely refrained from doing so until October, when Trump announced sanctions on Russia’s two largest oil producers, Rosneft and Lukoil. On one side of the Atlantic, sanctions—which require constant monitoring and updating to remain relevant—have seemingly been reduced from a tool of economic statecraft designed to inflict costs for and deter bad behavior to a bargaining chip. On the other, the European Union and United Kingdom have continued to expand their sanctions regimes, including by lowering the price cap they impose on Russian oil, but are unable to replicate the reach that the United States Treasury Department has thanks to the dominance of the US dollar and the US ability to enforce secondary sanctions.

The Russian economy is, therefore, in a precarious but manageable position. Its growth has slowed, its oil and gas revenues have slid, and the latest US sanctions on Rosneft and Lukoil directly challenge the prevailing assumption that geopolitical risks and sanctions threats had subsided. Nevertheless, the economy might yet be saved by fickle White House policy. Unless the new sanctions escalation is genuinely sustained, or global oil markets see a further downturn, the current slow downward trends are likely to hold as Russia appears to have hit supply-side constraints in the labor market and investment. This makes a better understanding of where the Russian economy currently stands all the more important. The following sections explore three key wartime developments: the growing role of China, the prioritization of the defense sector, and the positive effects of the war on poorer regions.

Pivot to the East: How China has come to Russia’s rescue

When Russian President Vladimir Putin launched a full-scale invasion of Ukraine, he gambled his country’s future on a quick victory. When that goal proved elusive, he doubled down. Two developments helped make this economically feasible. The first was the spike in energy prices, particularly for natural gas, which was precipitated by the uncertainty that Putin had wrought upon global markets. The second was Russia’s burgeoning trade relationship with China and its role in helping Russia circumvent sanctions.

Economically and politically, Russia’s relationship with China is simultaneously deeply asymmetrical and mutually beneficial. While Moscow has not become Beijing’s vassal—at least not to the extent that it would attack NATO purely to distract the Alliance from a war for Taiwan—Russia is certainly the junior partner in the “no limits” partnership. China has served as a lifeline for Russia, while Russia has supplied China with cheap energy and raw materials.

On one hand, China has easily overtaken the EU to become Russia’s largest trading partner. On the other hand, Russia accounts for just 3 percent of China’s exports and 5 percent of China’s imports as of 2024.² Russia’s economic importance to China, to be sure, is not fully reflected in these figures; it became China’s top supplier of crude oil in 2023. But even in the case of oil, China buys from an intentionally diversified set of suppliers, in which Russia accounts for less than one-fifth of imports. With an economy nine times the size of Russia’s, China has the same leverage in market power over Russia as the EU, without the structural dependencies on Russian energy.³ Many EU members (including Germany, the bloc’s largest economy) grew structurally dependent on cheap Russian oil and gas for their economic growth in the twenty-first century.⁴ The Nord Stream 1 and 2 natural gas pipelines from Russia to Germany via the Baltic Sea, which together cost €18 billion to build, best symbolized the relationship.

Even Russia’s energy exports to China are comparatively far more important to Russia. Oil and gas revenues account for nearly one-third of Russia’s budget inflows. Until 2023, Europe was the most lucrative export market for Russian energy and, thus, for Russian state coffers. Nonetheless, by invading Ukraine, Russia slayed its irreplaceable golden goose, leaving it reliant on new partners. And China, well aware of Russia’s lack of alternatives, purchases both oil and gas at a steep discount.

Russia’s trade to and from China could hardly be more different. It sells oil, gas, coal, and raw materials to China, while it buys machinery, vehicles, and electronics (see below).⁵ In other words, Russia exports what it can extract from the ground and imports what it lacks the technology and industrial capacity to build itself—highlighting the deep asymmetry in the relationship. This is a complete and embarrassing reversal in the relationship compared to the 2000s, when Russia exported higher value-added goods to China. 

Automobiles have become a bellwether of China’s presence in the Russian consumer market and a rare case of the Russian market’s importance to Chinese industry. Before the full-scale invasion in 2022, Russia imported cars from a range of countries—including Japan, South Korea, Germany, China, and the United States—and a number of countries established production facilities in Russia, creating productivity spillovers. The West’s sanctions regime upended the market so thoroughly that Russia, although wary of provoking its more powerful neighbor, even increased duties on car imports in an attempt to slow the Chinese takeover.⁶ Chinese brands’ market share surged from below 10 percent in 2021 to above 60 percent in 2023, and they allegedly accounted for the vast majority (about 90 percent) of revenues in 2024. 

Russia had become the largest export destination for Chinese cars, which filled the void left by Western brands exiting the country—and though Russia’s protectionist measures might have chipped away at this, the Chinese automotive industry is among the largest beneficiaries of the expanded Sino-Russian trade relationship. The industry produces far more than the Chinese consumer market can absorb, so markets like Russia—which is both large and absent of Western competition—are highly beneficial. In contrast, China’s smartphone industry, which has taken over the Russian market in a rather visible manner (86 percent of sales in 2024), is hardly dependent on Russia.

China’s manufacturing industries—which are purposefully designed for overcapacity—need international markets, and Russia has become an increasingly important destination for them to sell their products. But automotive exports are the exception that proves the rule; even mutually beneficial exchanges are far more important to Russia than to China. This conclusion is not as trivial as it might sound—the European Union, with a combined GDP that surpasses China’s, was so reliant on Russian energy that the bloc is still working on phasing it out. In other words, structural dependencies on Russia were ingrained in European economies, making it more painful to cut off the trading relationship than key economic figures would have suggested; Russia does not have this leverage with China.

But from an economic point of view, China is not a better trading partner for Russia than the European Union was. It buys oil and gas at lower prices, it invests far less in Russia, and its products are often technologically inferior. Nor is China’s relationship with Russia equivalent to the West’s relationship with Ukraine; whereas Ukraine has received billions of dollars in grants and in-kind contributions from the West, Russia pays in full for its imports from China. But with no alternatives to speak of, China has served as an economic lifeline for the Russian economy.

China has also been central to Russia’s efforts to evade Western sanctions. Following the exodus of Western countries and the imposition of a strict export control regime in 2022, Russian importers turned to increasingly complex sanctions-evasion supply chains to continue buying prohibited products and components. This was particularly urgent for the military-industrial complex, as Russia sourced more Common High Priority Items List (CHPL) items—a set of fifty export-controlled products that the sanctioning coalition jointly determined to be key to Russia’s military industry—from the EU than from anywhere else. A look at Russia’s 2023 imports of these goods reveals China’s new centrality: In value terms, 90 percent of CHPL imports were facilitated by a Chinese firm in some way. Over time, China’s role in providing sensitive goods to Russia has also tilted from facilitator to manufacturer—by 2023, 49 percent of all CHPL imports were made by Chinese companies in China. Goods as complex as computer numerical control (CNC) machines and as simple as ball bearings are now sourced from China instead of the West, making export controls less effective or, at the very least, more difficult to enforce.⁷

Chinese machinery and components are predominantly supplied to the military-industrial complex, while domestically produced alternatives usually go to civilian firms. Moreover, shipments of domestically produced machinery and components have declined during the full-scale war, indicating that Chinese imports have supplanted Russian competition. In other words, despite all of the resources that have gone into import substitution programs—and the restrictions that sanctions have imposed—Russia’s machinery and components supply chains are more import dependent now than they were in 2021. With the Russian economy on a war footing, manufacturers have merely swapped out their European dependencies for Chinese ones.

Russia’s turn from Europe to China raises the question: Did the sanctions regime backfire? After all, Russia has continued its war against Ukraine and is now closer to China than it was at any other time in the post-Soviet period. 

Economically, sanctions have neither backfired nor achieved maximalist goals. The sanctions regime has ensured that every drone, artillery shell, and missile aimed at Ukraine is more expensive or more difficult to produce. Supply chains have needed to be reoriented, introducing friction costs and quality concerns—the lengths to which Russian firms have gone to acquire export-controlled technologies and machinery effectively reveal the inferiority of alternatives. Disappointment with the fact that sanctions have not brought about the collapse of the Russian economy has more to do with overzealous expectations combined with lax enforcement than it does with the failure of sanctions themselves.

However, the tightening Sino-Russian relationship carries weightier consequences for the practice of economic statecraft. Financial sanctions against Russia—including the disconnection of some major banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT)—have driven the country out of the dollar-dominated global financial system and toward its (much smaller) Chinese alternative. China and Russia now settle the vast majority of their trade in renminbi, which could theoretically pave the way for a Chinese-led, anti-Western global financial system. Combined with the Trump administration’s trade policies, risks of de-dollarization have grown, particularly in Asia. This remains hypothetical, however, and it is unclear whether Beijing is willing to bear the costs associated⁸ with taking up such a role. In reality, the Russian economy’s resilience is more of a wake-up call than a cautionary tale for Western governments. A sanctions regime that allows energy export revenues to continue to flow and leaves an economy the size of China’s as a safe haven is destined to disappoint.

Guns over butter

In the push and pull between civilian and military priorities, never has post-Soviet Russia so clearly veered toward the latter. In part, this is reflected in Moscow’s larger ambitions to revive its status as a regional hegemon in Eurasia, and in all the costs it is already bearing in pursuit of this goal—it sacrificed its most lucrative oil and gas customers in the name of dominating Ukraine. But Moscow’s priorities are more straightforwardly revealed by its wartime federal budgets.

The Russian federal budget is both convoluted and secretive, with almost one-third of all allocated funds classified, including more than 80 percent of the defense budget. Even classified expenditures are attributed to broad budget chapters (e.g., national defense), and some categories are easier to ascertain than others—the Ministry of Defense’s classified social support, for example, is likely made up of payments to families of soldiers killed or wounded in the war. Spending on the war has been immense (pegged at or above 8 percent of GDP) but not entirely straightforward to measure. Not all defense expenditures go to the war, while some large civil expenditures, such as investments in occupied territories, are directly related to it. Nevertheless, a few observations can be made about how the budget reflects today’s Russian economy. 

First, direct military spending is likely to plateau, if not decrease, in real terms this year. As spending grew well above inflation since the full-scale invasion, further increasing spending would need to come at the cost of noticeable cuts to social spending, as liquid reserves in the country’s National Welfare Fund (NWF) have been depleted substantially (down 59 percent), and military spending accounted for almost half of budget revenues in the first half of 2025.⁹ As is the case with much of the Russian economy, 2025 has shown that growth cannot continue forever.

Second, while budget deficits are well above expectations, Russia has not had difficulties financing its deficits. Russia’s federal budget nearly exceeded the planned target for 2025 in just the first six months of the year. The shortfall, which was driven by a drop in oil and gas revenues and a 20-percent rise in expenditures, is far bigger than previous wartime deficits. Nonetheless, Moscow has managed to finance the deficit thanks to strong demand for bonds from Russian banks. This is particularly important to maintain, as domestic banks are effectively the only remaining buyers of the government’s bonds.¹⁰

Third, much depends on the price of oil. A bit less than one-third of the federal budget is funded by oil and gas income, and the Ministry of Finance based its budget projections on a forecasted $69.7 per barrel average export price in 2025. The extent of the budget shortfall that falling oil revenues create will depend on two factors: global oil prices, which have been weighed down by sluggish global growth, and how steep a discount on Russian oil prices the Group of Seven’s (G7) oil price cap sanctions can create. With its eighteenth sanctions package in July 2025, the European Union both lowered the price cap for crude oil (from $60 per barrel to $47.6 per barrel) and introduced an automatic mechanism to adjust the cap to market conditions. While this is a welcome change, its effect will still depend on enforcement, which has been subverted by Russia’s shadow fleet of old and uninsured oil tankers.

Besides defense expenditures as a share of GDP, one of Russia’s most-watched financial statistics has been the bonuses that the government pays those who sign up to join the “special military operation.” To entice men to join the war effort despite the risks, regional and local governments have offered sign-on bonuses that far exceed annual salaries. By early 2025, more than 60 percent of Russia’s regions offered bonuses that exceeded 1 million rubles (about $12,000). In Sverdlovsk Oblast in the Urals region, prospective soldiers are offered about 3 million rubles—2.5 million rubles from the regional government, 400,000 from the federal budget, and more from individual municipalities—which is nearly three times the median annual wage. In Mari El, a poor ethnic republic 400 miles east of Moscow, a stunning 10 percent of the region’s total budget is spent on sign-on bonuses.

In Russia’s poorer regions, the combination of sign-on bonuses and killed in action (KIA) payouts has created a system of “deathonomics” in which dying on the battlefield in Ukraine can be more profitable than living to retirement age. The system is particularly appealing to men who are not economically productive—whether due to a lack of training and education or a poor local economy—and effectively acts as local stimulus. From a macroeconomic perspective, these payouts must be viewed in the context of a tight labor market and an overheated economy, in which employers in the civilian sector compete for workers with the army, a military-industrial complex that receives favorable treatment from the government, and each other. Moreover, they are indicative of a larger trend: Russia’s resources are being directed away from the civilian economy and toward the war. Every working-aged man who joins the army is one fewer factory worker or local business employee, and every government ruble spent on incentivizing his choice is one fewer ruble for social spending.

It is no coincidence, then, that war-related industries have substantially outperformed the rest of the economy. While war-related industries have boomed—their combined output has increased by around 50 percent—the rest of the economy has been largely stagnant. Much of Russia’s investment, which is already low, is directed to supporting the war. Because Russia has long struggled to translate its military-industrial complex spending to durable civilian-sector growth, this leaves few opportunities for medium- to long-term spillovers. And as Russian workers move to the military-industrial complex or leave for the front, they are not being replaced by migrant labor, which is at its lowest level in a decade.

There are some areas that allow for direct, “apples to apples” comparisons between the fates of the civilian and military sectors. Though both sides are impacted by sanctions, restrictions on military-industrial complex entities are more stringent. Nonetheless, it is the military-industrial complex that comes out ahead.

Russia’s aviation industry, historically reliant on Western planes and technology, has been hit hard by sanctions. Even before the full-scale invasion, Russia’s commercial aviation industry was so reliant on Western supply chains that it resorted to smuggling parts and components from the United States to get around sanctions, as nominally Russian-made airplanes still rely on foreign components. Sanctions forced Russian airlines to quickly seize jets that had been leased from the West and cannibalize older aircraft for spare parts. But measures have clearly been insufficient, as civil aviation incidents hit a record high in 2024 and plans to build more than one thousand commercial aircraft by 2030 are merely a fantasy. In talks with the Trump administration, Russia specifically brought up the aviation industry as a pain point and proposed a scheme to purchase Boeing planes with frozen state assets. 

Military aviation—which is a top-heavy sector led by companies Yakovlev, United Aircraft Corporation, and United Engine Corporation—has not suffered the same fate. Military aviation manufacturers have rapidly expanded their production capacity since the full-scale invasion, with Chinese imports playing an ever-increasing role in their supply chains. While the commercial aviation fleet steadily degrades, military aviation is continuing to produce both fighter jets and helicopters for the war effort. The diverging performance of the civil and military aviation industries, despite the substantial overlap in companies active in them, is further evidence of how Russia has prioritized military production at the expense of the civilian economy.

An indefinite expansion of the military-industrial complex, however, is not feasible. Moscow does not appear willing to make the sacrifices necessary to truly militarize society—for example, to direct the resources to defense that the Soviet Union did during the Cold War—which would be unavoidable during a broader economic slowdown. The more it spends on military-industrial manufacturing and infrastructure, the less the civilian economy can compete for labor and financing (i.e., the military-industrial complex is crowding out the rest of the private sector). Russia has now pushed the limits of how much the civilian economy can be neglected before it is forced into stagnation.

In the first two years of the full-scale war, the Kremlin was not forced to face the trade-offs it is facing today. Military-led economic expansion was not at odds with broader economic growth for a number of reasons that no longer hold true. 

First, high inflation has forced the CBR to raise interest rates substantially as it attempts to pump the brakes on the overheated economy. With a key policy rate of 16.5 percent (down from a high of 21 percent), fewer businesses can afford debt-fueled growth. Furthermore, a significant share of economic actors receive subsidized interest rate loans; one-sixth of all new loans issued in 2023 were subsidized at below-market rates. Russia’s subsidized mortgage program made up a majority of these funds and was more distortionary than preferential loans to the corporate sector, but it ended in July 2024. The remaining portfolio of subsidized loans, held primarily by large banks, ranges from innocuous recipients—the agricultural sector, small and medium-size enterprises, and strategic industries—to defense contractors and the military-industrial complex writ large, which the Kremlin funds with “hidden war debt.”

The bottom line is that these preferential loan programs force the CBR to hike rates more than it would need to otherwise, hurting the broader economy’s growth prospects in the process. This has led to open infighting among regime elites, with defense executives like Rostec’s Chief Executive Officer Sergey Chemezov repeatedly lashing out at CBR Governor Elvira Nabiullina for her stewardship of the Russian economy.¹¹ Nabiullina and the CBR have been critical of these programs, noting that the subsidized loans are paid for by all the individuals and corporations that must pay market rate. Thus far, the Kremlin seems to have sided with the bank. But the longer rates remain high, the more difficult the balancing act becomes.

Second, the external environment has deteriorated significantly. In Russia’s case, this is first and foremost a question of oil and gas exports. Soaring energy prices—and the delayed application of key measures such as the G7’s oil price cap—supported the Russian economy, the ruble, and the government budget in 2022. Natural gas prices were particularly crucial in 2022 because Russian oil has been sold with a risk premium (i.e., with a discount) ever since the full-scale invasion. Russia’s gas revenues more than doubled between 2021 and 2022—from $64 billion to $130 billion—but fell precipitously below pre-war levels thereafter. Now, three and a half years into what was envisioned as a three-day war, energy revenues have structurally changed (see the analysis above). Depressed oil prices amid a global oil glut, China’s unwillingness to import more Russian natural gas via stalled projects like the Power of Siberia 2 pipeline, the EU’s measures targeting India’s refining of Russian crude oil, and Washington’s sanctions against Rosneft and Lukoil all represent real challenges for Russia’s economic prospects.¹² Regular Ukrainian strikes on hydrocarbon processing facilities have also hit Russia’s bottom line and show no sign of letting up. None of these challenges are insurmountable or even permanent, but they compound on each other in the absence of other key buffers—most notably, liquid reserves and a large and stable current account balance.

Third, Russia has burned through the reserves that it built prior to its full-scale invasion. Russia’s most important buffer has been the NWF, its sovereign wealth fund. Moscow has heavily relied on the NWF for budget financing—withdrawing more than 7.5 trillion rubles ($93 billion) for fiscal financing, while more than $300 billion of CBR reserves were immobilized in sanctions coalition countries. The NWF’s liquid funds, holdings of foreign currency and gold, have dropped by nearly 60 percent and now consist of just renminbi and gold, as Russia sold all hard currency assets in 2022. Once again, this is not an existential threat to the Russian economy, as the government’s ability to fund its deficit with debt issuance has been consistent. However, the depleted NWF is a lost buffer that creates new trade-offs for the Kremlin. If Moscow continues its war-related spending spree, it must fund its deficit by selling even more debt to domestic banks; if it does not continue its fiscal expansion, it no longer has the NWF to cushion the fall for the general population.

The reality is that the Kremlin spent the first two years of the full-scale war kicking the can down the road, avoiding the trade-offs inherent to its policies. Fiscal expansion, a supportive external environment, and large buffers had the economy growing but running on fumes. At least in the economic sphere, the war was all carrots and no sticks. In 2024–2025, when the situation deteriorated significantly on all three fronts, the Russian economy did not collapse, to be sure, but the Kremlin began to face the trade-offs that it had long put off. Interest rates climbed, real wages fell, and subsidized mortgage programs were scrapped. Fears of looming stagflation—the combination of high inflation, low growth, and high unemployment—have been (perhaps prematurely) in the ether for quite some time. 

What does this mean for the most fundamental trade-off of all: guns versus butter? It is difficult to imagine a scenario in which the Russian government can sustain its current defense expenditures without social spending cuts that are pervasive and visible to the general population. Moreover, the broader economy can no longer support growth (in output and real wages) in both the military-industrial complex and the civilian sector simultaneously. This does not spell disaster, but it will likely chip away at the gains that the country’s poorer regions and citizens have seen during the war.

Regions

Parts of the civilian sector have benefited immensely from the wartime spending bonanza, and it has helped reshape the economy in surprising ways. In some cases, the war has served as an equalizer, injecting cash into poorer regions through army recruitment and casualty payments. Self-reported well-being and financial security measures have generally increased. In other ways, wartime spending has reinforced existing structural inequalities that favor privileged groups and areas, such as ethnic Russians, large cities, and regions with a strong military-industrial base.

The benefits that poorer regions have enjoyed during the full-scale war come at a cost, and they are unlikely to be permanent. Household incomes rise in exchange for killed and wounded men and high inflation; investment into the military-industrial complex crowds out more efficient investment into the civilian economy. Moreover, casualty payouts and defense spending are hardly sustainable drivers of economic growth. Regardless of their permanence, it is worth understanding the regional dynamics associated with Russia’s war.

Both before and during the war, Russia’s economy has been centered around a few economic centers: Moscow, St. Petersburg, Ekaterinburg, and regions with oil and gas extraction industries such as the Nenets, Yamalo-Nenets, and Khanty-Mansi autonomous okrugs.

But the war has brought unprecedented investment and income to Russia’s poorer regions. Two indicators—fixed investment and retail turnover—exemplify the geographic nature of wartime growth. Fixed investment, which includes assets that range from machinery to factories, has shown explosive growth in Russia’s poorer and far-flung regions. The Republic of Tyva, a small ethnic republic on the Mongolian border, has seen 190-percent growth in fixed investment and 74-percent growth in retail turnover—some of the highest in the nation. However, income is not evenly distributed within the region, with military-related incomes not trickling down to the rest of the population. In other words, the fiscal stimulus (from recruitment and KIA payouts) and demand in the military-industrial complex have not dispersed across the entire economy.

Tyva also tops the charts in a less desirable metric; it has the highest number of confirmed war deaths per capita of any region in the country. While Tyva’s sign-up bonuses are some of the lowest in the country—the region merely matches the federal government’s 400,000-ruble payout—it is worth remembering that these bonuses are generally dwarfed by the payments to soldiers’ families when they are killed in action. Consequently, the growth of household bank deposits in Tyva has massively outpaced national averages.

Households are generally faring better in regions that have contributed more soldiers to the war. The growth in household bank deposits is so visible, in fact, that it has even been used as a proxy to measure regions’ mobilization results. Notably, trends in household incomes and household expenditures somewhat diverge. While regions like Tyva show only relatively middling growth in household income despite strong employment growth, their household expenditures have risen just like their bank deposits. In other words, deposits and expenditures have risen precipitously—but not necessarily from standard income sources.

Of course, these poorer regions have had help. In late 2024, the federal government implemented a program to allow lower-income regional governments to write off up to two-thirds of their debt, provided that they spend the freed-up funds on social and communal expenditures or, in some cases, national projects. This effectively means that some regions’ exorbitant spending on the war in Ukraine, including sign-up bonuses and benefits for families of soldiers wounded or killed in action, has been subsidized by Moscow. The program exemplifies the difficulty of assessing how much the Russian government has spent on the war; the Kremlin uses arcane budget maneuvers to funnel money to the war through programs that are ostensibly designed for economic development in poor regions.

Another key development during the war is the renewed convergence between regions’ average wages.¹³ Between 2000 and 2014, as commodity prices and the market economy helped Russia grow substantially, the differences in wages across regions declined. This trend stagnated between 2014 and 2021 but then reemerged with the full-scale war. More important than the convergence itself, however, is what has driven it.

The dispersion of wages across Russia’s regions is visible in two distinctions—between the rich and middle-income regions, and between the middle-income and poor regions. Between 2000 and 2014, the convergence of average wages was primarily driven by the poorest regions catching up to middle-income regions. Since the full-scale invasion in 2022, the driver of convergence has been on the other end of the wealth distribution, with middle-income regions catching up to rich ones. Geographically, this means that the strongest wage growth does not extend much further east than the Urals.

Trends in investment betray a more complex and less optimistic picture. At face value, fixed investment has increased dramatically in some poorer parts of the country, including in the archetypal region of the Republic of Tyva. But while growth figures are useful metrics, they can obscure differences in scale. In reality, Russia’s poorer regions entered the war so far behind on fixed investment that these large increases (above 100 percent since 2021, in many cases) are dwarfed in scale by those in major metropolitan areas and export-driven (i.e., resource-rich) areas. In fact, dispersion of fixed investment per capita between regions has increased considerably since the full-scale invasion. This suggests that the wage gains in poorer regions relative to the rest of the country are unlikely to become a permanent feature of the economy.

Much of this post-2022 divergence can be attributed to regions with a heavy military-industrial presence; most of these regions fall into the Central, Ural, and Volga federal districts. Regional manufacturing growth is, of course, strongest there, and weakest where production relied on Western export markets. 

Sverdlovsk oblast, which hosts key heavy industry manufacturing hubs, saw fixed investment rise by more than 100 percent since 2021. Russia’s premier tank-producing facility, Uralvagonzavod, is based in Sverdlovsk oblast’s Nizhny Tagil. The Nizhny Tagil industrial cluster has doubled down on military-industrial production, including by ramping up hiring (and wages) for skilled and unskilled workers. It faces macroeconomic headwinds, including a shrinking workforce, but has been buoyed by defense procurement orders (gosoboronzakaz) and debt-fueled investment. Thanks to the expansion of production and the tight labor market, manufacturing wages in Sverdlovsk oblast increased by 78 percent between February 2022 and February 2025 (compared to 70-percent growth in all sectors). 

While the convergence of economic prospects across Russia’s regions might not be permanent, the inefficient allocation of resources—particularly to the military-industrial complex at the expense of the civilian sector—is likely here to stay for the foreseeable future. After the sign-up and war casualty payments stop flowing to the country’s poorest regions, the investments in the war machine will remain, fed by Moscow’s aggressive posture toward NATO.

Conclusions and recommendations

Unfortunately for those (the present authors included) who wish for Russia’s aggression to end as soon as possible, the bill is not yet coming due for the Kremlin’s war economy. Rather, we have argued in favor of a different lens through which to view the Russian economy—one of increasing trade-offs—as costs have mounted but remain manageable.

Slowing growth, depressed oil prices, harsher sanctions, and high inflation are the key macroeconomic challenges that the Kremlin and CBR face in late 2025. However, they are not the only trends worth considering. We have examined three structural shifts that Russia’s full-scale war against Ukraine has wrought upon the country’s economy: an external sector pivot from West to East, a clear prioritization of guns over butter, and a convergence of regional economic trends. Among these, regional convergence is the least likely to persist beyond the war.

Prescriptions for hindering the Russian economy vary depending on the specific goals and risk tolerances of sanctioning states. The United States and EU, for example, have long held the contradictory goal of reducing Russia’s oil and gas revenues without pushing up global market prices—hence the price cap—so as to avoid domestic and international backlash. With the current oil market glut, however, it is feasible to impose sanctions on Russian oil majors without spiking global prices. The true test of this theory will come only in time, as we wait to see what waivers the Treasury Department’s Office of Foreign Assets Control (OFAC) issues to potential customers of Rosneft and Lukoil (particularly India and China) and whether these sanctions remain in place for the foreseeable future.

The Trump administration’s punitive measures against China and India for their support of Russia, be they secondary sanctions or secondary tariffs, have thus far largely been half-hearted and inconsistently applied. This leaves policymakers, particularly in Europe, in a tricky situation. When Washington strikes a more conciliatory tone toward Moscow, sanctions enforcement is tougher. EU and United Kingdom efforts to sanction shadow fleet tankers have continued without the United States, and a growing willingness to interdict law-breaking vessels also put downward pressure on Russia’s oil export revenues, but they are less effective without the Treasury Department’s help. And in the only case in which Washington has imposed new restrictions—on Rosneft and Lukoil—it did so without coordination.

Economically, the two fundamental goals of the post-2022 sanctions regime have been to make it harder for Russia to produce materiel for its war and make it harder for Russia to pay for its war. Both come with their own costs and challenges—the former is hard to enforce, while the latter threatens to boomerang costs back to the sender—that reduce the coalition’s resolve.¹⁴ Nonetheless, we see no reason to deviate from these two guiding principles. 

Reducing Russia’s industrial production for its war can and should be accomplished in various ways. 

First, the sanctions coalition’s existing export controls regime must be better enforced and expanded. This would require more resources for investigations and a willingness to target third-country intermediaries that help Russian firms access export-controlled goods.¹⁵ As we have detailed, this will inevitably focus on China. 

Second, Chinese and North Korean supply chains to the Russian military-industrial complex must be disrupted. Chinese manufacturers sell dual-use goods and machinery to a wide range of firms in the military-industrial complex, while North Korea has been supplying Russia with more than half of its artillery shells. Targeting Chinese supply chains could entail sanctioning the logistics providers that facilitate the transactions on the Russian side or imposing secondary sanctions on the manufacturers and banks that do so on the Chinese side. Targeting North Korean supply chains, while more difficult due to the country’s international isolation, could entail sanctioning Russian or Chinese banks that facilitate trade with North Korea. 

Third, many entities in the Russian military-industrial complex remain unsanctioned, particularly those that maintain civilian pretenses. Rosatom and Roscosmos, two state-owned enterprises that have heavy ties to the military-industrial complex, are prime examples.

Reducing Russia’s ability to finance its war effort is, for all intents and purposes, a question of reducing its energy export revenues. Despite the fact that the United States has little direct role in the generation of these revenues, it might indeed have more leverage than Europe in the situation by virtue of its more powerful sanctions (and secondary sanctions) toolbox. In either case, the sanctions coalition can target the price of Russian energy exports or the volume of the exports; thus far, sanctions have almost exclusively targeted the former. Rosneft and Lukoil sanctions do appear to be the first major attempt to remove some Russian oil from the market entirely.

Once again, there are multiple paths that the sanctions coalition can take. The simplest step would be to align and expand sanctions against shadow fleet oil tankers, which circumvent the oil price cap. While US sanctions against shadow fleet tankers have generally been the most effective, Brussels and London should continue their efforts to force Russian oil off the shadow fleet and back to the mainstream fleet, where the price cap applies. Washington adopting the EU’s new, lower oil price cap would also hurt Russia’s oil revenues. More severe options could target Russian export volumes by embargoing a specific port, deciding not to grant waivers for Rosneft and Lukoil sanctions, or even applying secondary sanctions on buyers of Russian oil.

Whether by hitting Russia’s military-industrial capacity or its energy revenues, the United States and its European allies can surely hinder Russia’s ability to continue prosecuting its war against Ukraine economically. What is less clear, particularly in Washington, is whether the political will exists to do so.

Elina Ribakova has been a nonresident senior fellow at the Peterson Institute for International Economics since April 2023. She is also a nonresident fellow at Bruegel and a director of the International Affairs Program and vice president for foreign policy at the Kyiv School of Economics. Her research focuses on global markets, economic statecraft, and economic sovereignty. She has been a senior adjunct fellow at the Center for a New American Security (2020–23) and a research fellow at the London School of Economics (2015–17).

Ribakova has over twenty-five years of experience with financial markets and research. She has held several senior level roles, including deputy chief economist at the Institute of International Finance in Washington, managing director and head of Europe, Middle East and Africa (EMEA) Research at Deutsche Bank in London, leadership positions at Amundi (Pioneer) Asset Management, and director and chief economist for Russia and the Commonwealth for Independent States (CIS) at Citigroup.

Prior to that, Ribakova was an economist at the International Monetary Fund in Washington (1999–2008) working on financial stability, macroeconomic policy design for commodity-exporting countries, and fiscal policy. Ribakova is a seasoned public speaker. She has participated in and led multiple panels with leading academics, policymakers, and C-level executives. She frequently collaborates with CNN, BBC, Bloomberg, CNBC, and NPR.

She is often quoted by and contributes op-eds to the New York Times, Wall Street Journal, Financial Times, Washington Post, Guardian, Le Monde, El País, and several other media outlets.

Ribakova holds a master of science degree in economics from the University of Warwick (1999), where she was awarded the Shiv Nath prize for outstanding academic performance, and a master of science degree in data science from the University of Virginia (May 2023).

Lucas Risinger is an economic analyst and nonresident research fellow at the Kyiv School of Economics (KSE) Institute. His research focuses on the macroeconomics and military industrial complexes of Russia and Ukraine, as well as the Western sanctions regime against Russia.

Prior to joining KSE Institute, Risinger received his master’s degree from Harvard University’s Davis Center for Russian and Eurasian Studies, where his research centered around Ukraine’s modern economic development. He has studied and worked in Kyrgyzstan, Kazakhstan, Poland, Georgia, and Russia, and is fluent in Ukrainian and Russian.

Russia Tomorrow May 23, 2024

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The CRINK: Inside the new bloc supporting Russia’s war against Ukraine

By Angela Stent

The latest report in the Atlantic Council’s Russia Tomorrow series details how Russia’s war against Ukraine has brought together a new set of partners–united not by shared values, but by shared grievances–on the international stage: China, Russia, Iran, and North Korea.

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A new Atlantic Council report explores the effect of Putin’s politics on domestic Russian demographic change. Is Putin heading towards a Russia without Russians?

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Learn more

The post The Russian economy in 2025: Between stagnation and militarization  appeared first on Atlantic Council.

Online Event Wed, December 10, 2025 • 10:00 am ET

US Trade Representative Jamieson Greer on one year of a new global trade system

AN #ACFRONTPAGE EVENT—US Trade Representative Jamieson Greer discusses the major changes in US trade policy that have taken place during the first year of the second Trump administration and how the strategy will evolve in the years ahead.

Economy & Business Politics & Diplomacy Trade and tariffs United States and Canada

Even with China’s unfair trade practices, the United States and China still “should trade,” said US Trade Representative Jamieson Greer. “Just . . . it needs to be managed.” 

Greer spoke at an Atlantic Council Front Page event on Wednesday, hosted by the GeoEconomics Center, where he unpacked a year in which US President Donald Trump implemented an aggressive trade strategy that resulted in clashes with China over tariffs, export controls, and other trade measures. 

“The president’s interest is not in blowing up everything,” Greer argued, “and that includes our relationship with China.” 

Greer said that the administration’s actions are intended not to solidify geopolitical camps but to address the “giant deficit” in trade. “The landing zone with China is really we just have more balanced trade,” he argued. 

Below are highlights from the event, moderated by The Wall Street Journal’s Greg Ip, where Greer talked about the Trump administration’s broader strategy, what it has and has not yet achieved, and what to expect next on tariffs and trade. 

Partners and allies 

• Greer said that he was “disappointed” to see how the European Union (EU) is implementing the bloc’s digital regulations, with social media platform X receiving the first fine under the EU’s Digital Services Act last week.  
• Greer argued that the EU had promised “no discrimination against US digital actors” in trade dealings this summer, but “what we think is fair treatment and what they think is fair treatment is quite different,” he added.  
• “With respect to our companies, we’re going to regulate our companies,” he said. “We’re not going to allow that regulation to be outsourced.” 
• In discussing whether the EU and United States will take a common approach to China on trade, Greer said that “we’re not really in a position of telling everybody, ‘You’re either with them or you’re with us.’” He added, “if we align in a way that helps America, great. If not, we’re going to take our own actions.” 
• Yet, he argued, “it’s in every country’s interest to take action against overcapacity and distortions, whether that’s from China or that’s from Vietnam or Indonesia.” 
• On the US-Mexico-Canada Agreement (USMCA), which enters review next year, Greer said that the United States is going to likely talk to each of the other signatories “separately,” because “our economic relationship with Canada is very, very different than our economic relationship with Mexico.” He indicated that all options are on the table for the USMCA—including a withdrawal.  
• When Ip raised the idea that the rules-based international order and its fair-trade norms are dead, Greer asked whether “it was ever alive at all,” saying “sometimes we kind of have white lies we tell ourselves in international relations to paper over the actual power politics that really control everything.” 

Performance review

• Greer, in jotting up his own report card for the Trump trade strategy, said that while the US trade deficit globally “is tracking higher than it was last year,” he attributed that increase to “people front-running the tariffs.”  
• He called attention to other datapoints to show the impact of the Trump administration’s trade policies, including that the trade deficit with China has decreased and that he expects it to be down 25 percent by the end of the year. “It’s clearly going the direction we want it to go, and we expect it to go,” he said. 
• Greer also noted that manufacturing as a share of the gross domestic product is up, a sign that some sectors are reshoring their production. And while reshoring has centered around select items “that matter most” (such as cars, pharmaceuticals, and semiconductors), Greer said that “a lot of other manufacturing . . . comes along with it.” 
• As reshoring takes place and manufacturing jobs become more plentiful, the US trade representative pointed out that manufacturing jobs in the United States “on average pay more than services jobs,” so Americans shouldn’t “turn up our nose” at such work. 
• Despite the impact of tariffs and the reshoring of select items, Greer said that “stores are stocked up and ready for a record holiday season,” quipping, “I’m not the Grinch just yet.”

What comes next 

• In response to GeoEconomics Center analysis about the potential impact of the Supreme Court’s review on Trump tariffs, Greer said that if the court blocks tariffs issued under the International Emergency Economic Powers Act, the administration would use alternative instruments to attempt to recreate the nearly $200 billion in tariff revenues. 
• “The default position for a long time in the United States was to raise revenue to fund the government, and then we switched to an income tax early in the twentieth century,” he explained. “So it’s not crazy to have revenue helping to fund your government.” 
• Greer said his main focus with tariffs is “getting the trade deficit down,” and he pointed out that the countries with the largest trade surpluses with the United States do so because they “have a variety of unfair trading practices,” including overcapacity and subsidization. “Those countries currently have the highest tariffs.” 
• On the possibility of working with the US Congress to legislate some of the tariff increases, Greer said that he has “had some interest” from members of Congress. He argued that doing so would “provide a new baseline for companies to understand” that the use of tariffs “is a bipartisan expression.” 
• When asked whether next year will be quieter on tariffs, Greer said that it will depend on the president, but he added that the administration is “in the middle” of the tariff project, suggesting more movement to come. 

Katherine Golden is an associate director of editorial at the Atlantic Council.

Watch the event

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Online Event Wed, December 10, 2025 • 10:00 am ET

US Trade Representative Jamieson Greer on one year of a new global trade system

AN #ACFRONTPAGE EVENT—US Trade Representative Jamieson Greer discusses the major changes in US trade policy that have taken place during the first year of the second Trump administration and how the strategy will evolve in the years ahead.

Economy & Business Politics & Diplomacy Trade and tariffs United States and Canada

Event transcript

Uncorrected transcript: Check against delivery

STEPHEN J. HADLEY: Good morning. Thank you all for being here for this highly anticipated Atlantic Council Front Page event. I want to welcome our distinguished visitors here with us today, including many members of the diplomatic corps, and our viewers watching online.

I’m Steve Hadley, one of the executive vice chairs of the Atlantic Council Board of Directors. And today I have the distinct honor and privilege of introducing the 20th US Trade Representative Ambassador Jamieson Greer. We could not ask for a better guest as we conclude this year of significant transformation of the global economy.

As we look back on the first year of President Trump’s second term, there’s no doubt that trade and tariffs have dominated the economic agenda. The effective US tariff rate has gone from 2.5 percent last January to above 15 percent today—the highest in eighty years. President Trump has set out to remake the global trading system. And Ambassador Greer has been at the center of those efforts. From Geneva to Madrid to Kuala Lumpur, over the past year, he has helped shape this new policy. This summer, writing in The New York Times, Ambassador Greer said that we are at the beginning of a new global trading system. He called it the Turnberry system, named after the resort in Scotland where the US-EU trade deal was brokered.

He wrote, and I quote, “In the past, we subordinated our country’s economic and national security imperatives to a lowest common denominator global consensus. This approach harmed American workers, their families, and communities by undermining a manufacturing sector that creates high-wage jobs, fosters innovation, and catalyzes investment across the country. What began at Bretton Woods as a necessary effort to rebuild a global trade system shattered by war evolved over nine rounds of trade negotiations into something unrecognizable.”

The question we hope to answer today with Ambassador Greer, the question that animates our work here at the Atlantic Council, is what comes next? The Atlantic Council Front Page Event Series was created for conversations like these with leaders like Ambassador Greer. Before taking on his current role, Ambassador Greer served as chief of staff at USTR during President Trump’s first term. In that role, he helped negotiate the Phase One US-China Agreement and the US-Mexico-Canada Agreement, the USMCA. Ambassador Greer has had a distinguished career in private legal practice, focusing on international law and national security. He also served in the US Air Force, in the Judge Advocate General’s Corps, including a deployment in Iraq. Ambassador Greer, we thank you for your many forms of service to our nation.

To moderate today’s conversation, we are pleased to welcome Greg Ip, chief economics commentator at The Wall Street Journal. I’m sure everyone in this room and watching online agrees that Greg’s analysis of the global trading system and his writing on the US and Chinese economies are simply unmatched. Those of you joining us today will have the opportunity to join the conversation, asking questions via AskAC.org. Before I turn the floor over to Greg, let me note that today marks the fifth anniversary of the founding of the Atlantic Council Geoeconomic Center. It was created thanks to the vision of Chairman John Rogers to help define the shape of the new global economic system. Through its new tariff tracker and its data-driven work on trade, digital currencies, China’s economy, sanctions, and more, it is doing precisely that. We could not ask for a better event to mark this milestone.

Ambassador Greer, the Atlantic Council floor is yours. And, Greg, over to you.

GREG IP: Thanks very much, Stephen. And thank you, everybody here. And, Ambassador Greer, thank you so much for coming today.

Now, I’ve known you for a while, and I know that you keep a busy schedule, but even by your standards, it’s been exceptionally busy. I understand that this is actually your third meeting of the day. You’ve already met with delegations from Jordan and the UK.

I also understand that there’s an AI avatar of you out there with a song put to you, too. So do you think that in the future you’ll be doing—you’ll allow your AI avatar to take over some of the negotiation?

JAMIESON GREER: Maybe. That would allow me to multitask.

GREG IP: That’s right, yeah. Catch up on your sleep.

Look, I want to start out by going back to a speech you gave in Detroit at a reindustrialization summit. And in that speech you laid out, you know, some of the goals of the Trump administration’s trade plan, and you also laid out a three-part test—three things that you thought would tell us if you were achieving what you wanted to. They were smaller goods trade deficit, higher median real incomes for households, and rising manufacturing share of GDP. I want to ask you, give us a report card. How has the agenda—how is it delivering so far? And what more do we need—needs to be done?

JAMIESON GREER: Thanks. And thanks for having me today. Thank you to the Atlantic Council and to, you know, Adrienne Arsht for your patronage here, and for the audience.

The president has a great line where he says, you know, a lot of you I really like and some I don’t like as much, and I’m not going to tell you who. I have a reputation for liking everybody, so I’ll just leave it at that.

With respect to the report card, you know, I give those metrics when I’m talking about our goals in the administration and at USTR. The goal is not to simply have a trade deal or to simply to have tariffs for tariffs’ sake; it’s to have a trade policy that leads to these kinds of outcomes. So where are we on all of these?

The trade deficit. Right now the trade deficit globally is tracking higher than it was last year. You know, why is that? Well, there were a lot of people frontrunning the tariffs, all right? They knew this was going to happen. So if you look—if you look on a monthly basis, you know, early on, you know, we had higher imports than normal. People were frontrunning the tariffs. If you look since August, we’ve seen a significant decrease. Notably, our bilateral trade deficit with China has continued to decrease. It’ll be about—it’ll be down by about a quarter this year, I think, if it continues at this pace. So overall on the year, of course, it’s going to—you know, the first half of the year is going to track a little bit what happened last year and the frontrunning, but when you look at what’s happening more recently it’s clearly going the direction we want it to go and we expect it to go.

You know, second, on wages, blue-collar wages are up. So we’re seeing the right direction there.

And then on the—on the last one, manufacturing as a share of GDP, it’s about the same. You know, some folks measure it a little less. You know, what I would say, though, is we’re seeing a lot of positive numbers there. And you have to forgive me, I actually just brought the numbers because I can’t remember everything. I remember a lot. But you know, some of the metrics I’m looking at are shipments of core capital goods, which rose to an all-time high in July, remained high in August, remained high in September. Real private fixed investment was 5.7 percent in the first half of the year; in 2024, it was about 1 percent. So some of those indicators of new investment, more capital goods. You know, construction of new factories and facilities is also up by a large percentage. So all of those are going the right direction that we want. You know, I think we’ll see it show up in, you know, early next year. Secretary Bessent said the same thing.

You know, we also have, accompanying the trade policy are, you know, good tax policies, energy policies. You know, we’re pumping more oil a day than we ever have. We have expensing in the One Big Beautiful Bill that’s going to help folks with their capital equipment and things like that. So a lot of the indicators we’re looking at are going exactly the right direction.

GREG IP: Manufacturing employment has been weak this year. I think it’s been down in the last few months. What do you make of that? Is that a sign that the reshoring has yet to happen?

JAMIESON GREER: Well, again, it’s something we track, and we’re—you know, we’re aware of those numbers, of course. And I look at it in the broader context of some of the figures I just talked about—you know, more capital equipment, more construction, more private fixed investment. Those are all good numbers.

The employment number overall, our numbers overall, are interesting because we have this phenomenon as well of the administration’s immigration policies, you know, really changing the fundamental employment numbers in the United States. And I’m looking into that, honestly, because I see that number and it seems a little out of step with what we’re seeing in the other numbers.

So we’re watching that. I mean, it’s not been a huge drop, but obviously, we want it to be higher.

GREG IP: Last night in Pennsylvania, the president talked somewhat about his tariff plan, and one line that caught my ear was that he talked about—you know, I think he said something about how we don’t need thirty-five—so many pencils and Barbie dolls, and he’s said this in the past. But explain to us the theory of the case about reshoring. Is it the case that we want to bring back the production of everything, including pencils and dolls? Or do you—does the administration have an overarching theory about which manufacturing is most important to bring back?

JAMIESON GREER: Sure. The first thing I’ll say on, you know, Christmas and all of that, you know, we had the National Retail Federation vice president come out, you know, recently and say stores are stocked up and ready for a record holiday season. So I think we’re—you know, I’m not the Grinch just yet.

GREG IP: No doll shortage?

JAMIESON GREER: No. No, there’s no shortage.

GREG IP: That we’re hearing from—OK.

JAMIESON GREER: What I would say is manufacturing—and not just manufacturing, but the associated research and development—it moves in ecosystems. And so when you reshore—when you’re focused on reshoring the things that matter most—automotive, pharmaceuticals, semiconductors, robotics, steel, fertilizer, all of these things—you tend to naturally get a lot of other manufacturing that comes along with it. Could that be toys and pencils, et cetera? I mean, we’ve made those things here before.

And by the way, manufacturing jobs in America on average pay more than services jobs. You know, we talk a lot about services jobs and how great they are, and they certainly are, but manufacturing on average pays more. So I don’t think we should turn up our nose at making pencils in the United States or other things. I don’t know if American Girl is made in America. It says American Girl. I have four daughters, so I’ve, like, got these things.

GREG IP: Yeah.

JAMIESON GREER: So what I would say is I’m not turning my nose up at this other manufacturing. I think all manufacturing jobs are good jobs, and they typically feed into the broader ecosystem.

GREG IP: All right. Let’s talk a little bit about the agenda. I think last week you had a series of hearings on USMCA—US-Mexico-Canada Agreement—and I believe the treaty or the agreement says renegotiation must begin sometime in the coming year. You were, of course, a part of the team that negotiated that treaty back in 2018. What are the flaws that have since become apparent to you and what do you want to fix? What’s your priority for altering or fixing this agreement?

JAMIESON GREER: So one of the things we really wanted to do with USMCA—and remember, when you look at North American trade you have—you have big—you know, big sectors. You have automotive transportation and everything around it. You have energy trade. You have agricultural trade. You have other important sectors, too. You have services trade. But those drive a lot of trade in North America and in the United States. And remember, it’s a $31 trillion deal, $29 trillion of which is in the United States, when it comes to GDP.

And so in the first term we were quite focused on, you know, securing and improving ag access, because I think a lot of our agricultural producers are big winners of the North American economy. On the automotive side and related manufacturing that was more challenging, where we saw a lot of that production go to Mexico and also to Canada. And a lot of people will say, well, that was the point; we wanted to, you know, have lower-wage, you know, manufacturing in Mexico. But if you go back and look at the history, the narrative around NAFTA was, well, it’s actually going to raise wages in Mexico; we’re going to export more because they’re going to buy more from us. So it played out quite differently than how it was sold.

What we did there is we changed the rules of origin. We wanted to incentivize more content from North America, particularly from the United States. One of the drawbacks is that the most favored nation rate for automobiles in America is 2.5 percent. And so we had a very narrow range to play with where we wanted to incentivize more production in North America, but we only really had 2.5 percent to play with. And that’s a problem. If our MFN rate for autos had been 25 percent like it is for pickup trucks, it’s a lot easier to create incentives to produce in America. We make a lot of pickup trucks in America. It’s because of that 25 percent chicken tax, as it’s called.

So one of the things we’ve already done in this administration, as you know, is we’ve imposed the Section 232 on autos. We’ve to some degree fixed that. I think going forward with USMCA we need to look at non-auto rules of origin to take a similar approach. Especially now that we have the reciprocal tariff overlay of Section 232, I think we have more incentives to create more US and North American content.

GREG IP: Do you have a view on whether this is best done trilaterally, as was done last time, or that it’s best done as two separate bilaterals?

JAMIESON GREER: Well, I—our economic relationship with Canada is very, very different than our economic relationship with Mexico. The labor situation’s different. The import-export profile is different. The rule of law is different. So it makes sense to talk about things separately with Canada and Mexico.

We have the underlying agreement. There are certainly areas where—

GREG IP: When you say underlying, are you referring to CUSFTA, the one that preceded NAFTA?

JAMIESON GREER: Well, I’m talking about USMCA.

GREG IP: Oh, OK. Sorry. All right. OK.

JAMIESON GREER: We have USMCA, which is a trilateral agreement. My sense going forward is we’re going—you know, we’re already talking to them separately.

GREG IP: Sure.

JAMIESON GREER: I have not—I have not had a meeting this year where I sat with Canada and Mexico in a room and we sat together and talked about USMCA.

GREG IP: So it sounds like, if I could sort of infer what you’re saying, is that, yeah, we could end up with simply two rather than one agreement.

JAMIESON GREER: You could have—you could have a couple of protocols attached to the agreement, you could have a replacement. I mean, there are a lot of things that you could do. Now, there are going to be certain areas where a trilateral discussion could make sense. Rules of origin being one of them. Do we align on external trade policies to some extent? That could be another one. Critical minerals could be another area.

GREG IP: Under this—under this scenario does USMCA plausibly go away altogether and is simply replaced by new agreements?

JAMIESON GREER: So we put, and Congress agreed, to have this sunset review clause. And the whole purpose was to review, revise, or even exit USMCA. That’s the purpose, because NAFTA did not have such a clause. And so for twenty-five years, it persisted without change, without a driving factor to force political accountability for the deal. And it lost political support over the years, to the point where, you know, presidential candidates from both parties regularly would run against NAFTA, when it’s fully in the power of the US government to change this and revise it. So we put in the forcing function. So, you know, could it be exited? Yeah, it could be exited. Could it be revised? Yes. Could it be renegotiated? Yes. I mean, that is the purpose of that clause. And all of those things are on the table.

GREG IP: Do you anticipate submitting the finished product to the Senate for ratification?

JAMIESON GREER: So, if you—if you have something where we require an adjustment to US laws, then you have to go to Congress. That’s just how it works. If I have a situation like with some of our reciprocal trade agreements that we’re doing, where there’s not really a congressional change to be made and it’s mostly just changes on the other side of the table, you don’t necessarily have to go to Congress. Now, all that being said, go to Congress, we consult with them. I was there last night in the hearing. Our people talk to them all the time. With respect to a vote, if we need to have a vote to change something in US law, of course we’re going to go to Congress.

GREG IP: OK. Let’s turn to the International Emergency Economic Powers Act. As you know, there is a case pending in the Supreme Court—

JAMIESON GREER: I’m familiar with it.

GREG IP: That’s right, yeah, because you’ve been reading The Wall Street Journal, I would hope, yes. On the legality of this thing. So there is—I’d say the betting markets are saying that the Supreme Court will rule against you. What’s your contingency for dealing with that situation?

JAMIESON GREER: So I would say that since the first term, President Trump and the policy people surrounding him have been thinking about ways to achieve his goals with respect to trade. And even this year, in January, when we were preparing the America first trade policy and options for the president to decide from, there are many statutory delegations that Congress has granted to the president or to other—to agencies to take action. Now, remember the Section 232 actions on steel, aluminum, autos, et cetera, those aren’t at issue in the case. So all of that stays.

The question is, you know, imposing the global tariff and ensuring that the biggest offenders when it comes to trade deficits and unfair trade practices are addressed. And, you know, you have a lot of familiarity with Section 301, with—obviously, I referred to Section 232. There are people out there talking about Section 122, which is a balance of payments power. And the courts have even talked about Section 122. So, you know, all of this is kind of in the ether and people are talking about it. I’m under strict instructions from my general counsel not to reveal the backup plan.

GREG IP: The Atlantic Council—they have a lovely visual, and I hope you can put it up right now, showing the IEEPA tariffs versus the 232 tariffs. Can we get that picture put up somewhere? Oh, there we go. So, as you can see, by their estimates the IEEPA tariffs are raising an annual run rate of around $200 billion a year. That’s a lot of money. Do you think that you can basically recreate that revenue stream using alternative instruments?

JAMIESON GREER: Yes.

GREG IP: Yes? Is that—

JAMIESON GREER: Short answer, but yes.

GREG IP: Is that, in fact, one of the policy goals? Will it be one of the considerations?

JAMIESON GREER: I mean, listen, revenue—tariff revenue is a byproduct of the policy. And you’ve heard the president talk about it a lot. And as this group knows, I think, and anyone who follows trade, the default position for a long time in the United States was to raise revenue to fund the government, and then we switched to an income tax early in the twentieth century. So it’s not crazy to have revenue helping to fund your government. And a lot of countries actually still do to this day. So it’s certainly, you know, a byproduct of the policy. The policy is to reshore the things that matter. It’s to get our trade deficit down. It’s to raise in real income, all those things I discussed.

GREG IP: Well, the reason I bring up the revenue is that’s, in some sense, a proxy for the tariff burden or the tariff incidents, right? I mean, divide the tariff revenue by the imports and there’s your rough proxy, right? So the reason—what I’m trying to get at in that question is, do you think that you can create more or less the same tariff incidents, the same policy outcome using alternative instruments?

JAMIESON GREER: I mean, so I would say, roughly yes. And here’s why—

GREG IP: And is that something that would be under a consideration? Would that be one of the policy objectives that you think about in that contingency?

JAMIESON GREER: I am focused—here’s what we’re focused on, getting the trade deficit down. So when you look at where we are right now, what does the trade landscape look like? The countries that have the largest surpluses with us and the world, have the largest problems with overcapacity or subsidization, they’re largely Asian countries but, you know, the EU has a giant surplus with us. You know, those countries currently have the highest tariffs, right? China has an all-in rate of about 45, if you add the 301s and what we’ve done this year. You know, Southeast Asia has high rates, you know, 18, 19, 20 percent. You know, and then we have a variety of, you know, closer allies that we trade with, but with whom we have real trade problems. This is Japan, Korea, EU. I keep pointing here because the EU ambassador is, like, right there.

You know, and then when you get to the Western Hemisphere we’re generally at about, you know, 10 percent. This is our this is our backyard and we have surpluses with these countries. The reason why some of those countries have a higher tariff is because they have a variety of unfair trading practices that they pursue. And so I’m confident that with other tools we have related to unfair trading practices we can—we can produce the tariff rates we need.

GREG IP: If, in the event the Supreme Court also orders a refund of tariffs paid, do you anticipate any difficulty in actually facilitating or advancing those refunds? It’s a lot of money. Could the people who—a lot of companies have lined up asking you—you know, preparing to ask for their money back. How long would they have to wait?

JAMIESON GREER: Well, it is a lot of money. And, I mean, this is part of the reason why the president’s been so vocal about this case. Obviously, he wants to have the leverage that is afforded by IEEPA to be able to take care of the emergency we’re facing, the offshoring of manufacturing and the deficit. You know, and he’s raised this point too, right? You leave a hole in our finances if you do this. So it’s a big deal, right? And hopefully the Supreme Court, you know, follows the plain language of the text, which is in our favor.

You know, one fortunate thing—and this is probably the only question I’ll dodge—is I’m the USTR. I’m not CBP. I’m not the Treasury Department. And so, you know, I’ll refer you to Secretary Bessent. But, listen, I had the commissioner of CBP in my office yesterday. And we were talking. And, you know, obviously people think about, you know, how this might work. I don’t know what the timeline looks like, though.

GREG IP: So don’t expect them to thank you for basically telling us to go ask them the answer to that question.

JAMIESON GREER: Well, they send people to me all the time.

GREG IP: OK. Fair enough. You mentioned the EU ambassador. Obviously, you know, we’re still sort of, I think, working on some of the details there. Your colleague, Commerce Secretary Howard Lutnick, recently suggested that, for example, the outcome on steel and aluminum tariffs might depend on the treatment of US tech companies. There was recently a very large fine imposed on X, and I think that obviously creates some friction. Are those two things linked, in your view? Will how the EU essentially implements their various digital legislation have—affect how they are treated in tariff negotiations?

JAMIESON GREER: In our joint statement from the past summer, which was really important, right? And Stephen Hadley referred to our statement and what happened at Turnberry. It was an incredible moment for the EU and the US to agree to look at the facts on the ground and say, listen, there are other things going on in global trade that, you know, maybe aren’t accounted for by the current system. And we need to address them, and we’ll do it together. So I give huge credit to President von der Leyen, her staff, and everybody for being super pragmatic on that point.

In that joint statement, there is language about no discrimination against US digital actors and making sure that they have fair treatment. You won’t be surprised to know that what we think is fair treatment and what they think is fair treatment is quite different. And I’ve been, frankly, disappointed over the past few months to see zero moderation by the EU and its implementation of the DMA and now the DSA. You know, I don’t purport to control any other country’s, you know, regulatory schemes, or their sovereignty, or anything like that. I understand that. But with respect to our companies, we’re going to regulate our companies.

You know, the challenge with the digital—in the digital trade space is that, due to the nature of the internet and digital trade itself, is it transcends boundaries. And so if you have one jurisdiction that says, well, we’re going to impose this super-draconian set of rules, or we’re going to limit your business models in certain types of ways, because these are naturally, you know, cross-border companies, it affects them everywhere, right? This is the equivalent of California setting the emissions rules for cars for the whole country, right, for what they do, right? The EU is essentially trying to do it, you know, for global digital operators.

And it would be one thing if they had their own champions, right? But they don’t. So it’s a real problem. And, by the way, we haven’t even quite settled this in the US, right? There’s a—there’s a lot of discussion in Congress and among policymakers on how to do digital tech regulation, and people are a little bit all over the place. What I will say is, we’re not going to allow that regulation to be outsourced, and so I’m hopeful we’ll have constructive discussions with our friends in the EU on this.

GREG IP: Yes, it’s been observed that the one thing the Europeans export a lot of is regulation, so looks like they might need to find some different comparative advantage.

JAMIESON GREER: This is why they gave the EU ambassador a front row seat here, to hear this again.

GREG IP: Going back to the revenue situation, how do you feel about going to Congress and saying, let’s legislate some of these tariffs, let’s go and amend the harmonized tariff schedule to create some permanence to this revenue stream?

JAMIESON GREER: Yeah. I mean, listen, if I were Congress, I’d be quite interested in that. You know, I’ve had members of Congress come up to me who I would not characterize as fans of tariffs, but they’ve said things like, this is real money. This is real money. We have actual priorities we’d be interested in legislating. I’ve had people come up and say, we understand exactly what you’re talking about when it comes to the supply chains that we need to reshore and the trade deficit we need to get down. You know, why don’t we legislate some of this? So I’ve had some interest. You know, we’ve had discussions in the White House about the viability of this. Obviously, any bill like that is really challenging, and I’ve been in Washington long enough to be jaded at the prospect of legislation, but I think it makes sense. I think that it would provide a new baseline for companies to understand, you know, this is not just President Trump or maybe the one person who comes after President Trump, but it truly is a bipartisan expression of what I think a lot of people agree with.

GREG IP: So could that involve, for example, raising the MFN tariff, which I believe is the first schedule?

JAMIESON GREER: Yes. I mean, my own view is, if I were—you know, if I were Congress, I would want to have something like a global baseline to help get the—

GREG IP: Ten percent?

JAMIESON GREER: For example, to get the deficit under control, and then you have higher tariffs based on, you know, whether it’s the deficit or unfair trading practices or something, and you give the president enough discretion to adjust that, to incentivize countries to, you know, come into the fold.

GREG IP: There’s even been interest, and I think there might actually have been a bill in Congress on creating a separate China tariff schedule. Is that something you’d be interested in?

JAMIESON GREER: I mean, I guess my view is you don’t need something China-specific if you have a broader kind of global approach, right? You can fold whatever your approach to China would be into that same legislation.

GREG IP: Sure, OK.

One thing we hear a lot about, and we at the Journal hear a lot about from our business readers, is complaints about the complexity, the uncertainty, the compliance burden of tariffs. Tariffs have changed a lot this year, and there’s a lot of interaction, you know, between the different—for the 232s, the 301s, the IEEPA tariffs. You know, the question is, do they stack, do they not stack? There are anecdotes out there of like an importer getting three different quotes on what tariff they raised, and there was a Fed study that suggested additional compliance costs are roughly equal to a tariff of like 1 to 2.5 percent. So do you agree complexity is an issue? And if so, what’s the solution, and can American businesses look forward to a period of stability?

JAMIESON GREER: So I’m sensitive to the complexity question, because I’m an international trade attorney, and in my private life, I spent many years helping navigate what’s already a complex system, by the way. So I mean, let’s level set, right? It’s not like before this it was like all roses and hugs in customs world. It’s always been quite challenging. You know, but we are sensitive to this.

So early on, there were questions about stacking. How do you relate 232 to the reciprocal tariff? And so, you know, there was guidance and executive orders to help clarify that. And as a general matter, if something’s under the 232 regime, that’s where it is. If it’s another reciprocal tariff regime, that’s where it is. There’s some exceptions to that.

You know, I understand on, you know, steel and aluminum, there are derivative products, and there’s some complexity there. We’ve heard from that on a lot of folks. So the goal is not to introduce complexity for its own sake. Naturally, when you are moving trade policy that’s been more or less the same for seventy years to a new outcome, and you’re changing the tariff regimes, there’s going to be challenges in making it operational, right?

GREG IP: Yeah.

JAMIESON GREER: It’s one thing to kind of have big ideas at the administration level. But again, I had the CBP commissioner in my office yesterday, and we discussed this very issue. So we’re committed to making it as smooth as possible, and so we’re very open to feedback on complexity.

GREG IP: By the way, as the Atlantic Council people, I know they had a slide they wanted to show. It’s really cool with a slider that shows the changing tariff levels that—feel free to put it up now if you have it, but that sort of like visually explains how much tariffs have changed. And so now you could say, wow, that’s a great, you know, like piece of work product there. But, you know, like, if you were in your old job, you’d be, like, rubbing your hands at all the work that’s been created, I’m sure.

But yeah, anyway, I get what you’re hearing, and I presume that you’ve gotten—it looks like a lot of the heavy lifting has been done in terms of just rebuilding and reframing, restructuring the system. All else equal, will 2026 be a quieter year than 2025 on tariffs?

JAMIESON GREER: Well, that’s a question for President Trump.

GREG IP: OK.

JAMIESON GREER: But what I would say is, you know—and I see the graphic, and obviously, again, we’re in the middle of a project. I’m sure you’re going to see things changing over time. And there’s a lot of focus on April 2 and Liberation Day and things that happen since then. I would really focus on August 1st, because that is when the president really set in place a lot of what the reciprocal tariffs are going to be, we announced a bunch of deals, and then in the couple months since then we’ve kind of fleshed out what those deals are. And you’ve really seen, you know, the structure play out that I talked about, right? The highest, you know, over capacity, you know, trade deficit, countries with the highest rates, and the farther you get away from that, the lower the tariffs are.

GREG IP: Yeah, yeah.

JAMIESON GREER: I mean, that’s the structure. There are outliers: Brazil, India. We’re working on that.

GREG IP: Yeah.

I want to turn to China now. And I believe you have a visual also that shows some interesting patterns in the trade between the United States, China, Mexico. So this is interesting. As you pointed out, we’re seeing the big drop in the China number and diversion behavior, but China now drops to third place in terms of its importance as a supplier to the United States.

And I bring that as background, because I think that one of the things that has remained constant between the Trump first term, this term, and even the Biden term in between was the view that China is different. And when I read the national security strategy—and I understand you contributed to this, right? USTR actually had some role in helping draft the national security strategy?

JAMIESON GREER: We got to see it and give input.

GREG IP: OK. So I’m just going to quote a little bit from it: “We must work with our treaty allies and partners to counteract predatory economic practices, use our combined economic power to safeguard a prime position in the world economy and ensure that allied economies do not become subordinate to any competing power.” It discusses encouraging our partners to rebalance China’s economy toward household consumption, forming coalitions that use our comparative advantage to pursue growth through managed cooperation tied to strategic alignment.

So, conceptually, all of this seems to be pushing us in a direction where, whatever other differences, the United States and its like-minded partners would benefit from a common approach to China. Is that true? And how do you actualize it? Can you talk about how the United States can actually—given there’s been a lot of tension, and a lot of you know, you know, friction between our partners—given all that, how does the United States, or should the United States, even want a common approach towards China?

JAMIESON GREER: Yeah, so first of all, I think, you know, I would characterize our view on China—and I’ve mentioned this, you know, recently. So it’s not, it’s not news or something. People in Washington like to talk about China hawks and China doves, etc. That’s a distinction that doesn’t really resonate with the Trump administration because we’re just pro-American, right? We’re just pro-American. We’re not anti-anybody. You know, we’re pro-American, America first, as they say. So, so first of all that, that’s our position.

And we hear this sometimes when partners say we should align on China. Oftentimes, that is code for don’t put tariffs on me.

GREG IP: Yeah.

JAMIESON GREER: Right? So that’s like its own thing.

I mean, my own view is it’s in every country’s interest to take action against overcapacity and distortions, whether that’s from China or that’s from Vietnam or Indonesia or other folks, right? You know, we talk about the EU. We have real issues with some of the EU’s, you know, regulatory approaches. So, you know, we’re not really in a position of telling everybody you’re either with them or you’re with us. I mean, that’s really not how it is. I mean, our view is the United States has taken a lot of unilateral actions since the Trump administration. The Biden people kept a lot of this. We’re doing things now.

A lot of it has to do with China simply because we have a giant deficit with them, and their economy doesn’t fit in very well with ours. We’re just quite different economies. It doesn’t mean we can’t trade together. We should trade together. I mean, I think the landing zone with China is really we just have more balanced trade. I think we have to manage it. I think we have to talk to each other about what we do want to buy and sell from each other, and just make it, frankly, quite managed. Is that ideal? Not for a capitalist, but, you know, we aren’t dealing with capitalists on the other side.

I think with respect to, you know, other countries, I think a lot of it is organic, right? You can see other countries already taking action against overcapacity, whether it’s from China or elsewhere. You know, I think it’s not really a situation where you have, like, the Justice League coming together and, you know, doing all this. This is not how it is. We’re taking unilateral actions. It always takes longer for other countries to, you know, get behind it or do things. And I understand that everyone has different politics and policies. You know, if we align in a way that helps America, great. If not, we’re going to take our own actions.

GREG IP: So we learned just this week that China ran a trade surplus, I think, of a trillion—more than a trillion dollars just through the first eleven months of the year, an all-time high. There’s growing concern—we wrote about it this week in the Journal—that China’s export-driven model is actually hurting other countries by deindustrializing them. And so that essentially—so where that’s heading towards is that it’s—the China challenge is not strictly a bilateral challenge; it’s global. And we can try and keep out China’s exports bilaterally, but they’ll find some other home somewhere else and it will redound to the United States in some way. And this brings folks to the idea that there’s some value in this common approach.

And I noted, for example, in the Malaysia deal there’s a section there that obligates Malaysia that if the United States imposes restrictions on a third country, such as China, Malaysia must sort of copy those. So what’s the driving thought behind that? And is there some willingness to consider, for example, in USMCA maybe the United—Canada and Mexico sort of mimic the American external tariff on China in exchange for maintaining some of the preferential access in that agreement?

JAMIESON GREER: Well, I would say, first of all, it’s really important to acknowledge that President Trump is very focused on having a constructive relationship with China. We certainly had tensions earlier this year. And you know, when China really escalated the situation through rare earth controls and all these different things, the United States certainly had an option to elevate our own export controls or other things. We have—we have a lot of leverage, you know, over all kinds of—China and everyone else. But the president’s interest is not in blowing up everything, right? And that includes our relationship with China. And so we’re quite focused on trying to find a path forward to have an exchange of goods and services between China and the US that makes sense for both of us and that is fairly balanced.

Now, you referred to some of the provisions we have in our trade agreements with Malaysia and agreements from others. You know, it makes sense in a bilateral trade agreement to want to ensure that the benefit of that agreement goes to the two parties involved, right? And that helps us control all kinds of things—control for transshipment, et cetera. And if you’re ever in a situation where we think that broader action is necessary with regard to third countries—and it’s not China-specific, right; if you look at the agreement, it doesn’t say anything about China specifically—you have that option. You have that option to be able to go to countries and say, listen, you agreed to work with us on these issues, and we’re seeing an effect in your market that affects us.

I mean, that’s a—that’s a pretty—I think a normal, natural thing. I think saying it out loud is new. I think writing it down is new. And I think it signifies the importance of economic security. That’s all new, and I think we should be commended for it.

You know, again, I think it’s there if we need it. Right now we’re really trying to have a constructive relationship with China.

GREG IP: OK.

I’m being told that I need to start asking the audience for questions. There’s a few other things I wanted to ask. But any questions out—OK. My friend Gavin Bade from The Wall Street Journal has a question.

Q: Moderator’s prerogative.

JAMIESON GREER: It’s kind of a plant.

Q: He doesn’t know what I’m going to ask, I promise.

GREG IP: It’s true.

Q: Ambassador, thanks for being here. I appreciate it. As you said, Gavin from the Journal.

I wanted to ask you about some recent recalibrations in some of these IEEPA tariffs. You all have rolled back some tariffs, especially on foodstuffs, recently. Some of that was in relation to trade deals or agreements that you signed with some nations, but some of it was outside of the trade negotiations. I wanted to ask you why you’ve recalibrated in that way. And is there kind of a tacit admission there that maybe some tariffs were applied to some goods that, you know, had raised prices for consumers in a way the administration didn’t want to see going forward?

JAMIESON GREER: Yeah, so I think you’re referring to stuff like coffee and bananas and stuff like that. And so from the—you know, from the outset of these negotiations, you know, at least internally, you know, there had been a view that there would be calibrations at some point. And some of these tariffs you have because you want to reshore, you want to protect, you want to take care of the deficit; and some you have for leverage.

And so in early September the president put out an executive order saying, you know, listen, you know, here’s a bunch of stuff where we can—you know, I’m going to authorize USTR and Commerce and all these folks to eliminate the tariffs contingent on progress on the deals. And so, you know, a couple months later, after we had announced deals—a swath of deals in Asia, obviously the EU, other places in Europe, Western Hemisphere, et cetera—we were in a position to feel like we finally had really had a critical mass of progress that we could—we could remove the tariffs on these items, which he had been signaling he was going to do. And several weeks later, we did. It’s no coincidence that when we announced deals with, you know, Ecuador and Guatemala and, you know, Vietnam and Cambodia and these places, places where we get banana and cocoa and coffee, like, there’s just no coincidence that we announced these deals and then we released this stuff.

You know, with respect to the incidence of tariff increases, I mean, listen, there’s a lot of stuff that goes into pricing. If you look at coffee, the coffee price had been going up for two years, right? I can’t control the weather in Brazil with a tariff.

That being said, I think it’s more likely that you have an incidence—a tariff incidence on a price for something that we just don’t make in America than something we do make in America. Also, when you think about the incidence of tariffs, you often get a situation—you know, particularly with manufactured goods or commodities that are broadly produced. If you’re trying to sell into the most valuable consumer market in the world, you want to keep your market share. And so you’re going to compete with other exporters to eat the tariff. And so that’s why you see the tariff effect really diffuse throughout the supply chain.

GREG IP: There was a—yes, right here. Introduce yourself, please. Wait for the mic, and then introduce yourself.

Q: Thank you so much. How are you, Ambassador? I just wanted to ask you a couple of specifics and then a general question.

So specifics—

GREG IP: Let’s see if we can compress it into one question.

Q: Sure. It’s all trade related, you know.

On Indonesia, there’s reporting that you are unhappy about what’s happening with Indonesia. If you could give us an explanation on what’s happening there and what they’re trying to push back on? And what does that mean about these other agreements that you’ve already sort of negotiated? And are you seeing that kind of same recalcitrant attitude from other players?

But then, the other issue is the chips issue and the ruling that came—or the decision that was made by the president. We understand that there’s some, you know, sort of pushback. Obviously, we’re seeing that on the Hill yesterday in the hearing. But can you tell us your view on allowing those chips to go? Thanks.

JAMIESON GREER: So I’ll just do the first one, because you said one question. So on Indonesia, yeah, we saw that report in the FT. And, you know, we have confidentiality agreements between us and Indonesia as we proceed. You know, what I will say, I think it’s meaningful that we had signed agreements at the ASEAN conference in October with Malaysia and Cambodia. I would love for Indonesia to be in that same position. I think it’s a great export market. There are things we import from Indonesia that we want to import. You know, I think that we’re always ready to move forward, and to move forward quickly. And I’m going to have a conversation with my counterpart in Indonesia tomorrow morning. I’m, like, looking at my staff. Tomorrow morning? You know, to talk about progress. You know, I’d love to see that deal finished and done. I think it’s in their interest, and in ours.

GREG IP: I’m going to go to a question from the online audience. And, by the way, if you are waiting to add a question you can go to AskAC.org and there will be an opportunity there, if you want to ask a question. Let me see. How do I do this? This is the part where my age starts to catch up with me. I’ll read the—well, I guess you can all see the question now.

JAMIESON GREER: So everyone can see it?

GREG IP: Yeah.

JAMIESON GREER: Yeah. So Brazil. All right. So with Brazil, we have a lot of issues going on with Brazil. Historically, they have been a challenging trade partner in a lot of ways. An important trade partner. We have a trade surplus there. A lot of good import-export trade that happens. But there are a lot of barriers to the United States, tariff, non-tariff barriers, regulatory barriers. On top of that, they’re a competitor for the United States, especially in agriculture. You know, whenever we are trying to sell our commodities overseas we’re always competing with the Brazilians. We’re concerned about some of their practices with respect to agriculture. So we’re conducting a Section 301 investigation that covers a number of practices in Brazil, including what we think could be illegal deforestation in the Amazon, you know, for their soybean production, a variety of digital practices.

The president also, kind of separate from the trade world, has had foreign policy concerns with respect to the weaponization of law and judicial system in Brazil with respect to officials in Brazil. We’ve seen them detain Americans. We’ve seen them issue, you know, secret orders to American tech companies. We’re concerned with all of these. Some of these are identified in our Section 301 investigation that we’re conducting. Some are identified in the executive order that empowers the State Department and others to take action. And so we essentially have a mix of tariffs on Brazil due to both trade issues and foreign policy issues.

President Trump has had several very constructive interactions with President Lula recently, in the process of relieving tariffs on coffee and cocoa, which we were discussing earlier. Brazil was included in that. And part of that is a recognition of progress we’ve made with them. You know, we would like to in the near term have some kind of deal with Brazil. It may not solve every problem, but I think that there are things they can do. They seem to be quite willing partners. They’re in the Western Hemisphere. You saw the National Security Strategy. Western Hemisphere is very important to us. We want to have a better trade relationship with them. And I think we’re—we kind of have a structure set up to do negotiations to achieve that. Of course, it takes both sides’ willingness to actually make concessions.

GREG IP: Thanks. Yes, there. Wait for the mic and then introduce yourself.

Q: Hi. Logan Wright, Rhodium Group.

You mentioned that the administration is favoring a more constructive relationship with China at this point. Is that inconsistent with other objectives to bring down the US trade deficit, given that China’s strategy remains export-oriented and, you know, continuing to increase global trade surpluses? And is that—does that reflect a change in the approach toward longer-term strategic competition with China?

JAMIESON GREER: So I don’t think it’s inconsistent at all. I mean, we’ve really—frankly, since May, since our Geneva talks, we’ve been on this path with China to be more constructive. And since May, we’ve seen more balance come into the relationship on the good side. So we’re doing both of these things at the same time. As I mentioned earlier, I think that US-China trade, just I think it needs to be managed. I think we need to figure out, you know, what do we want from you? What do we not want from you? What do you want to buy from us? And there’s always going to be this, you know, upper area of the highest tech—you know, the highest tech items, which, you know, folks have referred to and asked about. And that’s always going to be, you know, some stuff obviously, and other stuff is a gray area. You have to figure that out.

But there’s a lot of area where we should trade with China, right? There’s a lot of, you know, consumer goods or low-tech items. You know, we certainly should be selling ag, and airplanes, and medical devices, and things like that. I mean, I think we should focus on where do we agree where we should be trading, and what types of volumes, to try to have balance? And then if there are stickier issues we can address those down the road. I don’t think it’s inconsistent at all.

GREG IP: We’re almost out of time. And I’m going to do the moderator prerogative to ask the last question. You know, we heard the phrase “rules-based international order” so many times, but I think the only thing we all agree on now is that it’s dead. Is that it died sometime between 2016 and 2017, but it might have already been dying by that point. What is your vision of what replaces that order, if anything? I mean, I could have explained that when it was a WTO and nested in that were a group of bilateral and prolateral treaties. What will govern the rules of international trade going forward, if, in fact, there are such rules?

JAMIESON GREER: Well, first of all, I’d say, from what I would think is a realist view, the question is was it ever alive at all, right?

GREG IP: Yeah.

JAMIESON GREER: I think sometimes we kind of have white lies we tell ourselves in international relations to paper over the actual power politics that really control everything. I would say, with the WTO, it has a baseline set of commitments that were agreed to many years ago. There hasn’t been a lot of development there. That’s why we, as the United States, are layering over the WTO commitments bilateral agreements that we believe put America’s interests first and are also in the interest of these other countries to be able to maintain access to the US market in ways that are beneficial to them.

So, I mean, I think we have some of those underpinnings, but where they can’t—I mean, the WTO can’t fix overcapacity, right? They can’t even be transparent among their own members and publish notices of new rules. You know, they can’t fix overcapacity. So we’re going to have to deal with that, either on our own or with willing partners. So I think it’s going to be interest-based.

GREG IP: OK. Ambassador Greer, thank you very much. Very interesting conversation. Really appreciate your time.

JAMIESON GREER: Thank you very much.

GREG IP: Thank you.

Watch the event

The post Inside the Trump trade strategy with US Trade Representative Jamieson Greer appeared first on Atlantic Council.

This episode illustrates the true power of critical minerals. They now sit at the center of economic policymaking worldwide, with advanced economies racing to secure reliable access to the metals that power the modern global economy.

It is no surprise that the global race to secure long-term access to these resources is accelerating. The list of critical minerals is extensive—the latest US Department of the Interior assessment identifies fifty-four such commodities. But four of them stand out for their strategic value: lithium, nickel, cobalt, and graphite. These minerals are foundational to the future energy economy, in part because they form the core inputs of lithium-ion technologies that power electric vehicles, drones, grid storage, and modern electronics. At the same time, key nodes of their supply chains are highly concentrated. Securing access to these minerals is essential for economic competitiveness, national security, and the global energy transition.

Serious players in the critical minerals landscape specialize in at least one of three key assets—and the assets that these countries lack can present strategic vulnerabilities. One asset is access to reserves or mineral supply, either through geographic fortune or effective dealmaking with nations that host these resources. A second is processing capacity. While raw materials matter, true strategic advantage comes from the ability to reduce dependence on others to make use of those raw materials. And a third is strong export capability, which depends on having either an abundant supply, advanced processing infrastructure, or, ideally, both.

For the United States, the picture is mixed when it comes to the first key asset. But it isn’t as bad as many assume. While the United States holds significant geological potential for various critical minerals, it has not benefited from the same geological fortune in several essential deposits. Even where resources exist, production is frequently uneconomical, permitting processes are highly restrictive, and robust environmental standards further constrain the ability to scale extraction and processing. What it does have, however, is a strong capacity for strategic dealmaking. Both the Biden and Trump administrations have been notably successful in securing deals with countries with reserves. The chart below illustrates just how effective these efforts have been.

US efforts to secure access to lithium, nickel, and cobalt supplies have been largely successful. Countries shown on the graph in green represent those with active critical minerals agreements with the United States. Notably, those agreements include the $8.5 billion deal with Australia, a country that holds substantial reserves of key resources. In addition, the United States benefits from its long-standing free trade agreement with Chile—a major lithium producer. Although the free trade agreement does not explicitly address critical minerals, it makes Chile eligible for US tax credits. This preferential status means that Chilean lithium can enter the US market without additional tariffs, effectively making Chilean exports more cost-competitive.

The United States continues to lag in securing formal access to graphite, with no completed agreements so far and only ongoing negotiations with Brazil and a few African countries, including Mozambique, Madagascar, and Tanzania. Graphite remains especially challenging because China controls roughly 90 percent of global output—including extraction, processing, and exports.

However, the absence of a deal on graphite or any other mineral does not mean the United States is inactive on the ground in countries that host important reserves. The United States uses its development agencies, such as the Development Finance Corporation, to support private-sector deals, especially in Africa.

Of course, there are the other two critical components of supply-chain power: processing capacity and exports. Using lithium as an example, the chart below shows that reserves are relatively well distributed across the globe. However, processing capacity is not. Refining is almost completely concentrated in just two countries: China, which controls about 65 percent, and Chile, which holds roughly 25 percent. Processing capacity also directly shapes export power. While countries such as Australia can export large volumes of raw materials, the real value in the supply chain comes from exporting processed products.

Looking again at the four examples of lithium, nickel, cobalt, and graphite, their combined global market value in 2024, based on my calculations, was roughly $100 billion, about the size of Luxembourg’s gross domestic product. For comparison, the global oil and gas market that same year was valued at around six trillion dollars. I estimate that by 2030, the market value of these four critical minerals is projected to nearly double to $186 billion. That figure isn’t slated to catch up to oil and gas soon, yet critical minerals are gaining rapidly in their strategic significance. As the transition to a modern, electrified economy accelerates, their importance will only continue to grow.

To address its vulnerabilities, the United States must now focus on building and securing access to adequate refining capacity. In their analysis, my Atlantic Council colleagues—Reed Blakemore, Alexis Harmon, and Peter Engelke—highlight US vulnerabilities and offer concrete policy recommendations, such as designing trade and partnership strategies to ensure access, stability, and resilience when a fully domestic supply chain is unattainable. Whatever path the current administration chooses, it is clear that expanding global processing capacity remains a crucial—and currently missing—step in strengthening supply-chain control and export competitiveness. Fortunately, when considering the capacity of the United States’ partners and allies, the overall picture is far more promising.

A strong example of cooperation between the United States and its partners is the recent US-Saudi agreement, which includes a deal to establish a critical minerals processing facility in the Gulf. The joint venture—bringing together mining group MP Materials, the US Department of Defense, and Saudi Arabia’s state-backed mining giant Ma’aden—will focus on rare-earth processing, a segment of the supply chain still largely dominated by China. Looking ahead, expect more of these public-private partnerships as the United States works to strengthen its critical minerals ecosystem.

Bart Piasecki is an assistant director at the Atlantic Council’s GeoEconomics Center.

This post is adapted from the GeoEconomics Center’s weekly Guide to the Global Economy newsletter. If you are interested in getting the newsletter, email SBusch@atlanticcouncil.org.

The post On critical minerals, the US needs more than just supply. It needs refining power. appeared first on Atlantic Council.

“We’ve always been on the same side of every issue.” That’s how US President Donald Trump described Saudi Crown Prince Mohammed bin Salman (MBS) during a chummy Oval Office meeting on Tuesday, part of a day of pageantry and dealmaking at the White House. The United States and Saudi Arabia struck a series of agreements on defense, semiconductors, nuclear power, and more. While the world awaits the fine print of these deals, our experts took stock of what the leaders have announced so far and what to expect next. 

• Daniel B. Shapiro (@DanielBShapiro): Distinguished fellow at the Scowcroft Middle East Security Initiative and former deputy assistant secretary of defense for the Middle East and US ambassador to Israel
• Tressa Guenov: Director for programs and operations and senior fellow at the Scowcroft Center for Strategy and Security, and former US principal deputy assistant secretary of defense for international security affairs 
• Jennifer Gordon: Director of the Nuclear Energy Policy Initiative and the Daniel B. Poneman chair for nuclear energy policy at the Global Energy Center
• Tess deBlanc-Knowles: Senior director with the Atlantic Council Technology Programs and former senior policy advisor on artificial intelligence at the White House Office of Science and Technology Policy

Jet setters

• On defense, Trump approved the sale of fifth-generation F-35 fighter jets to Saudi Arabia, which Dan interprets as an indication that the US president “is going all-in on the US-Saudi relationship.” 
• But “China remains an issue in the backdrop of US-Saudi defense relations,” Tressa tells us. She notes that US intelligence agencies have reportedly raised concerns about Chinese access to the F-35 if a US-Saudi sale were to proceed, and “similar efforts to sell F-35s to the UAE were not realized across the previous Trump and Biden administrations, in part due to concerns of technology transfer to China.” 
• There’s also the US legal requirement to ensure Israel’s qualitative military edge (QME) in the region. Dan points out that although the 2020 F-35 deal with the United Arab Emirates was later scuttled, it did pass a QME review, and the Saudi deal is likely to do so as well, in part because “Israel will have been flying the F-35 for a decade and a half before the first Saudi plane is delivered, and Israel will have nearly seventy-five F-35s by then.” 
• But the UAE deal was linked to its normalization of diplomatic relations with Israel, and “it appears there is no link to Saudi normalization” with Israel in this deal, Dan points out. In the Oval Office, MBS conditioned his joining the Abraham Accords on “a clear path” to a Palestinian state, which does signal a potential disparity from Saudi Arabia’s previous stance requiring the “establishment” of a Palestinian state.
• The Biden administration held talks with Saudi Arabia about a treaty that “would have included restrictions on Saudi military cooperation with China and ensured access for US forces to Saudi territory when needed to defend the United States,” Dan tells us. But “Trump has not announced whether he is giving the Saudis a one-way security guarantee, or whether there are mutual-security commitments.” 
• So what about Trump’s announcement during MBS’s visit that Saudi Arabia has become the United States’ twentieth Major Non-NATO Ally? Tressa tells us the designation “is a favorite tool of US presidents to cap off major visits with a symbolic flourish to indicate elevated relations.” But Saudi Arabia already enjoys many of the benefits of the designation, Tressa notes, such as privileged access to US arms sales, and the designation “does not provide any special or enforceable security guarantees, nor is it a binding treaty.” 

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Nuclear option

• The White House also announced a Joint Declaration on the Completion of Negotiations on Civil Nuclear Energy Cooperation. Jennifer tells us it’s “likely a precursor to an official Section 123 agreement” on peaceful nuclear cooperation, which must also be reviewed by Congress. 
• “Saudi Arabia has indicated keen interest for years in pursuing civil nuclear technologies,” Jennifer notes, both to add to its power grid and for water desalinization. If the United States provides that nuclear technology, she adds, then “it can exert influence on security matters and help prevent the development of nuclear weapons in Saudi Arabia and beyond.”  
• “Although there had long been speculation that a civil nuclear agreement between the US and Saudi Arabia might cover broader geopolitical issues,” Jennifer adds, “this week’s announcement reflects a more pragmatic approach with a focus on technologies that have strong national security implications.” 

Chipping in

• The two leaders also announced an AI Memorandum of Understanding but did not release many details. “Likely this means the approval of the sale of a package of advanced AI chips to Saudi Arabia,” Tess says. In the Oval Office, she points out, “MBS shared his vision (and strategic bet) on computing to compensate for the country’s workforce shortfalls and ensure continued economic growth.” 
• While the Trump administration has lifted the Biden administration’s “AI Diffusion Rule” that limited the sale of chips to many countries, it still has the final say on exports of the most advanced chips to Saudi Arabia, Tess notes, “likely due to fears related to ties with China.” 
• Now, Tess adds, US national security officials will keep their eyes on “the provisions of the new AI agreement focused on technology protection and what measures will be put in place to keep America’s most advanced AI chips out of reach of Chinese adversaries.” 

The post Digging into the details of the US-Saudi deals appeared first on Atlantic Council.

As the US government reconsiders its trade architecture, as well as its trade network in the Western Hemisphere, updating the Central America–Dominican Republic Free Trade Agreement (CAFTA-DR) should be viewed not as a simple economic exercise, but as a strategic investment in US economic security and competitiveness. An upgraded CAFTA-DR could reinforce regional stability at a time when economic fragility, migration pressures, and external influence are converging in the United States’ near abroad.

Aligning CAFTA-DR’s standards with the more modern United States–Mexico–Canada Agreement (USMCA) framework—for example, on digital trade, labor, and supply-chain governance—would create a more coherent North American–Central American production corridor serving US industries, reducing dependence on distant suppliers, and supporting a more orderly regional economy.

China’s expanding presence in Central America and the Caribbean, via critical infrastructure investments, technology partnerships, and growing trade links, has altered regional dynamics and tried to dilute US influence. Modernizing CAFTA-DR is therefore not just an economic update; it is a geopolitical must-have to both secure supply chains and keep key trade partners aligned with the United States.

An updated CAFTA-DR could strengthen supply chain resilience by encouraging the strategic relocation of certain US light and more-labor-intensive manufacturing and by diversifying away from China-dependent networks. It would also enhance digital trade rules, environmental standards, and labor protections, all central issues on today’s economic security agenda. By refreshing these commitments, the United States could help its partners attract high-value investment, foster inclusive growth, and reduce migration pressures fueled by economic fragility.

Moreover, modernization would reaffirm Washington’s long-term commitment to shared prosperity and democratic governance. A proactive US agenda, anchored in fair trade, sustainable investment, and transparent governance, could offer a compelling alternative to China’s transactional and opaque financial approach. In short, an updated CAFTA-DR represents a strategic tool for deepening US partnerships, defending economic values, and reinforcing the hemisphere’s autonomy at a time when geopolitical competition is intensifying.

Enrique Millán-Mejía is a senior fellow in economic development at the Adrienne Arsht Latin America Center of the Atlantic Council. He served as senior trade and investment diplomat for the government of Colombia to the United States between 2014 and 2021.

Antonio Ortiz-Mena, PhD, is a nonresident senior fellow at the Adrienne Arsht Latin America Center of the Atlantic Council. He served as head of the Trade & Economics office of the Embassy of Mexico to the United States between 2007 and 2015. He is the CEO and founder of AOM Advisors.

Rocío Rivera Barradas, PhD, is a senior advisor with AOM Advisors. She served as trade and investment diplomat of the government of Mexico to the United States, based at the Mexican Consulate in Chicago, between 2019 and 2024.

Issue Brief Sep 19, 2025

Secure supply chains for the US run through its closest neighbors

By Jose Manuel Restrepo and Martin Cassinelli

Central America and the Dominican Republic are emerging as key partners for US economic security. Strengthening rule of law, workforce skills, and trade frameworks can secure lasting, mutually beneficial economic integration.

Americas Caribbean

Report Sep 17, 2024

From rhetoric to reality: Nearshoring in the Americas

By the Adrienne Arsht Latin America Center’s Nearshoring Working Group

Over the past five years, global shifts have reshaped the world. China’s rise, US-China tensions, COVID-19, and Russia’s 2022 invasion of Ukraine exposed supply chain vulnerabilities, pushing resilience to the top of the agenda. Latin America and the Caribbean (LAC) can seize the opportunity to provide solutions for US companies through nearshoring.

Caribbean Central America

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

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How did global trade get to this point? For years now, Trump has sought to end a decades-long US trade deficit with China. Throughout his first term and now again in his second term, he has accused Beijing of unfair trade practices, including subsidies and antidumping violations that he argues have hurt US manufacturing. This criticism has been accompanied by action. Since the start of Trump’s 2018 trade war, US tariffs on Chinese goods have risen eighteenfold. As recently as 2022, the US trade deficit with China was $382 billion. It fell to $279 billion in 2023 and rose in 2024 to $295 billion. But since April of this year, the administration’s tariff policy, including its often unpredictable implementation, has sharply shifted the balance. Monthly US imports from China have plunged by approximately 50 percent between January and June of this year, reducing the monthly deficit with China to $9.5 billion in June, the lowest it has been in twenty-one years.

Meanwhile, Chinese global exports continue to increase, reaching 20 percent of its gross domestic product (GDP) in 2024. As China-US economic ties weaken, the European Union (EU) has become China’s main export market. Chinese goods losing ground in the United States are now being redirected to Europe, flooding EU markets and creating growing trade imbalances reminiscent of those seen before in the United States. Chinese exports to the EU increased by 14 percent on the year in September, the sharpest rise in over three years, pushing the EU’s trade deficit with China to nearly double its 2018 levels. Between 2017 and 2024, China-EU trade increased by about $140 billion, with trade deficits increasing from $202 billion in 2017 to $333 billion in 2024. If this year’s trajectory continues, the EU’s trade deficit with China could exceed $400 billion this year. 

The surge of Chinese goods is reshaping Europe’s industrial landscape, exposing the EU to the same state-driven capitalist practices from Beijing that long challenged the United States under the guise of free trade. Frustrations in Brussels run beyond inexpensive electric vehicles (EVs) and low-cost goods. In July, European Commission President Ursula von der Leyen accused China of “flooding global markets with cheap, subsidized goods,” warning of a new “China shock.” Chinese EVs, which are 20-30 percent cheaper than European EVs due in large part to government subsidies, challenge Germany’s automotive hub and its European supply chains. In solar and green technologies, China’s dominance has already shuttered numerous European firms in the steel, aluminum, machinery, and batteries sectors. 

At the core of the problem is China’s persistent industrial overcapacity, which creates market distortions fueled by state subsidies and heavily impacts the EU’s competitiveness. Most Chinese exports to the EU still face low tariffs of 2-3 percent under World Trade Organization rules, but Brussels is increasingly imposing 20-50 percent duties on strategic sectors such as green tech, EVs, and industrial goods, signaling a more defensive EU trade stance. China, which has been the world’s top manufacturer for fifteen years, produces over 31 percent of global manufacturing output, compared to 17 percent from the United States and under 13 percent from the EU. With weak domestic demand from a property slump, youth unemployment, and deflation, China is redirecting excess production toward Europe as its long-standing access to the US market is curtailed, a shift that now poses a direct challenge to the EU’s industrial base.

At the same time, Europe’s growing frustration with Beijing is still tempered by its deep economic dependence. The EU relies on China for nearly all of its rare earth and permanent magnets supplies, as well as associated processing technologies—all of which are vital for Europe’s green-tech, digital, and defense industries. This gives Beijing significant leverage in trade and geostrategic relations with the EU. Europe’s ability to respond to China’s questionable trade practices is complicated further because Europe depends on Chinese supply chains to compete in the very industries in which China dominates. As part of the deal with the United States, Beijing will extend the suspension of rare earth export controls to the EU, giving the bloc some breathing space. But this relief alone will not be enough for the EU to diversify its sources even with initiatives such as the Critical Raw Materials Act and the Global Gateway strategy.

China’s dominance in critical raw materials is systemic, not temporary; its lead in global processing capacity allows it to control strategic choke points in supply chains. Many other suppliers in Africa and Latin America are themselves linked to China through ownership stakes or processing dependencies that keep Beijing embedded in global supply chains. Reducing dependence on China will require long-term investments in mining and processing, with significant financial and environmental costs.

In the meantime, the EU has proposed a joint purchase and storage of raw materials to secure better prices and reduce supply risks, with the first pilot tenders for joint purchasing of rare earths and lithium expected next year. In July of this year, the European Commission launched its EU Energy and Raw Materials Platform to empower domestic companies to jointly procure energy products and raw materials, but it seems that implementation has been minimal. So far, this platform has facilitated contracts for just 2 percent of potential demand of European companies in the gas sector.

While European policymakers want to avoid being drawn into the US-China rivalry, they nonetheless recognize the systemic challenges posed by China’s rise and know that Beijing’s leadership is unwilling to change course. It’s time for the EU to step up and protect its economic resilience and competitiveness. My co-author and I explore this issue in detail in a new Atlantic Council report titled “Is Europe waking up to the China challenge?” But a first step the United States and the EU can take is to launch a joint critical-minerals coordination platform—supported by co-financing, harmonized standards, and strategic stockpiles—to align project pipelines, risk screening, and offtake planning. Such efforts could eventually be elevated to the Group of Seven (G7). But this will only help if the group remains united and is not strained one of its member countries pursues a more autonomous China policy, such as when France recently floated the idea to invite China to the 2026 G7 summit. Engagement is necessary but will be effective only if all G7 members take a common approach. The EU’s best long-term insurance policy on that front is doubling down on stronger transatlantic and G7 coordination to bolster the collective leverage of the West.

Valbona Zeneli is a nonresident senior fellow at the Atlantic Council with a dual affiliation at the Europe Center and at the Transatlantic Security Initiative of the Scowcroft Center for Strategy and Security.

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In a big step reshaping Red Sea connectivity, Saudi Arabia and Egypt have recently announced finalized plans for the Moses Bridge, a thirty two-kilometer causeway linking the Saudi coast of Ras Hamid with Egypt’s Sinai Peninsula at Sharm el-Sheikh. Named after the biblical tale of Moses parting the Red Sea, this ambitious megaproject aims to physically connect Asia and Africa, bolstering trade, tourism and pilgrimage routes between the Gulf and North Africa. Fully financed by Riyadh, the initiative reflects Crown Prince Mohammed bin Salman’s broader infrastructure diplomacy under Vision 2030, and it marks a shift from decades of discussion toward implementation.

The project carries important geopolitical and economic implications for the region. While the bridge promises logistical gains and deeper Gulf–Africa integration, it also poses strategic challenges, particularly for Israel. The new land link bypasses Israel entirely, creating an alternative to the proposed India–Middle East–Europe Economic Corridor (IMEC), in which Israel was expected to serve as a key transit node. Together with emerging land corridors through rehabilitated Syria and Iraq, the Moses Bridge highlights a possible future in which Israel is excluded from regional integration if political tensions persist.

These alternative routes may challenge Israel, but they should also serve as a wake-up call about what is at stake and what is possible. Israel should resist viewing these new corridors as a zero-sum threat; rather, the multiple transit routes can coexist and even complement one another if approached with strategic foresight and pragmatism. Perhaps most important, the United States and Israel must treat these developments not as competition to outmaneuver, but as momentum to harness; through coordination, quiet diplomacy, and shared economic gains.

From vision to reality: The Moses Bridge

The Moses Bridge project reflects Saudi Arabia’s and Egypt’s intent to diversify connectivity on their own terms. Originally proposed decades ago, and agreed in principle by Saudi King Salman and Egyptian President Abdel Fattah el-Sisi in 2016, the plan gained momentum after Egypt transferred the strategic Tiran and Sanafir islands to Saudi Arabia in 2017—removing a major diplomatic hurdle.

In June 2025, nearly a decade later, with planning finalized and diplomatic sensitivities resolved, Egyptian Transport Minister Kamel al-Wazir confirmed that all planning for the Red Sea bridge is complete and that construction can begin “at any time,” pending final approval.

The project’s strategic location is critical. The Strait of Tiran is the gateway to Israel’s only Red Sea port, Eilat, and falls under international guarantees stemming from the Camp David Accords. However, with US-backed security assurances in place, Israel has not opposed the plan.

From a logistical standpoint, the Moses Bridge has the potential to significantly streamline regional trade and travel. Designed to support both road and potentially rail traffic, it is expected to connect with Saudi Arabia’s expanding rail network and Egypt’s developing infrastructure in Sinai. The bridge will also support Saudi’s NEOM megacity project, which lies near the Saudi endpoint. Officials estimate the bridge could serve over one million travelers annually, including pilgrims traveling directly from North Africa to Saudi Arabia’s holy cities. By offering an overland alternative, the bridge may ease pressure on maritime chokepoints and help reduce transit times and shipping costs, particularly important given the recent financial strain on the Suez Canal caused by Houthi disruptions in the Red Sea.

For Saudi Arabia, the project represents far more than a civil engineering ambition; it is a cornerstone of the kingdom’s broader geo-economic strategy. Vision 2030 prioritizes infrastructure development as a means to transform Saudi Arabia into a logistical powerhouse connecting Africa, Asia, and Europe—with the goal of ranking among the world’s top ten logistics hubs. In this context, the bridge is not merely a connector of land masses, but a strategic tool of influence, physically linking continents while reinforcing Saudi Arabia’s role as an indispensable regional nexus for connectivity and commerce.

The IMEC Context: Israel’s bypassed role

The Moses Bridge has emerged at a time when regional powers are racing to establish East–West connectivity. At the 2023 Group of Twenty (G20) summit, the United States, India, Saudi Arabia, the United Arab Emirates (UAE), and the European Union (EU) announced the IMEC initiative, a proposed trade corridor linking Indian ports to Europe via the Gulf and Israel. The plan included two legs: an Indian Ocean maritime link to the Arabian Peninsula, and a northern overland route through the UAE, Saudi Arabia, Jordan, and Israel to Mediterranean ports.

For Israel, IMEC was a strategic boon, offering both economic and diplomatic benefits by generating transit revenues and attracting foreign direct investment. Israeli Prime Minister Benjamin Netanyahu described the corridor as a “blessing of a new Middle East that will transform lands once ridden with conflict and chaos into fields of prosperity and peace.” It aligned with the momentum of the Abraham Accords and the vision of Israel as a vital partner in regional logistics and trade.

However, the IMEC project faces headwinds. The outbreak of war in Gaza in late 2023 dulled regional enthusiasm and put Saudi–Israeli normalization talks on hold, casting doubt over Israel’s political reliability as a partner. Meanwhile, regional actors started to diversify their options.

Saudi Arabia’s strategic hedging

The Moses Bridge reflects Saudi Arabia’s broader hedging strategy. Riyadh is investing in multiple corridors: east to India, west to Africa, and north through Iraq, and Syria to Turkey. All these routes sidestep Israel. While the IMEC plan placed Israel at the center, the Moses Bridge allows Saudi Arabia to connect to Europe independently, through Egypt’s Mediterranean gateway, offering a depoliticized alternative that avoids the risks of entanglement in the Israeli-Palestinian conflict.

Saudi officials have been clear on this front. In October 2024, Saudi Foreign Minister Prince Faisal bin Farhan reiterated that normalization with Israel is “off the table” until there is a “resolution to Palestinian statehood.” Moreover, recent polling indicates that 81 percent of Saudis oppose normalization with Israel, a figure that reflects deep public resistance to engagement with Israel absent meaningful progress on Palestinian rights. With tensions high and public opinion hostile, the kingdom is unlikely to embrace infrastructure projects tied to Israel in the near term.

Egypt’s expanding role

Egypt, for its part, sees this as a way to reinforce its own logistics ecosystem, ensuring that freight coming over the Moses Bridge can move efficiently to ports such as Port Said or Damietta. The bridge integrates with Egypt’s national transportation and logistics strategy, which includes investments in new east–west rail lines, port upgrades on the Mediterranean, and logistics zones in the Sinai Peninsula. It could also help boost tourism in Sharm el-Sheikh, a hub in the Sinai Peninsula.

Cairo is also eager to reduce its reliance on the Suez Canal, whose revenues have dropped by nearly 50 percent amid Red Sea tensions, by expanding overland trade routes. If successful, this infrastructure could help Egypt reposition itself as a land bridge between Africa, the Gulf, and Europe; again, bypassing Israel.

Beyond the Moses Bridge, two additional overland routes have been discussed: the gradual reopening of Syria, which could reconnect Gulf states to Turkey via Saudi Arabia or Jordan, and Iraq’s proposed “Development Road,” linking the al Faw Grand Port to Turkey. Both offer theoretical alternatives, though each faces significant financial, political, and security hurdles.

Geopolitical implications for Israel

Taken together, these developments suggest several overland alternatives that could reduce the strategic necessity of Israel as a transit center. The Moses Bridge is more than a physical connection, it is a strategic message. Saudi Arabia and Egypt are building the infrastructure of a post-conflict Middle East that might no longer depend on Israel. For the United States, this shift can erode one of its potential key channels of influence in the region. As other regional actors, including: Syria, Iraq, and Turkey rejoin the economic conversation, and Arab partners appear indifferent to explore other routes, Israel must act to reinstate its geopolitical advantage.

Recent diplomatic signals reinforce this shift. During his May 2025 Gulf tour, US President Donald Trump visited Riyadh, Doha, and Abu Dhabi, but conspicuously skipped Israel. In remarks delivered in Riyadh, he proposed new economic incentives to Saudi Arabia without linking them to normalization with Israel, a striking departure from past US policy that underscores shifting regional priorities. The message was clear: The Middle East’s road to Washington no longer necessarily runs through Jerusalem.

Strategic pathways forward

How should Washington respond to these developments? To begin with, the United States should assume a more proactive leadership role in advancing IMEC and coordinating with parallel initiatives. This includes fostering multilateral working groups among Israel, Egypt, India, Jordan, and Gulf states; encouraging interoperability between infrastructure projects; and providing political cover and technical support to accelerate implementation. A consistent US presence is essential to prevent fragmentation and ensure that economic corridors deliver on their strategic promise.

In parallel, the United States should elevate IMEC as a strategic priority. The corridor anchors Washington’s influence in the infrastructure domain, counterbalancing the influence of rival powers while reinforcing ties between its allies in the region. To achieve this, it could embed IMEC into national economic and foreign policy frameworks through interagency coordination, perhaps by appointing a dedicated envoy or task force. It could also take steps to integrate corridor diplomacy into the operational workflows of the State Department, National Security Council, and Department of Commerce. Such measures could help ensure continuity across administrations, demonstrate long-term US commitment to regional partners, and allow Washington to better align connectivity infrastructure with its broader geopolitical interests.

More broadly, both the United States and Israel should advocate for a depoliticized framing of IMEC—one that emphasizes mutual economic and logistic benefits rather than symbolic normalization. Quiet diplomacy that underscores shared interests in connectivity, climate adaptation, food security, and digital infrastructure may create space for engagement with Arab and Muslim states still cautious about ties with Israel.

Israel, for its part, must respond not with alarm, but with action. Rebuilding trust with Saudi Arabia should be a top priority. The cease-fire agreement in Gaza offers a window to re-engage regional partners: sustained de-escalation, paired with meaningful steps toward a sustainable and hopeful future for Palestinians, could help revitalize stalled dialogue and restore confidence among Arab states.

Finally, Israel should invest in its own logistical infrastructure, especially in digitization and artificial intelligence–powered logistics. Doing so will enhance its attractiveness and make participation in IMEC and future corridors more compelling.

If approached pragmatically and in close coordination with Washington, Israel can still position itself as a valuable partner; not just within IMEC, but in an emerging web of regional corridors. The window is open, but not forever.

Amit Yarom is a graduate student at the Elliott School of International Affairs at George Washington University. He is a foreign policy researcher, specializing in the Arabian Gulf.

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• Introduction
• Food, society, and politics
• Food security in the Americas
• Drivers of change in the Americas and beyond
• Toward a food-secure future
• Conclusion
• About the authors

Introduction

Food security is at the core of national, regional, and global security. When societies are food secure, they stand a much greater chance of social and political stability; when they are food insecure, the opposite is true. Fortunately, the Western Hemisphere—the Americas—is a food-secure region. Although access to food is an ongoing challenge deserving greater attention in every country (as there are hungry people across the hemisphere), food abundance generally characterizes the Americas. Historically, the hemisphere has owed its unique position to several factors: a favorable natural resource base; equally benign geopolitical conditions; and extensive public and private cooperation to improve production methods and support innovation.

However, the future is not guaranteed to look like the past. Several key drivers of change are afoot that could alter the trajectory of hemispheric food security. These drivers bring with them uncertain outcomes, alternatively threatening the stability and productivity of current agrifood systems or offering hope that they could become even stronger and more resilient in the years to come.

This report assesses the future of food in the Western Hemisphere. It focuses on the major uncertainties that are driving change in the agrifood systems within the hemisphere and the world. These drivers represent risks or opportunities, and sometimes both. They include the decline of healthy and stable ecosystems, rapidly changing geopolitics, the erosion of multilateral institutions, increasingly inflationary and volatile food prices, the promise of innovation and emerging technologies, and generational shifts in farming and agricultural production.

These forces are not siloed. Rather, they intersect. There might be an awareness that these individual drivers of change represent obstacles to (or opportunities for) achieving durable food-security solutions in the future, yet many leaders see them as isolated challenges rather than as intersecting ones, obscuring the bigger picture.

The drivers discussed in this report therefore are not just accumulating layers of risks and opportunities. Rather, their interaction multiplies the system’s dynamism. This emerging dynamism will require policymakers, business leaders, investors, and farmers to find innovative solutions in the face of a rapidly changing, and not entirely predictable, agrifood landscape. Yet such outlooks may not arise. Complacency is a big risk, if leaders believe that the status quo will continue to improve, requiring changes only at the margins. In such a situation, the hemisphere would become far more vulnerable to unexpected shocks because there would not be enough appreciation for how ecological, technological, geopolitical, and institutional changes are reshaping the future.

This concern is not hyperbolic. A very recent external shock—the COVID-19 pandemic—erased major progress that the hemisphere had made on reducing hunger, which should remind us that the foundations of food security remain shaky. Looking ahead, there is little margin for error, as even moderate shocks can have profound consequences.

Food, society, and politics

Food security is at the core of national, regional, hemispheric, and global security. When societies are food secure, they stand a much greater chance of social and political stability; when they are food insecure, the opposite is true.

This axiom, although a simple one, has been demonstrated time and again throughout history. High food prices occasioned by war, poor harvests, or high taxation of the peasantry (or all three) preceded the onset of the French Revolution in 1789 and the Russian revolutions of 1905 and 1917, to name just a couple of famous examples from history.

Today, despite far greater agricultural production at national and global levels, such disturbances still recur with alarming frequency: The 2007–2008 food riots across Africa followed commodity price spikes for agricultural inputs (oil, principally) that inflated the price of food; the 2010–2011 Arab Spring was preceded by food-price spikes owing to multiple breadbasket harvest failures across several world regions; and Russia’s war in Ukraine, which disrupted wheat, fertilizer, and natural gas exports, blocked the flow of agricultural inputs and outputs and dramatically raised food prices globally. Millions of additional people became food insecure around the world.

No other good has such an impact on society and politics as food because people need to eat every day. “Food riots are as old as civilization itself,” as one food security analyst summarized the impact of food on social and political stability. Often, it will only take a single big food-price shock to change social and political dynamics within a country or even an entire region. Although high food prices have a disproportionately negative impact on vulnerable, poor, and fragile countries, they also can have an outsized impact on otherwise wealthy and stable ones. Japan offers a recent example. In July 2025, soaring rice prices in Japan directly contributed to the defeat of Prime Minister Shigeru Ishiba’s Liberal Democratic Party in parliamentary elections.

The Food and Agriculture Organization (FAO) adopted a definition of food security at the 1996 World Food Summit (see box 1 for the history of the concept), which has persisted with only slight revision:

• Food security exists when all people, at all times, have physical, social, and economic access to sufficient safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life.

This definition contains four main dimensions, or pillars:

1. The physical, supply-side availability of food, typically assessed at the national level and consisting of domestic agricultural production plus food imports.
2. Household access to food, which is dependent on household incomes and food prices (set by a combination of market and nonmarket forces).
3. Nutritional intake by individuals, which is not the same thing as caloric intake; nutrition depends in part on dietary diversity.
4. Stability of the first three pillars over time.

A couple important pieces of the food security puzzle are missing from this formulation. One is ecological stability. Food security depends on the sustainability of the underlying Earth systems that are essential to food production. Maintaining the integrity of these Earth systems, including the integrity of the world’s soils, water, biodiversity, nutrients, and atmospheric conditions (precipitation and temperature, primarily), is critical. A second missing piece is the stability of the international systems, specifically stability of a rules-based trading order that ensures that food moves easily from food-surplus to food-deficit countries. Such a trading order improves food security through enhancing agriculture productivity and (under emergency conditions) enables swift distribution of humanitarian aid in the form of food. Such a system helps to avoid trade conflicts and establishes international norms for the notion that food security is in the collective interest and responsibility of all parties.

The capacity of the current international system to encourage global production and trade in food has increased over time, dramatically so over the past several decades: The FAO reported that in 2021, the world traded some 5,000 trillion kilocalories of food, more than double the amount that it did in 2000. A central piece of this equation has been the existence of key multilateral institutions that have had the credibility and authority to provide a forum for states to negotiate trade agreements, resolve trade disputes, and monitor and enforce commitments.

None of these conditions should be treated as a given. Looking ahead, the odds are high that the world will become more dynamic rather than less so, with no guarantee that dynamism will have more upside than downside. To adapt and thrive within changing conditions (with both positive and negative impacts), the world’s agrifood systems will need to become more resilient and adaptable. The good news is that humankind has the tools—or can develop the necessary tools—to ensure such outcomes.

Food security in the Americas

The Western Hemisphere is in a fortunate position regarding agriculture and food. Its natural endowment is significant, consisting of arable soils and plentiful rainfall distributed across numerous regions suitable for agriculture (temperate, subtropical, and tropical). The hemisphere’s highly productive agriculture benefits from relatively stable political and economic environments, medium-to-high income levels, and reasonably well-functioning domestic and international markets, all stimulated by public, private, and academic sector investments in agricultural research and development (R&D).

As a result, the hemisphere’s aggregate production capacity in both staple and specialized crops gives it an indispensable role in providing domestic food security but also meeting the world’s food needs.

There are several caveats to this picture, which this report endeavors to make clear. First, several driving forces are changing baseline conditions that will alter the hemisphere’s future, for better or worse. Second, the Americas might be fortunate in many respects, but it is not a single bloc of countries acting in unison. Trade disputes, unfortunately, are becoming a sharper and more common part of the hemisphere’s diplomatic landscape, for example. Finally, as this report also makes clear, food security is not just about supply-side agricultural production. Food insecurity remains a problem in the Americas as it does everywhere in the world.

Supply side: Agricultural production
in the Americas

The five largest primary crop producing countries (by tonnage) in the world are all in the Americas: Brazil, the United States, Argentina, Mexico, and Canada. As shown in table 1 and figure 1, the hemisphere also contains top exporters of all four primary crops: soybeans, corn, wheat, and rice. The largest producers of food in the Americas are, therefore, critical for ensuring global food security. What happens in the region matters greatly, because developments in the Americas have an outsized effect on global trade in food.

In addition to the largest primary crop producers, the Americas also lead in the production of a wide range of specialty crops, including coffee, avocados, lemons, limes, oranges, blueberries, cranberries, quinoa, almonds, and more. Numerous countries in the hemisphere are leading producers of these crops. For example, Peru is in the top three global producers of avocados, blueberries, and quinoa, while Colombia is a leading global producer of coffee, sugar cane, avocados, and agave fibers.

For many countries in the Americas, agriculture continues to be a critical piece of their national economies. As shown in figure 2, agriculture’s share of gross domestic product (GDP) is above five percent in most countries and is above ten percent in a handful of countries in Central America, the Caribbean, and South America. Over the 2023–2024 period, agriculture’s share of Brazil’s GDP was 6.24 percent while its agricultural exports represented nearly half (49 percent, at $164 billion) of Brazil’s total exports by value. Both figures demonstrate the spectacular growth in Brazil’s intensive farming, especially of soybeans (see also box 2).

Demand side: calories and nutrition

The FAO’s definition of food security, which is broadly accepted among experts, emphasizes that food security is as much about access and affordability, especially by vulnerable populations, as it is about the aggregate production of food. If people cannot access a nutritious diet at affordable and stable prices, they will not be food secure.

In recent decades, the Western Hemisphere has gradually decreased its level of food insecurity. In comparative terms, it has done well. Between 1990 and 2015, for example, Latin America and the Caribbean (LAC) was the only region in the world to reduce hunger by half.

As shown in table 2, the FAO’s latest data indicates that the Western Hemisphere continues to be relatively food secure. Over 2022–2024, the two major subregions in the Americas, North America on the one hand and LAC on the other, performed better than the world average. This is reflected in several key metrics related to the reduction of caloric intake of food, in particular undernourishment (calorie deprivation over time), severe food insecurity (a measurement of households going without food for periods of time), and the prevalence of wasting in small children (an indicator of undernourishment). On metrics related to poor diets such as overweight and obesity (both of which are indicators of too many calories rather than too few), the Americas performed less well.

These outcomes are consistent with levels of wealth. Although an oversimplification, as national wealth increases, per capita consumption of food rises. Most countries in the Americas are classified by the World Bank as either high- or upper middle-income countries. (Note, however, that lower-income populations, including those within both lower- and higher income economies, are at increasing risk of obesity, in part due to easy availability of inexpensive processed foods with low nutritional value.)

There are several countries in the Americas that underperform. According to the FAO, over half (54.2 percent) of Haitians are undernourished, while just 10.7 percent of adults are obese (compared with over 40 percent of US citizens); Haiti is the most fragile state in the Americas. Although undernourishment is much lower across the hemisphere now than in previous decades, it nonetheless remains high in several countries including Bolivia (21.8 percent), Honduras (14.8 percent), Ecuador (12.1 percent), and Guatemala (11.8 percent).

There is a gendered dimension to deprivation, with women being more likely to be food insecure than men. This difference worsened during the COVID-19 pandemic, increasing to a 3.3 percent gap between the genders in Latin America in 2021, before reducing again by 2024. In North America, the gap has worsened every year since 2020, from 0.1 percent in 2020 to 0.5 percent in 2024.

Drivers of change in the Americas and beyond

Strategic foresight asserts that the future likely will not conform to our expectations. It is risky to assume that the future will consist of a simple linear extrapolation of one or two current trends. Hence, the discipline focuses as much on the intersections of the drivers that together will drive multiple possible futures. Food security in the Americas is no different, as there are several significant intersecting drivers of change that will
shape the hemisphere’s future.

Changing ecology

Ecological risks are among the greatest threats to food security in the Americas. A rapidly changing climate creates the primary set of risks, from rising heat and worsening drought and flooding. Other ecological risks exist as well in specific subregions, for example deforestation, biodiversity loss, and soil erosion and degradation.

Of these changing ecological conditions, perhaps the worst for agricultural production is the combination of drought and heat, or “dry-hot” conditions. Trend data show that such conditions are becoming more frequent and intense. An Organisation for Economic Co-operation and Development (OECD) study of drought patterns, released in July 2025, found that the share of land globally exposed to drought has doubled since 1900.

Dry-hot conditions threaten to become more frequent across the Americas. In North America, for example, scientists estimate that the now decades-long megadrought that has impacted northern Mexico and the southwestern United States might be the worst in 1,200 years. In South America, the frequency of dry, hot, and flammable weather has increased across much of the continent since the early 1970s. Such changes are highly consequential for agriculture. A 2021 study, for instance, showed that increases in Brazil’s dry-hot conditions, combined with the impacts of deforestation on temperature and rainfall, have already pushed 28 percent of the country’s agricultural land beyond its optimum productive range, with further projections of 51 percent by 2030 and 74 percent by 2060.

One of the more discouraging climate-driven outcomes is the possibility, even probability, of future multiple breadbasket failures (i.e., “simultaneous harvest failures across major crop-producing regions” around the world). Climate change likely will make such failures more common in the future. A 2021 study projected that the probability of multiple harvest failures globally was “as much as 4.5 times higher by 2030 and up to 25 times higher by 2050.”21 Another, focusing on the impacts that oscillations such as the El Niño-Southern Oscillation (ENSO) and North Atlantic Oscillation (NAO) might have under future warming, concluded that shifting ENSO and NAO patterns might “expose an additional 5.1–12% of global croplands” to such oscillations, with strong ENSO/NAO negative phases “likely to cause simultaneous yield losses across multiple key food-producing regions.”

The Americas, home to several of the world’s major producers of staple crops including soybeans, corn, and wheat, faces the possibility of multiple breadbasket failures. It is entirely possible that in the years to come, severe dry-hot conditions could strike simultaneously in the United States, Mexico, Brazil, and Argentina. The consequences for agricultural production and global food security would be enormous.

A changing climate also will negatively impact most—perhaps all—of the other crops grown across the Americas. Coffee and banana production, to name just two examples, likely will be severely affected by increased heat and altered precipitation patterns. A recent scientific study conducted by the University of Exeter forecasts that 60 percent of the regions currently producing bananas—including regions in Central America—will be unable to do so before the end of this century, owing principally to increased temperature. The world will not have to wait nearly that long to see such effects because climate-driven impacts are already occurring. In 2024, the FAO reported a 38.8 percent annual increase in global coffee prices “primarily driven by supply-side disruptions, stemming from adverse weather conditions” including drought, heat, and flooding in major coffee-producing countries including Brazil, Vietnam, and Indonesia.

Because farmers are on the receiving end of changing ecological conditions, it is critical to understand how they are impacted by such change and how they process those changes.

Doing so will assist in defining the policy and investment options with the greatest likelihood of mass adoption on farms and in farming communities. Farmers will be impacted differently depending on where in the hemisphere they farm, their farm sizes and resources (financial and otherwise), whether they are subsistence farmers or integrated into national, regional, and global markets, and the types of crops they grow. Taken together, farmers do not experience changing ecological conditions in the same way at the same time. Smallholder farmers in poorer settings, for example, will be at greatest risk from climate-driven impacts given the small size of their landholdings and a lack of access to insurance and other sources of resilience. It follows that farmers’ perceptions of ecological impacts on their farming operations will not follow a straight line. Farmers will parse the impacts of environmental hazards such as drought, heat, or flooding differently.

In sum, ecological change dramatically increases the risk of declining crop yields while shifting the locations where crops can be grown. Potentially, ecological change with impacts at scale could generate significant shortfalls in global food supply, causing market panics, high prices, hoarding, and a breakdown of trade. Food insecurity would spike.

Geopolitical and geoeconomic turbulence

A second set of risks stems from rising geopolitical and geoeconomic competition and uncertainty. An open, rules-based trading system has been essential to improving hemispheric and global food security. Trade in that system has precipitated more economic integration of the region—more bilateral trade and investment agreements, greater investment flows, and exchange of technical know-how—which benefits food security via higher economic growth, greater employment opportunities and rising incomes, poverty reduction, and general economic dynamism. It also has allowed governments to see that a set of policies, including more focus on innovation and competitiveness and less on trade distortions and protectionism, is the best path forward.

Yet this trajectory is now subject to geopolitical risk. Over the past two decades, the global food trading system has been disrupted by several significant events including wars and related phenomena (e.g., civil strife, terrorism). Such events generate (largely) unanticipated shocks to agricultural inputs, supply chains, and agrifood exports, resulting in higher production prices and, therefore, consumer prices. The most well-known and significant of these events is the full-scale war in Ukraine, which upon its onset in 2022 immediately resulted in higher global prices for key commodities including natural gas and nitrogen fertilizers (because Russia is the world’s third ranking natural gas exporter and natural gas is a critical input for nitrogen fertilizers); potash fertilizers (primarily from Russia and Belarus) and wheat (before the war, Ukraine was the world’s seventh-largest wheat exporter).

Although global input markets, for example for fertilizers, are broadly resilient, at the same time they also clearly are affected by geopolitical turbulence arising from trade policies, sanctions, shocks such as wars, and other phenomena. While the war in Ukraine is an important case, it hardly exhausts the list of current examples. In July 2025, the World Bank said that sanctions and restrictive trade policies “are playing an increasingly significant role in reshaping global fertilizer markets,” citing China’s discretionary export restrictions on nitrogen and phosphate fertilizers to protect its domestic agriculture, and the European Union’s (EU) June 2025 tariffs against Belarusian and Russian fertilizers to reduce EU dependence on these countries.

An even more difficult problem is the risk that the hemispheric and global agrifood trading system is returning to a protectionist order, which risks the benefits that have accrued since the emergence of a rules-based trading model in the 1990s for agriculture established under the World Trade Organization (WTO) 1994 Agreement on Agriculture. Under that model, countries tended to place high tariffs only on a few politically sensitive crops (such as sugar or cotton). Yet today’s rising protectionism is much broader, affecting a larger number of crops, including staple crops, and implemented by an ever-longer list of countries. The result is likely to undermine food security by increasing food prices—with impacts falling most harshly on poor households—and reducing profitability by raising both producers’ and exporters’ costs, lowering investment and decreasing productivity.

Over the past several decades, the largest agricultural producers in the Americas, including the United States and Brazil, have become the world’s largest agrifood exporting nations. Southern Cone states have pushed agricultural exports as key pieces of their export-led growth strategies, especially to China given its rapidly growing demand for commodities. With such a high dependence on global agricultural exports, the biggest agricultural producers in the Western Hemisphere ought to be the most heavily invested in a global agrifood free-trading regime. Tariff and nontariff barrier uncertainty negatively impacts agrifood producers, processors, distributors, and consumers.

These disruptions have other distorting effects. Trade patterns within the Americas, and between the Americas and the rest of the world, are shifting because of trade tensions. China’s behavior in international agricultural markets is a significant example, with direct relevance to the Western Hemisphere. A decade ago, China imported more agricultural goods from the United States than from Brazil; today, China imports almost twice as much from Brazil as from the United States, including in soybeans and corn. China’s shift toward non-US sources (including but not limited to Brazil) began even before the 2018 trade dispute with the United States. In addition to supply diversification, China also has dramatically increased its stockpiling of food (grains, soybeans, and frozen meat), which it defines as a strategic good.

Further, China’s decoupling from the US agricultural market has had major consequences for trade patterns in that it has helped Brazil become the world’s largest exporter of soybeans. Since the 2018 Sino-American trade dispute, Brazil’s global soybean exports have increased by 40 percent, while those from the US have remained flat.

Geopolitical and geoeconomic turbulence has distorting effects on global trade in food. The biggest concern for global food security is the impact on food prices, both in terms of inflation but also price variability. Such turbulence also can generate trade disputes and, therefore, contribute to fractured relations among states. After the United States levied tariffs in August 2025 of up to 50 percent against certain Brazilian agricultural goods including coffee, beef, and sugar, Brazil immediately asked the WTO for consultation, arguing that the tariffs violate international trade rules. A likely immediate effect of the tariffs is to hasten Brazil’s interest in developing alternative markets for its agricultural products, including with China. A second and (often) underappreciated concern is that unstable trade rules and fluctuating market access make it more difficult for farmers to plan and make production and investment decisions, increasing their economic uncertainty.

Geopolitical tensions and rising trade protectionism are also likely to lead to slower economic growth. This is important because in the Americas, as everywhere, economic growth coupled with rising incomes are keys to increased food security. If slower economic growth combines with higher food prices owing to increasing trade friction, then there is a greater risk of more food insecurity in the future. International food trade is being shaped increasingly by geopolitical considerations rather than market signals, thereby realigning trade patterns in unpredictable ways.

Institutional uncertainty

Multilateral institutions are a hallmark of the current international order. Most of the world’s biggest and most important institutions that exist today were created after 1945. Although not without criticism, much of it deserved, these institutions have been central to building a global order which has delivered unprecedented—if also uneven—prosperity. When it comes to trade, the data say as much: Today’s global trade is 45 times by volume and 382 times by value greater than it was in 1950. Moreover, since the mid-1990s, global trade growth has accelerated, averaging 4 percent growth by volume annually and 5 percent by value.

However, the multilateral institutions that have facilitated this growth in trade now are under enormous pressure from all sides. One reason is that the world’s largest trading powers as well as many smaller ones have been willing to bend or even break established norms and international trade law. China, for example, has taken advantage of its status as a developing country under the WTO to engage in unfair practices, including massive subsidies, heavy use of state-owned enterprises, forced technology transfer, and protection of its domestic market (for example, limiting foreign companies’ and investors’ access to its technology and financial markets).36 Further, the United States is preventing the WTO’s Appellate Body from functioning as designed, preventing the organization from enforcing its own rules.

Such developments are important because they create uncertainty surrounding trading rules and thereby increase friction among countries when it comes to trade. Even worse, these developments create space wherein the breaking of rules by some countries prompts others to believe they can as well. Both India and Indonesia, for example, recently have taken advantage of the lack of a functioning Appellate Body to
implement policies that likely are in violation; Indonesia instituted a ban on nickel exports (to induce nickel processors to relocate to Indonesia) while India heavily subsidized steel and pharmaceuticals. By some estimates, two-thirds of initial WTO rulings made about trade disputes have been appealed, but the Appellate Body cannot convene itself.

The decline of multilateral institutions is significant because the Americas benefit more than other regions from an open global trading system in agricultural goods, per table 1 above. Agriculture always has been a controversial topic in trade negotiations, extending back to the origins of the Global Agreement on Tariffs and Trade (GATT) in the 1940s. Despite this fact, functional multilateral institutions are valuable because
they create a stable, rules-based global marketplace that in turn enables trade in food at scale.

In sum, a breakdown of multilateral institutions and rising protectionism portend headwinds for agriculture in the years to come, increasing risks and possibly disincentivizing investments by farmers. Such developments erode the open agrifood trading system that globalization made possible. The Americas have utilized open trade to expand agriculture production and exports and, therefore, is most at risk from the unraveling of that system

Price inflation and variability

The price of food is a core metric for food security: For the world’s consumers, the most desirable food prices are both low and stable over time. Food insecurity is made worse when the opposite applies: rapid price inflation combined with high price variability. Unfortunately, as shown in figure 3, the latter situation has characterized global food prices for much of the past quarter century.

Since the 2000s, shocks have occurred with such frequency that prices settle on a new higher baseline rather than returning to previous levels. The FAO noted this trend as early as 2009: Prior to the 2006–2008 global food-price shock, “real prices [in food had] shown a steady long-run downward trend punctuated by typically short-lived price spikes.” But by the mid-2000s, the FAO observed, this trend no longer held. As of 2008, its own food-price index “still averaged 24 percent above 2007 and 57 percent above 2006.” Indeed, as shown in figure 3, since the mid-2000s, global food prices have risen to a new and higher level after each exogenous shock. The most recent global shocks—the COVID-19 pandemic followed by the full-scale invasion of Ukraine—has had the greatest impact on sustained high food prices.

The upward trend in the price of food has important implications for food security around the world. Food is less affordable; households have more difficulty consuming a healthy diet, and they are forced to switch to less nutritious foods and/or reduce their total consumption of food. This cost-of-living crisis erodes food security gains and threatens to make societies less stable.

Food-price inflation and volatility is as problematic in the Americas as elsewhere in the world, increasing food insecurity and becoming a key social and political issue. In Latin America, rising food prices have been a major driver of inflation across the region. In some cases, such as Argentina, food prices have contributed to extreme inflation rates. In North America, food prices also continue to rise and are a major cause of the cost-of-living crisis experienced by many households.

Investment: Innovation, technology, and infrastructure

Public- and private-sector investments in on- and off-farm innovation and productivity have been critical enablers of modern agrifood systems. A question to be answered in the years to come is whether such investments will increase agricultural productivity and sustainability enough to match or exceed demand-side pressures for more food (from population and income growth), even as baseline conditions from other drivers—ecological, institutional, geopolitical—become more challenging.

Historically, on- and off-farm innovation and productivity increases, which stem from process and technological developments plus infrastructural improvements, have been fundamental to increasing the supply of food to meet rising demand. Since the 1990s, global efficiency gains have been the largest contributors to global growth in agricultural output. Efficiency gains have far outstripped the other contributors, including the use of more inputs per hectare of land, greater extension of irrigation to cropland, and expansion of new agricultural land (e.g., expansion of agriculture into previously forested lands).

In agriculture, efficiency is gauged using total factor productivity (TFP), a metric of inputs relative to outputs. If total on-farm output (e.g., volume of crops produced) is growing faster than inputs (defined as labor, capital, and material resources), then TFP is increasing.

That is the good news. The bad news is that global TFP growth is now slowing. After steadily increasing from a 0.55 percent annual growth rate during the 1970s to a peak of 1.97 percent annual growth rate in the 2000s, TFP has since fallen back to 1.1 percent annually (figure 4). Within the Americas, the picture is even more dire. Between 2011 and 2020, TFP increased by only 0.9 percent annually in Latin America and the Caribbean. In North America, typically at the global forefront in productivity and efficiency gains, TFP grew over the same period by just 0.2 percent annually. The Americas significantly lagged the global average (figure 5).

The decline in TFP over the past fifteen years is a worrisome development, as it threatens to undermine progress toward an elusive goal, which is to produce enough food to meet growing global demand while simultaneously retaining on-farm profitability and reducing environmental impact. Analysts at the US Department of Agriculture recently made this argument. “At the global level,” they wrote, “improvements in agricultural productivity have not been rapid or universal enough to make a significant dent in the effect of agriculture on the environment.” If TFP were to continue to slow down in the future, the impact “could [negatively] affect food prices, [lead to] the expansion of agriculture into more natural lands, and [threaten] global food security.”

Nor is underinvestment in innovation the only form of investment risk. Despite the hemisphere’s reliance on trade in agriculture and food, infrastructure across much of the Americas remains underdeveloped. The so-called infrastructure gap in the Americas refers to how the hemisphere’s ports, railways, bridges and roads, telecommunications, and other forms of infrastructure are insufficiently robust in kind, quality, and/or maintenance. In 2021, for example, the Inter-American Development Bank (IDB) estimated that countries in Latin America and the Caribbean alone would need to invest $2.2 trillion in “water and sanitation, energy, transportation, and telecommunications infrastructure” to meet the UN’s Sustainable Development Goals. The IDB’s estimate included not just funds for new infrastructural investment but for maintenance and replacement as well (at some 41 percent of the total).

North America is not exempt from this problem, as both Canada and the United States face large infrastructure deficits. As is well-known, for decades the United States has largely underinvested in infrastructure. Despite passage of the 2021 Infrastructure Investment and Jobs Act, which directed the federal government to spend some $1.2 trillion over five years on infrastructure, investment levels in the United States will remain insufficient absent systematic changes in how funds are raised by local, state, and federal governments.

Likewise, in Canada, the infrastructure deficit, which is estimated at $196 billion, is of particular importance to that country’s globally important agricultural exports, which include foodstuffs such as grains (wheat, principally) and key agricultural inputs such as fertilizers, largely produced in the country’s vast interior. Getting bulky grains and inputs to external markets more cheaply and efficiently will require Canada to upgrade its transport infrastructure, including railway lines, bridges, and ports, which are key in all circumstances but especially so during periods when unexpected disruptive factors, such as recent port labor strikes or extreme weather events, create choke points that necessitate rerouting. The recent announcements by the government of Canada to expand the Port of Montreal is a step in the right direction. However, significantly greater ambition will be required to push Canada’s infrastructure investments to levels comparable to other leading OECD countries.

Policymakers, the private sector, farmers, investors, and the scientific and technological communities will need to find solutions to these challenges. Doing so will require some combination of enhanced public and private investment in on- and off-farm infrastructure, R&D, improved piloting and scaling of new technologies, and implementation of policies to encourage farmers to become more innovative, productive, and efficient.

Demographic shifts

Agricultural employment as a share of global GDP has been trending downward for decades, owing to the ongoing mechanization of farmwork, increasing urbanization and industrialization, and other factors. According to the World Bank, in 1991, 43 percent of the world’s population was employed in agriculture. By 2023, that figure had fallen by almost half, to 26 percent.

The Western Hemisphere has followed this trendline. In Latin America and the Caribbean, agricultural employment fell over the same 1991–2023 period from 21 percent to 13 percent and in North America from 2.8 percent to 1.6 percent. As can be expected, given differences in income levels, structure of national economies, and crop specialization, there are widespread differences in agricultural employment across the hemisphere. In 2023, several countries still had employment levels in agriculture above 20 percent: Haiti (by far the most, at 45 percent), Ecuador, Guatemala, Bolivia, Nicaragua, Peru, and Honduras. In contrast, the hemisphere’s biggest producers of staple crops—the United States, Canada, Mexico, Brazil, and Argentina—are all well below the global average of 26 percent, in most cases in low single digits.

This demographic transition underscores how agriculture is becoming more capital-intensive and productive: more food is being produced per person employed in the sector. The largest food producers also typically have the lowest share of farmers and agricultural workers employed in the national economy, as the United States, Canada, and Argentina all show (each is at less than 2 percent of their populations employed
in agriculture).

However, there is a generational downside to this demographic trend: farmers worldwide are aging in part because on-farm employment opportunities are declining. The trend appears to be worse in the wealthiest regions having the smallest share of employment in agriculture. In the EU, for example, only 11.9 percent of farmers were under forty years old in 2020.52 In the United States, only 9 percent were under thirty-five years of age in 2022.

Toward a food-secure future

The world needs a bold new way of thinking about food security, one that incorporates a comprehensive understanding of how divergent forces, including those identified in this report, are creating a dynamic and unsettled agrifood landscape that will shape the future in unpredictable ways. To avoid negative future scenarios and increase the odds of positive ones, what is needed is a shift in the prevailing debate about food security that incorporates all these driving forces. That debate should stress that these forces combine in important and not entirely predictable ways to disrupt agrifood systems.

Such an outlook recognizes, for example, that geopolitical tensions add risk to other phenomena such as climate change to make an already perilous situation more difficult.

Policymakers and other leaders across the Americas should recognize that these drivers intersect and combine, in turn reshaping the hemisphere’s agrifood outlook. The challenge is clear: They will need to develop strategies and design policies that will lead to resilient and sustainable food systems that minimize the impact of shocks—both natural and human-made—on the production, distribution, and access to food.

Ecology

As stated above in the introduction, a central challenge will be to ensure that food production can remain profitable and resilient in the face of disruptive change. Ecological changes and the environmental resources that the world relies upon for productive and healthy agriculture systems are critical pieces of this equation.

A key task concerns how best to frame this problem for policymakers, business leaders, and farmers, to relay that ecological changes threaten to undermine progress toward a food-secure future. How these stakeholders act through policies, investments, and practices to mitigate and adapt to ecological changes will go a long way to determining whether the hemisphere’s future is food secure or insecure.

Farming is inherently uncertain because of the vagaries of weather and disease, so efforts to minimize the instability caused by ecological changes, including climate change, extreme weather, disasters, and other phenomena, will help farmers to manage this complex set of risks. Integration across risks is an important way to frame the problem, not only because the problem itself is multifaceted but so too are the solutions. Synergies among healthy ecosystem services, robust agricultural production, and profitability can be found with the right application of imagination, creativity, policymaking, investment, and on-the-ground application by utilizing input and knowledge from farmers and farming communities.

Agriculture is a major driver of ecological change, including land-use patterns and carbon emissions. Yet at the same time, agriculture also holds enormous potential, under the right domestic and international conditions, to provide robust and lasting solutions. Doing so would require that policymakers, investors, farmers, scientists, and technologists and society writ large coordinate efforts toward effecting scalable change.

Synergistic approaches include a range of alternative farming techniques and practices as well as novel technologies that collectively hold great potential not only to perform at a high level of output but at the same time go some way toward repairing the natural world. These strategies, which overlap in practice, include regenerative agriculture, no-till farming, agroforestry, climate-smart agriculture, and 4R nutrient stewardship practices (referring to nutrient-management practices focusing on the right sources, right rates, right times, and right places for nutrients). Such approaches aim to improve resource efficiency, reduce waste, protect ecosystems and ecosystem services including freshwater sources, soils, and biodiversity, while retaining profitability. Through the more efficient use of resources, carbon sequestration in soils, land and forest conservation, and improved management (for example, of water and waste processes), these strategies also can mitigate the agricultural sector’s significant greenhouse gas emissions.

Although many of these approaches once were considered experimental, novel, and unproven, that is far less the case today. Regenerative farming, for example, now has more adherents (including farmers) who believe that the diverse methods falling under it deliver tangible environmental benefits without sacrificing on-farm yields—a claim that is also drawing greater financial-sector interest and investment. A global survey of farmers, conducted in 2024 by McKinsey and Company found that over three-quarters of farmers in Argentina, Brazil, Canada, and the United States were adopting no-till or reduced tillage practices. Farmers’ willingness to adopt these and other regenerative practices were “underpinned by economics,” according to McKinsey, with respondents in the Americas ranking increased yields as their primary motive for adoption, followed by lower production costs and additional revenue streams.

There is an enormous amount of land worldwide and in the Americas that could be revitalized through such approaches. Land degradation, which by extension means the degradation of the world’s soils, is a massive problem. The world is losing at least one hundred million hectares of productive land each year, with some forecasts suggesting up to 95 percent of the world’s arable land could be in some kind of degraded state
by 2050.

In the Americas, degradation is a serious problem but also a big opportunity for soil and land regeneration. Brazil alone has enormous swathes of degraded pastureland. Embrapa, Brazil’s agricultural research agency, estimated in 2024 that the country has approximately twenty-eight million hectares of degraded pastureland (classified as intermediately or severely degraded). Bringing this land back into production using regenerative methods would help alleviate forest conversion pressures in Brazil’s Cerrado and Amazon regions.

One important consideration for policymakers is that if trade in agriculture and food becomes more costly, there is a risk that the fiscal capacity to invest in policies to make agrifood systems more productive and resilient in the face of ecological change will be reduced. Hence, this report focuses on understanding how these issues are linked and addressing them through greater international cooperation to promote more sustainable and resilient agrifood systems.

Trade, geopolitics, and institutions

Rising protectionism and geopolitical competition undermine the incentives for states to cooperate. Trade tensions risk spilling over into diplomatic tension, eroding international trust. In such conditions, states will be less likely to collaborate, which can sour international relations. If the world’s biggest economies are becoming more protectionist and eschewing a rules-based trading system, a zero-sum world returns, with many states, concerned by protectionist measures placed on them from elsewhere, believing they must adopt such policies. More dialogue among states, not less, is an antidote.

An increasing number of governments around the world appear to no longer see the equation in these terms. China, for example, is seeking greater self-reliance in food through stockpiling and other measures. It also has weaponized tariffs for its own purposes, imposing large tariffs on grain imports from Australia and more recently on Canada. These are not isolated incidents but part of how China exercises its power, given its outsized impact on world markets.

As articulated in this report, global trade in food depends on the strength of multilateral institutions and international agreements. These institutions are often underappreciated contributors to global food security. Today these institutions are being eroded by rising geopolitical and diplomatic conflict and other forces. The rapid rate of their erosion is worrisome.

Despite the WTO’s flaws—of which there are many—it remains valuable because it has the reach and standing to create and enforce global trading rules. Yet the organization is failing at doing so, in large part because of its own rules (decisions are made by consensus) and even more so because the largest trading countries no longer want to abide by a rules-based system. The risk is a collapse of the entire multilateral trading system. “The reversal of global economic integration [if the multilateral trading system were to fail] would bring with it growing lawlessness, conflict, and disorder in the global economy,” one scholar writes, and with it “the international system at large.”

One aim should be to build alternative institutions within the hemisphere consisting of states having the critical mass to achieve desired outcomes. One such solution would be to mimic the Group of Seven and Group of Twenty, two examples of institutions that bring leaders from the world’s largest economies together to attempt to coordinate solutions to various global challenges. One possibility would be to start with just the largest agricultural producers in the hemisphere—an “A5” consisting of the United States, Brazil, Mexico, Canada, and Argentina—to bring agriculture ministers together for systematized dialogue about hemispheric trade. Dialogue outcomes might include regional food-security compacts that generate commitments to invest in agricultural research leading to breakthrough technologies (“agtech”), to avoid the most trade distorting policies (export bans, for example), and more.

A related idea is to construct a standing (as opposed to episodic) hemispheric food security council to bring willing governments together for discussing responses to future shocks, identifying pathways for greater scientific and technological cooperation, and buttressing the norm regarding the hemisphere’s responsibility to the rest of the world as a major food supplier. Hemispheric institutions such as the Organization of American States (OAS) and Inter-American Development Bank can be leveraged to convene this council, given their credibility in addressing hemispheric affairs, including in trade. Using the inter-American system to convene a hemispheric food security council consisting of foreign, environment, and agriculture ministers—alongside representatives from industry and producer groups—should appeal to a wide set of stakeholders.

Investment in innovation, technology, and infrastructure

The constant improvement of on- and off-farm activities, including innovative use of new technologies and processes, and capital investment in the phenomena that enable them (including infrastructure), are central to ensuring that the hemisphere and the world are food secure. Innovation and investment also are critical components of agrifood systems that not only are productive but also sustainable and resilient, given
the need to prepare for climate-driven shocks in the future. Innovative technologies and processes, and the infrastructure that undergirds them, can build redundancy and efficiency into the agrifood system in anticipation of such shocks.

Regenerative agriculture and other agrifood systems focused on sustainability can be enhanced through the application of advanced technologies. Examples include:

• Alternative energy sources can enhance on- and offfarm systems while reducing carbon footprints.
• Geospatial remote sensing tools for precision farming can identify and help safeguard ecological assets.
• Robotics and mobile digital technologies (including deeper integration of handheld devices into farming practices) can improve agricultural efficiencies while reducing environmental impact.
• AI-driven analytics can integrate and utilize data streams from numerous applications.

Such technologies will become more critical in the future, as ecological changes make farming more difficult. Rising heat, for example, will create harsher working conditions for farm labor, in turn requiring machines and other technologies to alleviate workers’ outdoor exposure during periods of extreme heat.

Biotechnologies should be added to this list, given their promise to improve on-farm productivity and nutrient use efficiency while protecting ecological assets such as soils and water. Biofertilizers, for example, aim to improve soil fertility and nutrient use efficiency through application of living organisms including bacteria, fungi, and algae, with crop yields increasing by an estimated 10 percent to 40 percent. They also help
plants withstand abiotic stressors, some brought on by climate change, including drought, salinity, and extreme temperatures.

How can governments, the private sector, and other actors together ensure that the right mix and scale of investments are being made that will lead to innovative technologies and processes across the hemisphere’s agrifood systems? Additionally, how can they ensure that innovative technologies and processes are transformative at all scales, including for the hemisphere’s millions of smallholder farmers in addition to its largest producers? Some technologies and processes are more suitable for large-scale applications because of high cost or other considerations, for example. Improving access to the benefits of such technologies will require improved pathways for dissemination of knowledge, practical know-how, access to capital, and other services (e.g., training).

Every year, researchers at Virginia Tech produce the Global Agricultural Productivity Report, which tracks and analyzes TFP trends. The 2025 version asserts that reversing the decline in TFP growth—including low growth in the Americas—will require five “policy, investment and research priorities,” which are:

• Invest more in strengthening and expanding multistakeholder dialogues, agriculture extension services, and incentive structures for technology transfer to smallholder farmers.
• Expand access to markets for all participants in the agrifood value chain, including smallholder farmers.
• Strengthen trade as it “enhances competitive prices” which incentivizes investment in improved inputs and technologies” while facilitating “the exchange of knowledge, innovations, and best practices across borders, driving productivity gains.”
• Reduce food loss and waste.
• Invest in public-private partnerships, joint ventures, knowledge sharing agreements and platforms, and interdisciplinary research.

These types of innovative practices have real impact on agrifood systems at every level, down to the farm itself. Innovation delivers new seeds and crop varieties, creates more efficient production methods, solves practical problems faced by farmers (pests and disease), and creates new markets for goods and services provided by farmers (such as using sugarcane to produce ethanol to reduce carbon emissions of transport
fuels).

Farmers are both users and creators of innovative technologies and processes, so their knowledge and experience should be included in robust feedback loops. Moreover, farmers must be able to adopt and utilize innovative technologies and processes to realize their full positive contributions. This is not an automatic process, as on-farm adoption is not the same thing as laboratory invention. When making investment decisions, farmers are businesspersons, concerned about the upfront costs and return on investment (ROI). Global surveys of farmers indicate they are hesitant to adopt new technologies and processes if the technologies and processes are unfamiliar or they face high initial investment costs or uncertain ROI.

Publicly funded agricultural extension programs, which connect researchers at universities and other institutions to farmers—in the process, enabling mutual learning and successful technology transfer—are critical to improving agtech adoption. Maintaining and strengthening extension services (including public funding) should be central to any country’s aspiration to build world-class agrifood systems based on widespread technology and process adoption by farmers.

Improving infrastructure to strengthen agrifood supply chains is also critical, especially as higher temperatures, changing precipitation patterns, more frequent and powerful disasters, and other problems will put more infrastructure—e.g., ports, bridges, roads, railroads, canals— at risk. Ports are especially at risk, with most food trade moving by cargo ships. The Panama Canal, which in recent years has had low water levels due to Central American drought, is a good example. (Chinese ownership of port facilities also has proven controversial in the United States.) Beyond adaptation measures designed to improve individual pieces of infrastructure, there is much need for strategies that will frame the challenge in terms of societal and even transboundary (international) resilience. Canada, for example, in 2023 released a whole-of-society National Adaptation Strategy that emphasizes the need to make physical infrastructure (and communities) more resilient to climate-driven impacts.

Farmers for the future

Ensuring a food-secure future in the Americas must place human beings at its center. This formula long has been the focus on the demand side of the food-security equation: The goal always is to ensure that all humans always have access to affordable and nutritious food.

Yet the same logic also holds on the supply side of the equation. To avoid the demographic decline of farming amid the chronic aging of the world’s farmers, it is imperative that farming be made financially, socially, and culturally attractive to younger generations. Unfortunately, such conditions are not prevalent in many countries (perhaps most) around the world. The reasons for this are many. To young people, particularly those without a family heritage in agriculture, farming can be perceived as backward, unprofitable, difficult, alien, or uncool—or all the above.

There is no single set of recognized solutions to assist in turning the demographic trendlines around. However, evidence from around the world suggests that a combination of interventions, some obvious and others not so much, might suffice. The obvious ones are to make it easier to gain access to farming in the first place by reducing barriers to entry (access to affordable financing or access to farmland through ownership or long-term contract), and closing knowledge and skills gaps through on-farm training programs, scholarships, and apprenticeships. There are less obvious interventions, too. One such intervention is to incentivize nontraditional candidates to enter farming, for example, young women, in addition to traditional candidates (typically men). Another is to stress the increasingly important role played by digital technologies, robotics, big data and remote sensing, artificial intelligence, and other technical applications that appeal to tech-savvy and ambitious young people.

Although none of these solutions will guarantee a demographic rebound in farming, there are examples of where the curve has been bent toward youth. Brazil’s farmers are getting younger rather than older. They appear to be attracted by the prospect of getting rich in Brazil’s booming, forward-facing, and tech-savvy industry.

Conclusion

The issues outlined in this report should be seen as a starting point for discussion. The challenges and the opportunities facing agrifood systems in the Americas in the coming decades will be profound. A central question is whether the hemisphere’s key actors—governments, farmers, the private sector, researchers, foundations, civil society groups, and the public—will be willing to invest in the transformative processes and approaches that will reduce risk while increasing prosperity, sustainability, and resilience.

This report has put great emphasis upon generating productive dialogues among key stakeholders. Promoting the diffusion of critical innovations for food security will be an important piece of this process. It is imperative that governments and multilateral institutions in the hemisphere find financing and pool technological know-how to support programs tailored to meet the needs of the region.

Beyond that, however, it is critical that nongovernmental stakeholders, including investors, the private sector, researchers, scientists, analysts, farmers, and farming communities, act in concert with one another. They must themselves build the transnational dialogues to assist in envisioning, creating, and strengthening the tools that will be needed to ensure a food-secure future.

This report was produced by the Atlantic Council with support from The Mosaic Company as part of the Food security: Strategic alignment in the Americas project.

Peter Engelke is a senior fellow with the Atlantic Council’s Scowcroft Center for Strategy and Security as well as a senior fellow with its Global Energy Center. His diverse work portfolio spans strategic foresight; geopolitics, diplomacy, and international relations; climate change and Earth systems; food, water, and energy security; emerging and disruptive technologies and tech-based innovation ecosystems; and demographics and urbanization, among other subjects, and he is the creator of the Council’s most widely read long-form publication series, Global Foresight. Engelke’s previous affiliations have included the Geneva Centre for Security Policy, the Robert Bosch Foundation, the World Economic Forum, and the Stimson Center.

Matias Margulis is associate professor of the School of Public Policy and Global Affairs and a faculty member of Land and Food Systems at the University of British Columbia. His research and teaching interests are in global governance, development, human rights, international law, and food policy. In addition to his academic research, Margulis has extensive professional experience in the field of international policymaking and is a former Canadian representative to the World Trade Organization, Organisation for Economic Co-operation and Development, and the UN Food and Agriculture Organization.

The GeoStrategy Initiative, housed within the Scowcroft Center for Strategy and Security, leverages strategy development and long-range foresight to serve as the preeminent thought-leader and convener for policy-relevant analysis and solutions to understand a complex and unpredictable world. Through its work, the initiative strives to revitalize, adapt, and defend a rules-based international system in order to foster peace, prosperity, and freedom for decades to come.

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Introducción

La seguridad alimentaria está en el núcleo de la seguridad nacional, regional y global. Cuando las sociedades tienen garantizado el acceso a los alimentos, poseen una probabilidad mucho mayor de mantener la estabilidad social y política; cuando carecen de ella, sucede lo contrario. Afortunadamente, el hemisferio occidental—las Américas—es una región con seguridad alimentaria. Aunque el acceso a los alimentos sigue siendo un desafío constante, la abundancia alimentaria caracteriza en general a las Américas, gracias a una base favorable de recursos naturales, condiciones geopolíticas benignas y una amplia cooperación pública y privada orientada a mejorar los métodos de producción y fomentar la innovación. 

Sin embargo, el futuro podría no parecerse al pasado. Varios factores clave de cambio podrían alterar la trayectoria de la seguridad alimentaria hemisférica, amenazando la estabilidad y productividad de los actuales sistemas agroalimentarios o, por el contrario, ofreciendo esperanza de que estos se vuelvan aún más sólidos y resilientes. Estos factores incluyen el deterioro de ecosistemas sanos y estables, la rápida transformación de la geopolítica, la erosión de las instituciones multilaterales, la creciente inflación y volatilidad de los precios de los alimentos, la promesa de la innovación y las tecnologías emergentes, y los cambios generacionales en la agricultura y la producción agropecuaria. 

Aunque estas fuerzas se cruzan, muchos líderes las perciben como desafíos aislados. Su interacción multiplica el dinamismo del sistema, lo que exigirá que los responsables de políticas públicas, líderes empresariales, inversionistas y agricultores encuentren soluciones innovadoras frente a un panorama agroalimentario que cambia rápidamente y cuyo futuro no es del todo predecible. 

Alimentación, sociedad y política 

Ningún otro bien tiene un impacto tan profundo en la sociedad y la política como los alimentos, porque las personas necesitan comer todos los días. A menudo, basta con un solo gran aumento en los precios de los alimentos para alterar las dinámicas sociales y políticas dentro de un país o incluso de toda una región. Aunque los precios altos de los alimentos afectan de manera desproporcionada a los países vulnerables, pobres y frágiles, también pueden tener un gran impacto en naciones que, en principio, son ricas y estables. 

La definición estándar de seguridad alimentaria, adoptada en 1996 por la Organización de las Naciones Unidas para la Alimentación y la Agricultura (FAO) y solo ligeramente revisada desde entonces, establece que: 

La seguridad alimentaria existe cuando todas las personas, en todo momento, tienen acceso físico, social y económico a alimentos suficientes, inocuos y nutritivos que satisfacen sus necesidades dietéticas y preferencias alimentarias para llevar una vida activa y sana. 

Sin embargo, faltan algunos elementos importantes en esta formulación de la seguridad alimentaria. Uno de ellos es la estabilidad ecológica. La seguridad alimentaria depende de la sostenibilidad de los sistemas naturales de la Tierra que son esenciales para la producción de alimentos. Un segundo elemento es la estabilidad del sistema internacional, específicamente la estabilidad de un orden comercial basado en normas que garantice que los alimentos puedan desplazarse fácilmente desde los países con excedentes hacia aquellos con déficits alimentarios. 

Estas condiciones no deben darse por sentadas. Mirando hacia el futuro, es probable que el mundo se vuelva más dinámico y menos estable, con aspectos tanto positivos como negativos. Para prosperar, los sistemas agroalimentarios mundiales deberán volverse más resilientes y adaptables. 

Seguridad alimentaria en las Américas 

El hemisferio occidental desempeña un papel indispensable en la seguridad alimentaria global. 

Lado de la oferta: Producción agrícola en las Américas 

Los cinco países con mayor producción primaria de cultivos (por tonelaje) en el mundo se encuentran todos en las Américas: Brasil, Estados Unidos, Argentina, México y Canadá. El hemisferio también cuenta con los principales exportadores de los cuatro cultivos básicos: soya, maíz, trigo y arroz. Además, las Américas producen una amplia variedad de cultivos especializados, entre ellos café, aguacates, limones, limas, naranjas, arándanos, cranberries, quinua, almendras y muchos más. 

La agricultura continúa siendo un componente esencial de las economías nacionales en las Américas. La participación de la agricultura en el PIB supera el 5% en la mayoría de los países y llega a más del 10% en algunos de ellos. 

Lado de la demanda: Calorías y nutrición 

La definición de seguridad alimentaria de la FAO subraya que, si las personas no pueden acceder a una dieta nutritiva a precios estables y asequibles, no se puede hablar de seguridad alimentaria. 

En las últimas décadas, el hemisferio occidental ha reducido gradualmente su nivel de inseguridad alimentaria. En términos comparativos, ha tenido un buen desempeño. Entre 1990 y 2015, América Latina y el Caribe fue la única región del mundo que logró reducir el hambre a la mitad. Actualmente, el hemisferio presenta mejores resultados que el promedio mundial en cuanto a subalimentación, inseguridad alimentaria severa y prevalencia de emaciación infantil (niños pequeños con bajo peso). 
(Aunque varios países tienen un rendimiento inferior, como Haití, Bolivia, Honduras, Ecuador y Guatemala.) 

En los indicadores relacionados con dietas poco saludables, como el sobrepeso y la obesidad, las Américas muestran un desempeño menos favorable. 

Finalmente, las mujeres en las Américas son ligeramente más propensas que los hombres a sufrir inseguridad alimentaria. 

Factores de cambio en las Américas y más allá

La seguridad alimentaria en las Américas enfrenta varios factores de cambio significativos que se cruzan e interactúan entre sí. 

Cambio ecológico 

Los riesgos ecológicos se encuentran entre las mayores amenazas para la seguridad alimentaria. Los principales riesgos incluyen el cambio climático, la deforestación, la pérdida de biodiversidad y la erosión y degradación del suelo. Quizás la amenaza más grave para la producción agrícola sea la combinación de sequía y calor extremo, condiciones “secas-calientes” que se volverán más frecuentes tanto en el mundo como en las Américas. 

Una posibilidad desalentadora para el futuro es la aparición de fallas simultáneas en múltiples regiones productoras de granos básicos (“fallas en las canastas de pan” del mundo). Las Américas, hogar de varios de los principales productores mundiales de cultivos básicos, enfrentan esta posibilidad. El cambio climático también afectará negativamente a la mayoría de los cultivos especializados, incluidos el café y los plátanos. 

Los agricultores se verán afectados de manera diferente dependiendo de dónde trabajen dentro del hemisferio, el tamaño y los recursos de sus fincas (financieros y de otro tipo), si son agricultores de subsistencia o están integrados en los mercados nacionales, regionales y globales, y los tipos de cultivos que producen. Los pequeños agricultores en contextos más pobres estarán en mayor riesgo debido al tamaño reducido de sus parcelas y a la falta de acceso a seguros y otros recursos. 

Potencialmente, los cambios ecológicos con impactos a gran escala podrían generar importantes déficits en el suministro mundial de alimentos, provocando pánicos en los mercados, precios altos, acaparamiento y una ruptura del comercio internacional. La inseguridad alimentaria se dispararía. 

Turbulencia geopolítica y geoeconómica 

Un segundo conjunto de riesgos proviene de la incertidumbre geopolítica y geoeconómica creciente. Un sistema comercial abierto y basado en normas ha sido esencial para mejorar la seguridad alimentaria, al fomentar una mayor integración económica que, a su vez, contribuye a la seguridad alimentaria mediante mayor crecimiento económico, más empleo, aumento de ingresos, reducción de la pobreza y dinamismo económico. 

Sin embargo, el sistema mundial de comercio de alimentos ha sido perturbado por varios acontecimientos geopolíticos importantes, incluyendo guerras (como la de Ucrania), políticas comerciales y sanciones que generan choques imprevistos en los insumos agrícolas, las cadenas de suministro y las exportaciones agroalimentarias, lo que resulta en mayores costos de producción y precios de los alimentos. 

El sistema agroalimentario mundial podría estar regresando a un orden proteccionista previo a los años 1990, cuando los países solían aplicar aranceles elevados solo a unos pocos cultivos políticamente sensibles (como el azúcar o el algodón). Hoy, el proteccionismo emergente es mucho más amplio, afecta a un número mayor de cultivos y lo implementa una lista cada vez más larga de países. 

Los patrones comerciales también están cambiando debido a la geopolítica. El comportamiento de China es un ejemplo significativo. Hace una década, China importaba más productos agrícolas de Estados Unidos que de Brasil; hoy, importa casi el doble de Brasil que de EE. UU. La desvinculación de China del mercado agrícola estadounidense ha ayudado a que Brasil se convierta en el mayor exportador mundial de soya. 

Además, después de que Estados Unidos impusiera aranceles en agosto de 2025 a ciertos productos agrícolas brasileños, Brasil probablemente intensificará su interés en desarrollar mercados de exportación alternativos, incluidos los acuerdos con China. 

Incertidumbre institucional 

Las instituciones multilaterales han contribuido a generar una prosperidad sin precedentes—aunque desigual—al fomentar el comercio global y hemisférico. Sin embargo, hoy estas instituciones están bajo una enorme presión. Las principales potencias comerciales del mundo, junto con muchas naciones más pequeñas, han estado dispuestas a romper normas establecidas y leyes internacionales de comercio, creando una gran incertidumbre en torno a las reglas comerciales. 

Las Américas se benefician más que otras regiones de un sistema global de comercio agrícola abierto. La agricultura siempre ha sido un tema controvertido en las negociaciones comerciales, desde los orígenes del Acuerdo General sobre Aranceles Aduaneros y Comercio (GATT) en la década de 1940. A pesar de ello, las instituciones multilaterales funcionales son de gran valor porque crean un mercado global estable y basado en normas, lo cual posibilita el comercio de alimentos a gran escala. 

Inflación y variabilidad de precios 

La inseguridad alimentaria se agrava con una inflación rápida de precios y una alta variabilidad de precios. Desde los años 2000, los sucesivos choques han generado nuevos niveles base de precios más altos. Los alimentos son menos asequibles, y los hogares enfrentan más dificultades para mantener una dieta saludable. 

La inflación y la volatilidad de los precios de los alimentos son tan problemáticas en las Américas como en otras partes del mundo, y se han convertido en un tema clave social y político. En América Latina, el aumento de los precios de los alimentos ha sido un principal impulsor de la inflación regional, mientras que en América del Norte, el alza de precios ha sido una de las principales causas de la crisis del costo de vida que afecta a muchos hogares. 

Inversión: Innovación, tecnología e infraestructura 

Las innovaciones y aumentos de productividad dentro y fuera del ámbito agrícola —derivadas de los avances tecnológicos, las mejoras en los procesos y las inversiones en infraestructura— han sido fundamentales para aumentar la oferta de alimentos y satisfacer la creciente demanda mundial. 

Desde la década de 1990, las ganancias globales en eficiencia han superado ampliamente otros factores, como el uso de más insumos por hectárea, la expansión del riego en tierras de cultivo o la apertura de nuevas áreas agrícolas (por ejemplo, la conversión de tierras forestales en agrícolas). 

Sin embargo, el crecimiento mundial de la Productividad Total de los Factores (PTF) —una medida de eficiencia que evalúa los insumos agrícolas en relación con los resultados— se está desacelerando. Después de aumentar de forma constante durante décadas, la PTF ha comenzado a caer, especialmente en las Américas. 

Las inversiones en infraestructura en gran parte del hemisferio también siguen siendo insuficientes, con trillones de dólares necesarios para mejorar las redes de transporte, energía y logística. 

Por ejemplo, en Canadá, el déficit de infraestructura, estimado en casi 200 mil millones de dólares, es particularmente relevante para las exportaciones agrícolas de ese país, que incluyen tanto productos alimenticios (como granos) como insumos agrícolas clave (como fertilizantes) producidos en su vasto interior. Reducir los costos y aumentar la eficiencia del transporte de estos bienes hacia los mercados internacionales exigirá modernizar la infraestructura de transporte. 

Cambios demográficos 

El empleo agrícola como proporción del PIB mundial lleva décadas en descenso. El hemisferio occidental ha seguido esta tendencia, lo que demuestra que la agricultura se está volviendo más intensiva en capital y más productiva. 
Hoy se produce más alimento por persona empleada en el sector. 

Sin embargo, existe un efecto generacional negativo asociado a esta tendencia. En todo el mundo, los agricultores están envejeciendo, en parte porque las oportunidades laborales en las fincas están disminuyendo. 
Esta tendencia es más pronunciada en las regiones más ricas, donde la proporción de empleo agrícola es menor, como en la Unión Europea y los Estados Unidos. 

Hacia un futuro con seguridad alimentaria 

El mundo necesita una nueva y audaz forma de pensar sobre la seguridad alimentaria, una que incorpore una comprensión integral de cómo fuerzas divergentes están creando un panorama agroalimentario dinámico e inestable, que moldeará el futuro de maneras impredecibles. 

Ecología 

Un desafío central será garantizar que la producción de alimentos siga siendo rentable y resiliente frente a los cambios ecológicos disruptivos. 
Las sinergias entre los servicios ecosistémicos saludables, una producción agrícola robusta y la rentabilidad pueden encontrarse mediante la aplicación adecuada de imaginación, creatividad, formulación de políticas, inversión y acción práctica, utilizando el conocimiento y la participación de los agricultores y sus comunidades. 

La agricultura es un importante impulsor del cambio ecológico, incluido el uso del suelo y las emisiones de carbono. Sin embargo, al mismo tiempo, la agricultura posee un enorme potencial —bajo las condiciones nacionales e internacionales adecuadas— para ofrecer soluciones sólidas y duraderas. 

Los enfoques sinérgicos incluyen una amplia gama de técnicas y prácticas agrícolas alternativas, así como tecnologías novedosas, entre ellas: 

• La agricultura regenerativa 
• La siembra directa (no-till farming)
• La agroforestería 
• La agricultura climáticamente inteligente 
• El Manejo 4R de Nutrientes (Right sources, Right rates, Right times, Right places: fuentes, dosis, momentos y lugares correctos para aplicar nutrientes). 

Aunque muchos de estos enfoques se consideraban antes experimentales o no comprobados, hoy eso es mucho menos cierto. Por ejemplo, la agricultura regenerativa cuenta con un número creciente de adeptos —incluidos agricultores— que creen que puede generar beneficios ambientales tangibles sin sacrificar los rendimientos en las fincas. Existe una enorme cantidad de tierras y suelos degradados que podrían revitalizarse mediante estas prácticas.

 
En las Américas, la degradación representa un problema serio, pero también una gran oportunidad. Brasil, por ejemplo, posee vastas extensiones de pastizales degradados que podrían volver a ser productivas utilizando métodos regenerativos, lo que ayudaría a reducir la presión sobre la conversión de bosques en las regiones del Cerrado y la Amazonía. 

Comercio, geopolítica e instituciones 

El aumento del proteccionismo y la competencia geopolítica socavan la cooperación entre Estados y erosionan la confianza internacional. El comercio mundial de alimentos depende de la fortaleza de las instituciones multilaterales y de los acuerdos internacionales, que suelen ser contribuyentes subestimados a la seguridad alimentaria global. Hoy, estas instituciones están siendo erosionadas, y el riesgo es la posible caída de todo el sistema multilateral de comercio. 

Una mayor cantidad de diálogo entre los Estados es un antídoto necesario. 
Un objetivo podría ser la creación de nuevas instituciones regionales, empezando, por ejemplo, con los principales productores agrícolas del hemisferio —un posible grupo “A5” compuesto por Estados Unidos, Brasil, México, Canadá y Argentina— para reunir a los ministros de agricultura en torno al diálogo comercial. 

Los resultados de dicho esfuerzo podrían incluir: 

• Pactos regionales de seguridad alimentaria 
• Compromisos de inversión en investigación agrícola
• Acuerdos para evitar políticas comerciales que distorsionen los mercados 

Una idea relacionada es la creación de un Consejo Hemisférico Permanente de Seguridad Alimentaria, que reúna a los gobiernos para coordinar respuestas a crisis y choques, identificar vías para una mayor cooperación científica y tecnológica, y reforzar la norma que reconoce la responsabilidad del hemisferio como principal proveedor de alimentos para el resto del mundo. Instituciones hemisféricas existentes, como la Organización de los Estados Americanos (OEA) y el Banco Interamericano de Desarrollo (BID), podrían desempeñar un papel clave en la convocatoria y apoyo de este consejo. 

Inversión en innovación, tecnología e infraestructura

La mejora constante de las actividades dentro y fuera de las fincas —incluyendo el uso innovador de nuevas tecnologías y procesos, así como la inversión de capital en los factores que las posibilitan (como la infraestructura)— es fundamental para garantizar que el hemisferio y el mundo sean seguros en materia alimentaria. 

La agricultura regenerativa y otros sistemas agroalimentarios sostenibles pueden potenciarse mediante la aplicación de tecnologías avanzadas. Algunos ejemplos incluyen: 

• Fuentes de energía alternativas que mejoran las operaciones dentro y fuera de la finca, reduciendo al mismo tiempo la huella de carbono. 
• Herramientas de teledetección geoespacial aplicadas a la agricultura de precisión, que permiten identificar y proteger los activos ecológicos. 
• Robótica y tecnologías digitales móviles (incluyendo una mayor integración de dispositivos portátiles en las prácticas agrícolas) que pueden mejorar la eficiencia y reducir el impacto ambiental. 
• Analítica impulsada por inteligencia artificial (IA), que puede integrar y utilizar flujos de datos provenientes de múltiples aplicaciones. 
• Biotecnologías que mejoran la productividad agrícola y la eficiencia en el uso de nutrientes, al tiempo que protegen activos ecológicos como el suelo y el agua. 

Los agricultores son tanto usuarios como creadores de tecnologías y procesos innovadores, y deben tener la capacidad de adoptar y aprovechar estos avances. Sin embargo, la adopción en el campo no es lo mismo que la invención en laboratorio. 

Las encuestas globales de agricultores muestran que muchos son reacios a adoptar nuevas tecnologías o procesos cuando enfrentan altos costos iniciales de inversión y rendimientos inciertos. 

Por ello, los programas públicos de extensión agrícola, que conectan a investigadores y agricultores para fomentar el aprendizaje mutuo y la transferencia tecnológica, son críticos. Fortalecer los servicios de extensión debe ser una prioridad central para lograr una adopción amplia de innovaciones agrícolas. 

Asimismo, mejorar la infraestructura para fortalecer las cadenas de suministro agroalimentarias es esencial. Se necesitan estrategias que aborden este desafío desde la perspectiva de la resiliencia social e incluso transfronteriza (internacional). 

Los agricultores del futuro 

Para evitar el declive demográfico del sector agrícola, es fundamental que la agricultura se vuelva financieramente, socialmente y culturalmente atractiva para las nuevas generaciones. 

Para muchos jóvenes —especialmente aquellos sin una herencia familiar agrícola—, dedicarse al campo puede parecer anticuado, poco rentable, difícil, ajeno o poco atractivo… o todo lo anterior. 

No existe un conjunto único de soluciones reconocidas para revertir esta tendencia demográfica. Sin embargo, la evidencia global sugiere que una combinación de intervenciones podría ser suficiente: 

• Facilitar el acceso a la agricultura, reduciendo las barreras de entrada, como el acceso limitado al financiamiento asequible y a la tierra cultivable. 
• Cerrar las brechas de conocimiento y habilidades mediante programas de capacitación en campo, becas y programas de aprendizaje. 
• Incentivar la participación de candidatos no tradicionales, como mujeres jóvenes, en la agricultura. 
• Resaltar el papel creciente de la tecnología digital, la robótica, los macrodatos (Big Data), la teledetección, la inteligencia artificial y otras aplicaciones técnicas que resultan atractivas para los jóvenes ambiciosos y con afinidad tecnológica. 

En resumen, el futuro de la agricultura dependerá de su capacidad para integrar la innovación con el atractivo social y económico, de modo que las nuevas generaciones vean en el campo una oportunidad de progreso y liderazgo, no una ocupación del pasado. 

Conclusión breve 

Una cuestión central es si los actores clave del hemisferio —gobiernos, agricultores, sector privado, investigadores, fundaciones, grupos de la sociedad civil y el público— estarán dispuestos a invertir en procesos y enfoques transformadores que reduzcan riesgos a la vez que incrementen la prosperidad, la sostenibilidad y la resiliencia. 

Promover la difusión de innovaciones críticas para la seguridad alimentaria será una parte importante de esta ecuación. Es imperativo que los países y las instituciones multilaterales del hemisferio encuentren financiamiento y compartan el conocimiento tecnológico necesario para apoyar programas adaptados a las necesidades de la región. 

Otros actores no gubernamentales, incluyendo inversores, sector privado, investigadores, científicos, analistas y comunidades agrícolas, también deben actuar de manera concertada para visualizar, crear y fortalecer las herramientas necesarias que aseguren un futuro con seguridad alimentaria. 

Este reporte fue elaborado por el Atlantic Council con el apoyo de The Mosaic Company como parte del proyecto Seguridad alimentaria: alineación estratégica en las Américas

Peter Engelke es experto sénior del Centro Scowcroft para Estrategia y Seguridad del Atlantic Council, y experto sénior del Centro Global de Energía. Su diverso portafolio de trabajo abarca previsión estratégica; geopolítica, diplomacia y relaciones internacionales; cambio climático y sistemas terrestres; seguridad alimentaria, hídrica y energética; tecnologías emergentes y disruptivas y ecosistemas de innovación basados en tecnología; y demografía y urbanización, entre otros temas. Es el creador de la serie de publicaciones extensas más leída del Consejo, Global Foresight. Las afiliaciones previas de Engelke han incluido el Centro de Política de Seguridad de Ginebra, la Fundación Robert Bosch, el Foro Económico Mundial y el Centro Stimson.

Matias Margulis es profesor asociado de la Escuela de Políticas Públicas y Asuntos Globales y miembro de la facultad de Tierras y Sistemas Alimentarios de la Universidad de Columbia Británica. Sus intereses de investigación y docencia se centran en la gobernanza global, el desarrollo, los derechos humanos, el derecho internacional y la política alimentaria. Además de su investigación académica, Margulis tiene una amplia experiencia profesional en el ámbito de la formulación de políticas internacionales y fue representante canadiense ante la Organización Mundial del Comercio, la Organización para la Cooperación y el Desarrollo Económicos y la Organización de las Naciones Unidas para la Alimentación y la Agricultura.

La Iniciativa GeoStrategy, alojada dentro del Centro Scowcroft para Estrategia y Seguridad, utiliza el desarrollo estratégico y la previsión a largo plazo para servir como el principal referente y convocante de análisis y soluciones relevantes para las políticas públicas, con el fin de comprender un mundo complejo e impredecible. A través de su trabajo, la iniciativa se esfuerza por revitalizar, adaptar y defender un sistema internacional basado en normas para fomentar la paz, la prosperidad y la libertad durante las próximas décadas.

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The post El futuro de la alimentación en las Américas appeared first on Atlantic Council.

Introdução

A segurança alimentar está no núcleo da segurança nacional, regional e global. Quando as sociedades possuem segurança alimentar, elas têm muito mais chances de alcançar estabilidade social e política; quando não a possuem, ocorre o contrário. Felizmente, o hemisfério ocidental — as Américas — é uma região com segurança alimentar. Embora o acesso aos alimentos continue sendo um desafio constante, a abundância de alimentos geralmente caracteriza as Américas, graças a uma base favorável de recursos naturais, condições geopolíticas estáveis e ampla cooperação entre os setores público e privado para aprimorar os métodos de produção e promover a inovação.

Entretanto, o futuro pode não se parecer com o passado. Diversos fatores determinantes de mudança podem alterar a trajetória da segurança alimentar no hemisfério, ameaçando a estabilidade e a produtividade dos atuais sistemas agroalimentares ou, alternativamente, oferecendo a esperança de que esses sistemas se tornem ainda mais fortes e resilientes. Esses fatores incluem o declínio de ecossistemas saudáveis e estáveis, as rápidas transformações na geopolítica, a erosão das instituições multilaterais, o aumento da inflação e da volatilidade dos preços dos alimentos, o potencial da inovação e das tecnologias emergentes, bem como as mudanças geracionais na agricultura e na produção agropecuária.

Embora essas forças se interconectem, muitos líderes as veem como desafios isolados. A interação entre elas multiplica o dinamismo do sistema, o que exigirá que formuladores de políticas públicas, líderes empresariais, investidores e produtores rurais encontrem soluções inovadoras diante de um cenário agroalimentar em rápida transformação — e não totalmente previsível.

Alimentação, sociedade e política           

Nenhum outro bem exerce impacto tão significativo sobre a sociedade e a política quanto os alimentos, pois as pessoas precisam se alimentar todos os dias. Muitas vezes, basta um único grande choque nos preços dos alimentos para alterar as dinâmicas sociais e políticas dentro de um país ou até mesmo em toda uma região. Embora preços elevados de alimentos tenham um impacto desproporcionalmente negativo sobre países vulneráveis, pobres e frágeis, eles também podem afetar de maneira significativa países que, de outra forma, seriam ricos e estáveis.

A definição padrão de segurança alimentar, adotada em 1996 pela Organização das Nações Unidas para a Alimentação e a Agricultura (FAO/Food and Agriculture Organization) e apenas ligeiramente revisada desde então, é:

A segurança alimentar existe quando todas as pessoas, em todos os momentos, têm acesso físico, social e econômico a alimentos seguros, nutritivos e em quantidade suficiente para atender às suas necessidades dietéticas e preferências alimentares, permitindo uma vida ativa e saudável.  

Algumas peças importantes do quebra-cabeça da segurança alimentar estão ausentes nesta formulação. Uma delas é a estabilidade ecológica. A segurança alimentar depende da sustentabilidade dos sistemas terrestres subjacentes, essenciais à produção de alimentos. A segunda é a estabilidade do sistema internacional, especificamente a estabilidade de uma ordem comercial baseada em regras, que garante que os alimentos possam se mover com facilidade de países com excedentes para países com déficits alimentares.

Essas condições não devem ser tratadas como garantidas. Olhando para o futuro, é provável que o mundo se torne mais dinâmico — e não o contrário — com ganhos e perdas. Para prosperar, os sistemas agroalimentares globais precisarão se tornar mais resilientes e adaptáveis.

Segurança alimentar nas américas

O hemisfério ocidental desempenha um papel indispensável na segurança alimentar global.

Lado da oferta: Produção agrícola nas Américas

Os cinco maiores países produtores de culturas agrícolas primárias do mundo (em volume) estão todos nas Américas: Brasil, Estados Unidos, Argentina, México e Canadá. O hemisfério também abriga os principais exportadores das quatro principais culturas globais: soja, milho, trigo e arroz. Além disso, as Américas produzem uma ampla variedade de culturas especiais, incluindo café, abacate, limões, limas, laranjas, mirtilos, cerejas, quinoa, amêndoas e outras.

A agricultura continua sendo uma peça fundamental das economias nacionais nas Américas. Em grande parte dos países, sua participação no PIB é superior a 5%, e em alguns casos ultrapassa 10%.

Lado da demanda: Calorias e nutrição

A definição de segurança alimentar da FAO enfatiza que, se as pessoas não tiverem acesso a uma dieta nutritiva a preços acessíveis e estáveis, elas não estarão em situação de segurança alimentar.

Nas últimas décadas, o hemisfério ocidental reduziu gradualmente seu nível de insegurança alimentar. Comparativamente, teve um bom desempenho. Entre 1990 e 2015, a América Latina e o Caribe foram as únicas regiões do mundo a reduzir a fome pela metade. Atualmente, o hemisfério apresenta desempenho superior à média mundial em indicadores de desnutrição, insegurança alimentar grave e prevalência de emagrecimento em crianças pequenas, (embora vários países apresentem desempenho inferior, incluindo Haiti, Bolívia, Honduras, Equador e Guatemala). Em métricas relacionadas a dietas inadequadas, como sobrepeso e obesidade, as Américas tiveram desempenho menos favorável.

Por fim, as mulheres nas Américas têm uma probabilidade ligeiramente maior do que os homens de enfrentar insegurança alimentar.

Fatores de transformação nas américas, e além

A segurança alimentar nas Américas enfrenta diversos fatores significativos e interconectados de transformação.

Transformações ecológicas

Os riscos ecológicos estão entre as maiores ameaças à segurança alimentar. Os principais riscos incluem mudanças climáticas, desmatamento, perda de biodiversidade e erosão e degradação do solo. Talvez o mais preocupante para a produção agrícola seja a combinação de seca e calor — as chamadas condições “quentes e secas” — que ameaçam se tornar mais frequentes em todo o mundo e nas Américas. Um cenário desanimador para o futuro é a ocorrência de múltiplas falhas nas “breadbaskets” (quebras simultâneas de safra em regiões produtoras de grãos-chave). As Américas, que abrigam vários dos principais produtores mundiais de culturas alimentares básicas, enfrentam essa possibilidade. As mudanças climáticas também terão impacto negativo sobre a maioria das culturas especiais, incluindo café e bananas.

Os agricultores serão impactados de maneiras diferentes, dependendo de onde se localizam no hemisfério, do tamanho e dos recursos de suas propriedades (financeiros e de outra natureza), de serem agricultores de subsistência ou estarem integrados aos mercados nacionais, regionais e globais, e dos tipos de culturas que cultivam. Os pequenos produtores em contextos menos favorecidos estarão sob maior risco, devido ao tamanho reduzido de suas propriedades e à falta de acesso a seguros e a outros recursos.

Potencialmente, transformações ecológicas com impactos em larga escala podem gerar déficits significativos na oferta global de alimentos, provocando pânico nos mercados, elevação de preços, acúmulo de estoques e colapso do comércio. A insegurança alimentar aumentaria drasticamente

Turbulência geopolítica e geoeconômica

Um segundo conjunto de riscos decorre da crescente incerteza geopolítica e geoeconômica. Um sistema comercial aberto e baseado em regras tem sido essencial para o avanço da segurança alimentar, promovendo maior integração econômica — o que beneficia a segurança alimentar por meio de crescimento econômico mais elevado, maior geração de empregos, aumento de renda, redução da pobreza e dinamismo econômico.

Ainda assim, o sistema global de comércio de alimentos tem sido impactado por diversos eventos geopolíticos significativos, incluindo guerras (como a guerra na Ucrânia), políticas comerciais e sanções que geram choques inesperados sobre insumos agrícolas, cadeias de suprimentos e exportações agroalimentares — resultando em aumento dos custos de produção e dos preços dos alimentos.

O sistema de comércio agroalimentar pode estar retornando a uma ordem protecionista anterior aos anos 1990, quando os países costumavam aplicar tarifas elevadas apenas sobre algumas culturas politicamente sensíveis (como açúcar ou algodão). O protecionismo atual, no entanto, é significativamente mais amplo, afetando um número maior de culturas e sendo implementado por uma lista cada vez mais extensa de países.

Os padrões de comércio estão se transformando em função da geopolítica. O comportamento da China é um exemplo significativo. Há uma década, a China importava mais produtos agrícolas dos Estados Unidos do que do Brasil; atualmente, importa quase o dobro do Brasil em relação aos EUA. Esse processo de desacoplamento da China em relação ao mercado agrícola norte-americano contribuiu para que o Brasil se tornasse o maior exportador mundial de soja. Além disso, após a imposição de tarifas pelos Estados Unidos, em agosto de 2025, sobre determinados produtos agrícolas brasileiros, é provável que o Brasil intensifique seu interesse em desenvolver mercados de exportação alternativos para produtos agrícolas, incluindo a China.

Incerteza institucional

As instituições multilaterais têm contribuído para proporcionar uma prosperidade sem precedentes — embora desigual — ao impulsionar o comércio global e hemisférico. No entanto, essas instituições estão agora sob enorme pressão. As maiores potências comerciais do mundo, assim como muitos países menores, têm demonstrado disposição para romper normas estabelecidas e leis internacionais de comércio, gerando incertezas em torno das regras que regem o sistema comercial.

As Américas se beneficiam mais do que outras regiões de um sistema global de comércio aberto de produtos agrícolas. A agricultura sempre foi um tema controverso nas negociações comerciais, desde a origem, na década de 1940, do Acordo Geral sobre Tarifas e Comércio (GATT/General Agreement on Tariffs and Trade). Apesar disso, instituições multilaterais funcionais são valiosas, pois criam um mercado global estável e baseado em regras, que, por sua vez, possibilita o comércio de alimentos em larga escala.

Inflação e volatilidade dos preços

A insegurança alimentar se agrava com a rápida inflação de preços e a elevada volatilidade dos preços. Desde os anos 2000, choques geraram novos patamares mais altos de preços. Os alimentos se tornaram menos acessíveis, e as famílias enfrentam maior dificuldade para consumir uma dieta saudável.

A inflação e a volatilidade dos preços dos alimentos são tão problemáticas nas Américas quanto em outras regiões do mundo, tornando-se uma questão social e política fundamental. Na América Latina, o aumento dos preços dos alimentos tem sido um dos principais impulsionadores da inflação em toda a região, enquanto na América do Norte, o aumento dos preços dos alimentos é uma das principais causas da crise do custo de vida enfrentada por muitas famílias.

Investimento: Inovação, tecnologia e infraestrutura

A inovação dentro e fora das propriedades rurais, aliada ao aumento da produtividade, decorrentes de avanços processuais e tecnológicos, além de melhorias na infraestrutura, têm sido fundamentais para aumentar a oferta de alimentos e atender à crescente demanda. Desde a década de 1990, os ganhos globais de eficiência superaram amplamente os demais fatores, incluindo o uso de mais insumos por hectare de terra, a extensão da irrigação em áreas cultivadas e a expansão de novas terras agrícolas (por exemplo, a expansão da agricultura em áreas anteriormente florestadas).

Infelizmente, o crescimento global da Produtividade Total dos Fatores (PTF — métrica de eficiência que relaciona os insumos agrícolas aos resultados obtidos) está desacelerando. Após décadas de crescimento contínuo, a PTF passou a registrar queda, especialmente nas Américas.

Os investimentos em infraestrutura em grande parte das Américas também permanecem subdesenvolvidos, sendo necessários trilhões de dólares para impulsionar a infraestrutura do hemisfério. No caso do Canadá, por exemplo, o déficit de infraestrutura — estimado em cerca de US$ 200 bilhões — é particularmente relevante para as exportações agrícolas do país, que têm importância global. Essas exportações incluem produtos alimentares como grãos e insumos agrícolas essenciais, como fertilizantes produzidos no vasto interior canadense. Para viabilizar o transporte desses produtos volumosos aos mercados externos de forma mais barata e eficiente, será necessário modernizar a infraestrutura logística do país.

Mudanças demográficas

A participação do emprego agrícola no PIB global vem diminuindo há décadas. O hemisfério ocidental tem seguido essa tendência, evidenciando que a agricultura está se tornando mais intensiva em capital e mais produtiva. Cada vez mais alimentos são produzidos por pessoa contratada no setor.

No entanto, há um efeito geracional negativo associado a essa tendência demográfica. Os agricultores em todo o mundo estão envelhecendo, em parte devido à redução das oportunidades de emprego no campo. Essa dinâmica é mais acentuada nas regiões mais ricas, que apresentam a menor participação relativa de empregos no setor agrícola, como a União Europeia e os Estados Unidos.

Construindo a segurança alimentar do futuro

O mundo precisa de uma nova e ousada forma de pensar sobre a segurança alimentar — uma abordagem que incorpore uma compreensão abrangente de como forças divergentes estão criando um cenário agroalimentar dinâmico e instável, que moldará o futuro de maneiras imprevisíveis.

Ecologia

Um dos principais desafios será garantir que a produção de alimentos continue sendo lucrativa e resiliente diante das mudanças ecológicas disruptivas. É possível encontrar sinergias entre serviços ecossistêmicos saudáveis, uma produção agrícola robusta e lucratividade, por meio da aplicação adequada de imaginação, criatividade, formulação de políticas públicas, investimentos e ações práticas, baseadas na contribuição e no conhecimento de agricultores e comunidades rurais.

A agricultura é um dos principais vetores das mudanças ecológicas, incluindo as relacionadas aos padrões de uso da terra e emissões de carbono. No entanto, ao mesmo tempo, a agricultura também possui um enorme potencial — sob as condições domésticas e internacionais adequadas — para oferecer soluções sólidas e duradouras.

Abordagens sinérgicas incluem uma variedade de técnicas e práticas agrícolas alternativas, bem como tecnologias emergentes, como agricultura regenerativa, cultivo sem revolvimento do solo (no-till farming), sistemas agroflorestais, agricultura inteligente para o clima (climate-smart agriculture) e o Manejo 4R de Nutrientes (4R Nutrient Stewardship) — um conjunto de práticas de gestão de nutrientes que prioriza o uso das fontes corretas, nas doses certas, nos momentos adequados e nos locais apropriados.

Embora muitas dessas abordagens tenham sido consideradas, no passado, experimentais, inovadoras e não comprovadas, hoje essa percepção mudou significativamente. A agricultura regenerativa, por exemplo, conta hoje com um número crescente de adeptos — incluindo produtores rurais — que acreditam em seu potencial para gerar benefícios ambientais concretos sem comprometer a produtividade das lavouras. Há uma quantidade expressiva de terras, incluindo solos, que poderiam ser revitalizadas por meio dessas práticas. Nas Américas, a degradação representa um problema grave, mas também uma grande oportunidade. O Brasil, por si só, possui extensas áreas de pastagens degradadas que poderiam ser reincorporadas à produção agrícola por meio de métodos regenerativos, contribuindo para reduzir a pressão por conversão de florestas nas regiões do Cerrado e da Amazônia. 

Comércio, geopolítica e instituições

O aumento do protecionismo e da competição geopolítica enfraquece a cooperação entre os Estados, desgastando a confiança internacional. O comércio global de alimentos depende da força das instituições multilaterais e dos acordos internacionais — instituições que, muitas vezes, não recebem o devido reconhecimento por sua contribuição à segurança alimentar mundial. Atualmente, essas instituições vêm sendo enfraquecidas, e o risco é o colapso de todo o sistema multilateral de comércio.

Mais diálogo entre os Estados é um antídoto para esse cenário. Um dos objetivos deve ser a construção de instituições alternativas — por exemplo, começando com os maiores produtores agrícolas do hemisfério, um grupo “A5” formado por Estados Unidos, Brasil, México, Canadá e Argentina — para reunir ministros da agricultura em torno de um diálogo sobre comércio. Os resultados potenciais incluem convenções regionais de segurança alimentar, compromissos de investimento em pesquisa agrícola e acordos para evitar as políticas que mais distorcem o comércio.

Uma ideia relacionada é a criação de um conselho hemisférico permanente de segurança alimentar, destinado a reunir governos para discutir respostas a choques, identificar caminhos para uma cooperação científica e tecnológica mais ampla e reforçar a norma que reconhece a responsabilidade do hemisfério perante o restante do mundo como um dos principais fornecedores de alimentos. Instituições hemisféricas, como a Organização dos Estados Americanos (OEA) e o Banco Interamericano de Desenvolvimento (BID), podem ser mobilizadas para convocar esse conselho.

Investimento em inovação, tecnologia e infraestrutura

A melhoria contínua das atividades dentro e fora das propriedades rurais — incluindo o uso inovador de novas tecnologias e processos, além do investimento de capital nos elementos que os viabilizam (como a infraestrutura) — é fundamental para garantir a segurança alimentar no hemisfério e no mundo.

A agricultura regenerativa e outros sistemas agroalimentares voltados à sustentabilidade podem ser aprimorados por meio da aplicação de tecnologias avançadas. Exemplos incluem:

• Fontes alternativas de energia podem aprimorar os sistemas dentro e fora das propriedades rurais, ao mesmo tempo em que reduzem as marcas das emissões de carbono.
• Ferramentas de sensoriamento remoto geoespacial aplicadas à agricultura de precisão podem identificar e contribuir para a preservação dos recursos ecológicos.
• Tecnologias robóticas e digitais móveis (incluindo a integração mais ampla de dispositivos portáteis às práticas agrícolas) podem aumentar a eficiência da produção agrícola, ao mesmo tempo em que reduzem o impacto ambiental.
• As análises orientadas por inteligência artificial podem integrar e utilizar fluxos de dados provenientes de diversas aplicações.
• As biotecnologias podem melhorar a produtividade no campo e a eficiência no uso de nutrientes, ao mesmo tempo em que protegem recursos ecológicos, como o solo e a água.

Os agricultores são tanto utilizadores quanto criadores de tecnologias e processos inovadores, e precisam ter condições de adotar e aplicar essas inovações. A adoção no campo não é o mesmo que a invenção em laboratório. Pesquisas globais indicam que os produtores rurais tendem a hesitar em adotar novas tecnologias e práticas quando os custos iniciais de investimento são elevados e os retornos financeiros são incertos.

Programas de extensão agrícola financiados com recursos públicos — que conectam pesquisadores a produtores, promovendo aprendizado mútuo e transferência de tecnologia — são fundamentais. O fortalecimento dos serviços de extensão deve estar no centro das estratégias para ampliar a adoção de inovações pelos agricultores.

Aprimorar a infraestrutura para fortalecer as cadeias de suprimento do sistema agroalimentar também é fundamental. Há uma necessidade premente de desenvolver estratégias que enquadrem esse desafio em termos de resiliência social e até mesmo transfronteiriça (internacional).

Agricultores para o futuro

Para evitar o declínio demográfico da agricultura, é fundamental tornar a atividade agrícola financeiramente, social e culturalmente atrativa para as novas gerações. Para os jovens — especialmente aqueles sem vínculo familiar com o setor —, a agricultura pode ser percebida como uma atividade ultrapassada, pouco lucrativa, difícil, distante da realidade ou “sem apelo” — ou todas essas coisas ao mesmo tempo.

Não existe um único conjunto de soluções reconhecidas para reverter as tendências demográficas no setor agrícola. No entanto, evidências de diversas partes do mundo indicam que uma combinação de intervenções pode ser eficaz: facilitar o acesso à atividade agrícola, por meio da redução de barreiras de entrada (como o acesso a financiamento acessível e a terras cultiváveis); reduzir lacunas de conhecimento e habilidades por meio de programas de capacitação prática nas propriedades rurais, bolsas de estudo e estágios supervisionados; incentivar a entrada de perfis não tradicionais na agricultura — como jovens mulheres — e destacar o papel cada vez mais relevante desempenhado pelas tecnologias digitais, pela robótica, pelo Big Data, pelo sensoriamento remoto, pela inteligência artificial e por outras aplicações técnicas que despertam o interesse de jovens ambiciosos e familiarizados com tecnologia.

Breve conclusão

Uma questão crucial é saber se os principais atores do hemisfério — governos, produtores rurais, setor privado, pesquisadores, fundações, organizações da sociedade civil e o público em geral — estarão dispostos a investir em processos e abordagens transformadoras capazes de reduzir riscos e, ao mesmo tempo, aumentar a prosperidade, a sustentabilidade e a resiliência.

Promover a difusão de inovações essenciais para a segurança alimentar será um elemento crucial dessa equação. É indispensável que os países e as instituições multilaterais do hemisfério encontrem fontes de financiamento e reúnam o conhecimento tecnológico necessário para apoiar programas adaptados às necessidades específicas da região.

Outras partes interessadas, não governamentais — incluindo investidores, o setor privado, pesquisadores, cientistas, analistas, além de agricultores e comunidades agrícolas — também deve agir em conjunto para conceber, criar e fortalecer as ferramentas que serão necessárias à garantia de um futuro com segurança alimentar.

Este relatório foi produzido pelo Atlantic Council com o apoio da The Mosaic Company como parte do projeto Segurança alimentar: Alinhamento estratégico nas Américas.

Peter Engelke é pesquisador sênior do Scowcroft Center for Strategy and Security do Atlantic Council, bem como pesquisador sênior do seu Global Energy Center. Seu portfólio diversificado abrange prospecção estratégica; geopolítica, diplomacia e relações internacionais; mudanças climáticas e sistemas terrestres; segurança alimentar, hídrica e energética; tecnologias emergentes e disruptivas e ecossistemas de inovação baseados em tecnologia; e demografia e urbanização, entre outros temas, sendo o criador da série de publicações de formato longo mais lida do Atlantic Council, Global Foresight. As afiliações anteriores de Engelke incluem o Geneva Centre for Security Policy, a Robert Bosch Foundation, o World Economic Forum e o Stimson Center.

Matias Margulis é professor associado da School of Public Policy and Global Affairs e membro do corpo docente de Sistemas Agrícolas e Alimentares da University of British Columbia. Seus interesses de pesquisa e ensino abrangem governança global, desenvolvimento, direitos humanos, direito internacional e política alimentar. Além de sua pesquisa acadêmica, Margulis possui vasta experiência profissional na área de formulação de políticas internacionais e foi representante canadense na Organização Mundial do Comércio, na Organização para a Cooperação e Desenvolvimento Econômico e na Organização das Nações Unidas para a Alimentação e a Agricultura.

A GeoStrategy Initiative, sediada no Scowcroft Center for Strategy and Security, utiliza o desenvolvimento de estratégias e a prospecção de longo prazo para servir como principal referência e articuladora de análises e soluções relevantes para políticas públicas, visando a compreensão de um mundo complexo e imprevisível. Por meio de seu trabalho, a iniciativa busca revitalizar, adaptar e defender um sistema internacional baseado em regras, a fim de promover a paz, a prosperidade e a liberdade nas próximas décadas.

Saiba mais

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Such alignment, however, has often been uneven. While the United States identified China as its primary strategic competitor and shifted from engagement to balancing as early as 2017, the European Union (EU) approach has evolved more slowly and inconsistently. This report explores the structural and political roots of that inconsistency—and offers guidance on how US policymakers can use these insights to foster unified transatlantic action.

In doing so, it traces the policy trajectories of individual member states, assesses the role of EU institutions in shaping China policy, and examines four key geopolitical trends that have nudged the EU toward a gradual move from engagement to balancing and “de-risking” vis-à-vis Beijing. Although significant differences persist between the United States and the EU in their broader trade posture, the findings indicate that Europe is increasingly waking up to the China challenge—and that the EU’s shifting stance could lay the groundwork for a more coherent, durable transatlantic strategy toward China.

Fellow

Zoltán Fehér

Nonresident Fellow

Global China Hub

Central Europe China

Fellow

Valbona Zeneli

Nonresident Senior Fellow

Europe Center Scowcroft Center for Strategy and Security

Albanian Corruption

This report is the culmination of a year-long research project made possible through the generous support of the Smith Richardson Foundation.

The authors would like to express their gratitude to numerous individuals at the Atlantic Council for their hard work and dedication to the project, including:

• Melanie Hart, senior director, Global China Hub
• Samantha Wong, assistant director, Global China Hub
• Jörn Fleck, senior director, Europe Center
• James Batchik, associate director, Europe Center
• Emma Nix, assistant director, Europe Center

The authors would also like to thank Jeff Fleischer, Daniel Malloy, Andrea Ratiu, and Kai Schnier for their editorial and digital assistance.

The project drew on the insights of numerous policymakers, experts, and scholars who participated in interviews and roundtables hosted by partner institutions, including the European Policy Centre in Brussels, the Institut Montaigne in Paris, the Equilibrium Institute in Budapest, the Institute for International Political Studies in Milan, and the Mercator Institute for China Studies in Berlin. Their contributions significantly informed the analysis presented here.

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By Atlantic Council experts

European Commission leaders are headed to Beijing for a one-day summit to discuss a range of issues. But expectations for a breakthrough are low and falling.

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Then came Hurricane Melissa, the strongest Atlantic hurricane on record ever to make landfall in Jamaica. Starting late last month and into this week, it tore through the island’s central and western parishes, destroying towns, roads, hospitals, and critical infrastructure.

After days of watching the slow, relentless approach of Hurricane Melissa, one of the authors, Patricia, sheltered in her home in Kingston. She could hear the wind howling at over 100 miles per hour (mph) and rain lashing sideways against the windows—yet even that was nothing compared to the 185 mph winds and torrential rain battering the west of the country, where her friends and family live. While Patricia dealt with small leaks, her friends and family were left with nothing.

In the days after, her family visited some of the hardest-hit communities to distribute care packages, and what they saw was heartbreaking. Entire neighborhoods flattened, the landscape looking as if an atomic blast had torn through it.

At least 40 percent of the buildings and roads on the western part of the island, including Montego Bay, suffered damage. Many small communities, such as the port town Black River, were almost completely wiped out. Such damage is remarkable mostly for its sudden severity, not for its novelty. The Caribbean Community (CARICOM) countries lose an estimated 2 percent of their infrastructure capital stock annually to climate-related damage. Infrastructure upgrades must therefore be a priority, given the region’s exposure to natural disasters and climate change.

This is where US leadership can step in, not as charity, but as shared investment in resilience and regional stability. Jamaica has kept its promises: it has delivered disciplined fiscal reform, climate-smart policies, and innovation in risk financing. It has done what the international system asks of developing nations. Now, it needs that system, and its closest ally, the United States, to respond.

Reality over foresight

The Caribbean remains highly vulnerable to hurricanes and other climate-related events, which can disrupt or extend projects critical to rebuilding, driving up costs. Natural disasters often destroy essential infrastructure, forcing projects to pause or cancel. The question now is how long it will take Jamaica to recover from this cumulative destruction. The immediate response is urgent, but so too is planning for the months ahead. With projections indicating that dangerous climate events will become more frequent and severe, insurability declines and the cost of future investment rises.

The damage caused by Hurricane Melissa already amounts to almost eight billion US dollars, which is equivalent to nearly half of Jamaica’s annual GDP. That figure dwarfs the country’s much-heralded $150 million parametric catastrophe bond that it arranged with the World Bank. This bond, purchased as a form of insurance from capital markets, is designed to trigger after major disasters like this one. Given the strength of Hurricane Melissa and the scale of Jamaica’s losses, it is expected that the 2024 catastrophe bond to pay out its full $150 million value. Even so, Jamaica will need much more to rebuild.

Two sustainable paths forward

The destruction caused by Hurricane Melissa is so extensive that once the search-and-rescue efforts end and basic services such as water and electricity are restored, the damage to homes and infrastructure will exceed the capacity of any single government. Jamaica’s recovery will likely therefore depend on two important factors: innovative financing models that reduce investment risk and strong public-private partnerships that accelerate sustainable recovery.

The Caribbean’s unique and small markets call for creative financing, but there are tools readily available to help US companies invest in infrastructure and the recovery process. Two options are especially relevant.

First, US companies partnering with multilateral development banks and insurance companies can help de-risk investments. To reach the average of advanced economies by 2030, Jamaica would need significant investment, including $5.8 billion for new infrastructure and asset replacement in road infrastructure. It would also need more than $1.4 billion toward telecommunications infrastructure for fixed broadband and 4G networks to reach equivalent levels in developed economies. This significant need offers opportunities large enough to attract major investment. Limited human and institutional capacity make collaboration with third-party institutions even more important. Projects such as the Inter-American Development Bank’s One Caribbean program can help prepare projects, strengthen public-private partnerships, and manage political risk. Equally important is building trust with local partners. Many Caribbean firms are family-owned and community-rooted, which makes relationship-building essential for lasting investment. Joining local business organizations such as American Chamber of Commerce chapters and participating in trade missions can help US investors understand regulations, identify talent, and ensure that projects succeed over time.

Second, public-private partnerships can help the Jamaican government and their partners meet urgent recovery needs while driving long-term, sustainable efforts. Launching public-private partnerships is one of the most effective ways to mobilize capital from local, regional, and private investors. Under these partnerships, governments provide needed guarantees and subsidies to reduce risk, while the private sector generates the capital needed to determine a project’s commercial viability.

It is important that this model is used, as opposed to wholesale private ownership of foreign operators, to avoid eroding projects’ national economic value. Therefore, local equity participation should be prioritized in public-private partnership structures to maximize national benefits and ensure long-term sustainability. The private sector can work with governments and local civil society to strengthen resilience through environmental and social impact assessments. It can also support by improving infrastructure standards, including for underground piping and the usage of hurricane-proof glass, as well as updating building codes where necessary. Insurance can also help keep infrastructure projects afloat during delays and stoppages resulting from natural disasters. At the same time, new investments will need to focus on renewable energy, resilient infrastructure, digital connectivity, and community housing, all sectors where US expertise and capital can make an immediate impact.

Hurricane Melissa tested Jamaica’s strength and found it unbreakable but not inexhaustible. The island has proven that fiscal responsibility is possible. Now it’s time for the United States to prove that climate solidarity is, too.

Patricia R. Francis, who currently resides in Jamaica, is a nonresident senior fellow for the Caribbean Initiative at the Adrienne Arsht Latin America Center, Atlantic Council.

Maite Gonzalez Latorre is a program assistant at the Adrienne Arsht Latin America Center, Atlantic Council.

The post Hurricane Melissa left $8 billion in damage. Jamaica needs US support to get back on its feet. appeared first on Atlantic Council.

If the tariffs—including measures targeting Mexico, Canada, and China over fentanyl imports—are upheld, it would confirm the executive branch’s unprecedented reach over economic policy. But if the court rejects the administration’s measures, the decision would limit the White House’s ability to move rapidly on some of its core strategic objectives.

Before the Supreme Court issues its verdict, it’s worth stepping back to assess the broader issues at play: What alternatives could the administration pursue if the court strikes down its use of IEEPA—and why has Trump relied on an aggressive tariff policy in the first place?

Alternative legal pathways exist—but they come with limitations

Even without IEEPA, the administration could rely on other legal instruments to replicate the intensity and scope of the current tariff environment. One alternative is Section 301 of the Trade Act of 1974. However, like all legislation explicitly granting the executive branch authority to levy tariffs or duties, Section 301 comes with constraints—particularly with regard to speed and applicability. Section 301 gives the US Trade Representative the authority to investigate and respond to foreign trade practices that violate trade agreements or disadvantage US commerce. After an investigation is complete, and if it affirms a trade partner’s unfair practices, the White House may impose tariffs on a range of products from that trading partner. However, it must first review petitions, hold public hearings, and issue findings before providing recommendations. In the past, this process has usually taken at least nine months. Unlike IEEPA, Section 301 duties cannot be applied instantly or without a comprehensive assessment.

Section 232 of the Trade Expansion Act of 1962 faces similar constraints in speed and scope. It gives the Commerce Department the authority to investigate whether the quantity or circumstances of specific imports pose national security risks, or could in the future. If such a risk is identified, the president can respond by imposing tariffs or quotas. Unlike Section 301, Section 232 authorizes tariffs on specific products from all US trading partners. While Section 232 involves fewer procedural steps than Section 301, it is limited in scope to products with national security implications. Notably, this limitation is flexible, as “national security” is broadly defined.

Meanwhile, Section 122 of the Trade Act of 1974 gives the president the authority to address significant balance-of-payments deficits through imposing temporary import tariffs of up to 15 percent. These tariffs can remain in place for 150 days unless extended by Congress. Actions must be applied on a nondiscriminatory basis to maintain the existing distribution of trade. However, the president can target specific countries by exempting others. Section 122 has never been used to levy tariffs and is clearly constrained in both duty level and the duration of measures.

Section 338 of the Tariff Act of 1930 allows the president to impose additional duties on countries engaging in discriminatory trade practices against the United States. These practices must uniquely disadvantage US exporters and not be universally applied. If applicable, the president may impose tariffs of up to 50 percent of the imported product’s value—and persistent discrimination may allow the blocking of all imports from the offending country. Section 338 has also never been invoked and is limited to responses to unfair trade practices.

Generating revenue and countering trade imbalances without IEEPA

It is worth remembering that Trump has wielded tariffs for four distinct purposes: to generate revenue, balance nontariff barriers imposed by trading partners, punish adversaries for practices often unrelated to trade, and serve as a negotiation tool. If the Supreme Court rules against Trump’s claim of unilateral power to impose tariffs, these objectives would be jeopardized, but not unachievable.

A majority of the additional tariff revenue collected, for instance, would theoretically need to be refunded to importers, potentially as a future credit. One alternative the administration could use to raise revenue in 2026 would be leveraging Section 301 to impose tariffs on major US trading partners such as China, Canada and Mexico (for goods not compliant with the United States-Mexico-Canada Agreement), and the European Union.

However, Section 301 cannot be used to generate revenue, only to counter unfair trade practices. Without linking tariffs to addressing unfair trade, these measures could be vulnerable to legal challenges if the Supreme Court rules that revenue-generating tariffs must originate in Congress. The White House initiated a Section 301 investigation on China in October and could pursue new investigations against other major trading partners. The graph below illustrates the US import value potentially exposed to Section 301 tariffs for the United States’ top ten trading partners if applying current IEEPA tariff rates. The White House clearly does not need global tariffs to raise revenue.

The administration could also expand Section 232 tariffs—as it is already likely to do on pharmaceuticals, critical minerals, and semiconductors. Thanks to the broad definition of national security, the White House has already expanded the lists of products subject to Section 232 tariffs to include many derivative products, such as bathroom vanities, which do not present obvious national security concerns. The value of US imports exposed to the Section 232 tariffs added just in Trump’s second term are already comparable to that of the IEEPA tariffs, suggesting that the revenue collected could also be comparable. 

To compensate for the 10 percent global baseline tariff, the administration could use Section 122 to levy up to a 15 percent baseline tariff on all economies with large and sustained trade deficits. This approach, however, rests on a weaker legal foundation than Sections 232 and 301 and would likely face court challenges.

Overall, the administration has sufficient tools at its disposal to achieve comparable tariff revenue in coming years, even if invoking IEEPA is no longer an option. 

Targeting unfair trade through Section 301 and sanctions

When it comes to using tariffs as a punitive tool for grievances, the administration has applied this tactic mostly to trade unrelated to IEEPA. For example, a 40 percent tariff was imposed on imports from Brazil due to “policies, practices, and actions of the Government of Brazil” threatening US national security, foreign policy, and economic interests. The United States also added a 25 percent tariff on imports from India because of its continued imports of Russian oil. This strategy is likely to falter without IEEPA, which allows tariffs to be applied instantaneously.

Using Section 301 could potentially replace this strategy with regard to country-focused actions, but it requires a comprehensive review and must address unfair trade practices. For countries such as Brazil, with which the United States maintains a trade surplus, defending such tariffs legally may be more difficult, although investigations are already underway. Moreover, the administration could also rely on traditional national security tools, such as sanctions, instead of tariffs.

The tariff regime may hold, but negotiating power could wane

Meanwhile, the administration’s use of tariffs as a negotiation tool would be substantially weakened without IEEPA. After all, even after deals are agreed upon, enforcement is critical. As US Trade Representative Jamieson Greer wrote in the New York Times, “the new U.S. approach is to closely monitor implementation of the deals and swiftly reimpose a higher tariff rate for noncompliance if needed.” The emphasis is on “swiftly reimpose.”

If the administration must rely on Section 301 or Section 232 to target economies or key industries, the penalty for noncompliance would be much slower than with IEEPA. Section 122 or 338 could be experimented with, but countries may perceive these alternatives as less credible, especially if the Supreme Court has already ruled against the administration regarding IEEPA. 

If the administration’s primary objective is to preserve tariff revenue and counter unfair practices, sections 301, 232, or 122 remain viable alternatives. While slower and more constrained, these tools can replicate the current tariff regime. However, if the goal is to secure new trade agreements or enforce compliance, the absence of IEEPA is likely to diminish both credibility and speed, weakening the administration’s negotiating power.

Sophia Busch is an associate director at the Atlantic Council’s GeoEconomics Center.

Trump Tariff Tracker

The second Trump administration has embarked on a novel and aggressive tariff policy to address a range of economic and national security concerns. This tracker monitors the evolution of these tariffs and provides expert context on the economic conditions driving their creation—along with their real-world impact.

The post The Supreme Court might slow Trump’s strategy. But he still has other tariff options. appeared first on Atlantic Council.

However, Beijing holds dry powder it has not yet deployed. China supplies most critical drug ingredients to the United States and ranks as the nation’s second largest source of finished critical pharmaceuticals. Despite deep distrust, US dependence on Chinese pharmaceuticals is growing.

The Trump administration’s ongoing investigation into pharmaceutical supply chain risks could reduce this dependence. Yet the one-year trade truce may delay implementation. And tariffs alone will not work. A third of generic active pharmaceutical ingredients (APIs) come from sole suppliers—many of which are in China. Without competition, these monopolists will raise prices rather than relocate. Washington must use the next year to negotiate pharmaceutical sector trade deals, replicating its critical minerals approach.

China’s pharmaceutical monopoly

China is the United States’ largest foreign supplier of critical pharmaceutical inputs by volume (39.9 percent of imports in 2024) and second largest source by value (16.8 percent). China employs distortive policies to achieve dominance across APIs, key starting materials (KSMs), and auxiliary chemicals. In 2008, Beijing designated pharmaceuticals a “high-value-added industry” and established subsidies and export incentives. Lax environmental protections and the world’s largest chemical industry have also let Chinese manufacturers undercut global competitors.

China holds near-monopoly control over certain critical pharmaceutical ingredients. One in four imported drug inputs comes from product categories where China controls at least three-quarters of US imports. For one in ten critical inputs, China’s market share exceeds 99 percent. The API for sulfonamide-class antibiotics—used to treat type 2 diabetes, high blood pressure, and HIV/AIDS—exemplifies this dependence, with nearly all US imports originating from China.

Chinese firms are even more dominant in the upstream components for APIs. Forty-one percent of key starting materials—the chemical building blocks used for API synthesis—come from China. China controls critical KSMs for major drug categories, including antibiotics. China also holds near-monopolies on essential auxiliary chemicals, including reagents and solvents for API synthesis. These upstream concentrations create obscure risks. Focusing on API suppliers while ignoring KSM and auxiliaries is like tracking bullet manufacturers while ignoring gunpowder suppliers.

Finished pharmaceuticals tell a similar story. While Mexico is the United States’ largest supplier by volume, China remains a key source of generics and bandages. In 2024, the United States relied on China for 99 percent of imported prednisone, a powerful anti-inflammatory; 92 percent of penicillin and streptomycin antibiotics; and 94 percent of first aid kits.

The risk extends to research and development. Beijing is building a formidable drug discovery engine by designating pharmaceuticals a strategic industry, showering the sector with state support. The results show in drug development pipelines. China leads the world in clinical trial starts and, in 2024, large pharmaceutical companies sourced nearly a third of external drug candidates from China. While China’s portfolio remains overweighted toward “me-too” molecules—refined versions of existing drugs—Beijing is prioritizing original, first-in-class (FIC) drugs. In 2024, China accounted for 24 percent of the world’s FIC drug pipeline, trailing only the United States.  

Three risks from China’s drug dominance

Overreliance on Chinese imports and innovation threatens US public health resilience in three ways: coercion, disruption, and capability loss.

China could leverage control over US drug supply chains during a major geopolitical conflict, like a trade war. China’s 2020 Export-Control Law and 2021 Biosecurity Law grant broad authority to weaponize pharmaceutical exports. Blanket bans, like the rare earth controls, are unlikely. Even the rare earth restrictions include carveouts for medical use. Still, Beijing could threaten pharmaceutical leverage during trade disputes. More worryingly, China could target the US military. A 2023 Pentagon study found that 27 percent of military drug purchases depend on China. Though unlikely, Chinese pharmaceutical coercion is a “nuclear option.”

Even without deliberate coercion, concentrated Chinese production creates acute vulnerability to accidents and policy shocks. When Shanghai locked down during the COVID-19 pandemic, GE Healthcare’s plant—which supplied 80 percent of the world’s iodinated contrast media—went dark. Hospitals worldwide rationed diagnostic imaging for ten months until production recovered. When a single facility or region controls global supply, any disruption—from disease, natural disaster, or manufacturing failure—can cripple the system.

The third risk extends beyond supply chains to future drug development. As Chinese firms climb the value chain, dependence shifts from manufacturing capacity to innovation capabilities. Last year’s record $41.5 billion in China-to-West licensing, a 66 percent jump from 2023, exacerbates risks of competitive erosion. Drug deals originating in China siphon revenue from US domestic research. Western teams lose essential skills as Chinese partners control trials and scale up for advanced therapies like bispecifics, mRNA, and CAR-T cell therapy. The semiconductor industry offers a stark warning. The United States let chip fabrication move offshore, lost critical process expertise, and is now spending hundreds of billions to rebuild what it surrendered. The pharmaceutical industry cannot repeat this mistake. Sustaining domestic drug discovery ensures the United States maintains technical capabilities for long-term scientific leadership.

Two tools to break China’s grip

Washington needs both protectionist and promotional policies to secure US pharmaceutical supplies. Section 232 tariffs on imports could push some API production out of China. US import rules treat the API source as the drug’s country of origin—even if another country completes final manufacturing. An Indian-made drug using Chinese APIs pays the Chinese tariff rate. Tariffs could be especially potent as China expands domestic manufacturing, dissuading downstream producers in India, Mexico, and the European Union (EU) from integrating Chinese production.

However, tariffs can’t break a monopoly. A third of generic APIs come from sole suppliers, including many across China, which face no competitive pressure to relocate. For many generic drugs, returns on new production facilities are too low and uncertain to bypass China. Firms may instead pass costs on to consumers, cut quality, or discontinue production. Beijing also understands its leverage as the global pharmacy and is defending market share by flooding countries with below-cost exports to cripple alternative suppliers. 

These dynamics require promoting domestic and allied production through sectoral trade arrangements. Washington’s recent critical mineral deals provide the template. Joint strategic stockpiles, price-support mechanisms, and targeted financing to accelerate production could strengthen medical trade and supply chain resilience among the EU, India, Mexico, and the United States while reducing their collective dependence on Beijing. Unlike tariffs, which cannot stop intellectual property flows, a pharmaceutical trade arrangement could include incentives to support US and allied research ecosystems.

The United States’ pharmaceutical dependence on China is a critical vulnerability. Beijing controls 40 percent of imported drug ingredients and holds monopolies on essential medicines. A one-year trade truce gives the United States runway to break this dependence. Washington must use that time wisely.

Methodology

Calculating pharmaceutical supply chain market share requires discretion and results in variability across estimates. Similar analysis differs in the unit of measurement; conflicting definitions of finished doses, APIs, KSMs, and other inputs; blending of up and downstream products; and extrapolations or mischaracterizations of China’s role in Indian supply chains. For a detailed analysis of the implications of different analytical choices, see Marta E. Wosińska and Yihan Shi’s Brookings paper surveying different estimates of US drug supply chain exposure to China.

This piece relied on the US Department of Commerce’s list of critical goods and materials to define inputs and final goods. Commerce defined inputs to include APIs, KSMs, auxiliary chemicals, and other feedstock essential to pharmaceutical production. Final goods included drugs, vitamins and supplements, and medical supplies. Notably, the Commerce Department’s list of critical final pharmaceuticals excludes certain, finished pharmaceutical products. For all pharmaceuticals (defined as HS 30), China’s share of US imports in 2024 was 13 percent by volume and 4 percent by value.

Unless otherwise noted, calculations were based on the author’s analysis of the Commerce Department’s list and US trade data regarding volume of trade. Volume-based exposure better captures supply risk because Americans mostly use cheap generic options, not expensive branded drugs.

Niels Graham is a contributor at the Atlantic Council and former policy analyst at the US-China Economic and Security Review Commission. He previously served as an associate director at the Atlantic Council GeoEconomics Center.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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Multilateral diplomacy, bilateral balancing

South Korea has played a special role in APEC’s history, from its establishment and expansion of diplomatic membership to the modernization of the forum’s economic agenda. South Korea last hosted the APEC summit in 2005 in Busan, where it championed the reduction of regional tariffs as a means of enhancing Indo-Pacific economic prosperity.

Twenty years later, however, the geopolitical system is marked by rising economic competition under an increasingly fractured global trade regime. To address these challenges, this year’s APEC meetings—under the banner of “Building a Sustainable Tomorrow: Connectivity, Innovation and Prosperity”—emphasized the necessity of regional cooperation, shared trade benefits, reinforced supply chain resiliency, and expanded regional science and technology innovation. Despite concerns over US-China economic competition, South Korea successfully convened twenty-one nations from across the Indo-Pacific region.

This year’s proceedings also included the first-ever APEC CEO Summit on October 29-31, which focused on expanding industry-to-industry relations. Gathering more than 1,700 business executives from around the world, the CEO Summit aimed to broaden APEC’s public-private partnerships across critical industries including on energy, digital and artificial intelligence (AI) transformation, trade, and biotechnology. Additionally, this year’s multilateral discussions concluded with the 2025 APEC Leaders’ Gyeongju Declaration, highlighting consensus on economic and technology cooperation and a shared “determination to build a region of peace and prosperity” in the Indo-Pacific.

Amid the rush of APEC meetings, South Korea also hosted a series of successful bilateral summits with world leaders, including US President Donald Trump for his second meeting with Lee, Chinese President Xi Jinping for his first visit to South Korea in eleven years, and recently elected Japanese Prime Minister Takaichi Sanae.

An emphasis on AI innovation

Building on August’s APEC Digital and AI Ministerial Statement, South Korea spearheaded international consensus-building for AI regulation and innovation at the summit. This culminated in the summit’s participants making cross-regional commitments laid out in the APEC Artificial Intelligence Initiative (2026-2030).

South Korea’s emphasis on science and technology innovation comes at a time when advances in AI are redefining traditional pillars of global economic cooperation and competition. Following the United States’ and China’s lead, South Korea has announced its own agenda for building a “sovereign AI” system and played an increasingly visible role as a convener of international fora on AI innovation and deployment.  

As a core pillar of Lee’s economic policy, South Korea has also launched new comprehensive support programs, targeting leading South Korean companies to advance industrial capacity-building and develop the domestic workforce needed to drive AI innovation. On the international stage, South Korea has emphasized the balancing of risk versus reward for AI innovation through multilateral platforms such as the Summit for Democracy in March 2024, the AI Seoul Summit in May 2024, and Responsible AI in the Military Domain (REAIM) Summit in September 2024.

However, despite global interest in AI development policy, the landscape for geopolitical cooperation on AI norms and regulations remains nascent. But the APEC AI Initiative marks the first documented agreement endorsed by both the United States and China—further demonstrating South Korea’s role in middle-power science and technology diplomacy.

US-South Korea trade deal and rising technology cooperation

Ahead of the APEC Leaders’ Summit, Trump and Lee met for the second time after months of tariff negotiations. During the first Trump-Lee Summit last August, Washington and Seoul failed to reach an official agreement to reduce US tariffs due to the fact that South Korea’s proposed $350 billion investment package remained relatively nebulous.

On October 29, however, following Trump and Lee’s meeting, South Korea announced the successful conclusion of an official US-South Korea trade deal. The deal reduced US “reciprocal tariffs” on the South Korean auto industry from 25 percent to 15 percent over the coming months. Based on the agreement, South Korea will invest $350 billion in critical US industries and markets—marking a stark increase from the $140 billion in promised foreign direct investment commitments the United States secured under the Biden administration. While $150 billion will go toward expanding US-South Korea cooperation on shipbuilding, Seoul has stated that the remaining $200 billion will be direct cash investments, capped at $20 billion annually, for future initiatives.

Additionally, the US-South Korea trade deal came amid a flurry of productive, industry-level memorandums of understanding (MOUs) on expanded technology cooperation signed between the two countries. Most notably, Nvidia CEO Jensen Huang pledged to provide more than 260,000 graphics processing units to Korean companies including Samsung Electronics, Hyundai Motor Group, and SK Group in support of South Korea’s domestic AI development.

Additionally, under the newly declared US-ROK Technology Prosperity Deal, both Washington and Seoul aim to expand cooperation on innovation for AI technology development and deployment. Under this deal, the two nations reasserted their commitments to “elevate the U.S.-ROK Alliance” through close collaboration on “developing pro-innovation AI policy frameworks.” Neither the APEC AI Initiative nor the US-South Korea AI-centered technology deal, however, broach the subject of AI regulations outright—unlike previous multilateral agreements such as the European Union’s AI Act or previous Group of Seven (G7) declarations on “safe, secure, and trustworthy” AI innovation.

Instead, the APEC AI Initiative aims to harness the “transformative potential of AI,” while “acknowledging member economies’ different approaches to their respective AI policies.” Moreover, the US-South Korea technology deal marks a bilateral restructuring of their shared AI development agenda, which is now focused mainly on pro-innovation policies in alignment with Trump’s domestic AI agenda.

The road ahead

South Korea’s hosting of the APEC Summit demonstrated successful leadership as a global convener, advancing US allies’ and partners’ engagement in the Indo-Pacific region and beyond.

By leveraging the forum’s multilateral platform, Seoul secured critical trade and technology outcomes, including expanded semiconductor supply chain partnerships, multilateral and bilateral frameworks on AI innovation, and joint initiatives to accelerate low-carbon energy initiatives and digital innovation. These outcomes reinforced South Korea’s strategic positioning as a pragmatic leader in shaping global technology norms and advancing economic resilience across the Indo-Pacific region.

Following the summit, however, the harder task will be to ensure successful implementation of the US-South Korea trade and technology deals. The two countries’ deepening cooperation on critical and emerging technologies offers an opportunity for them to strategically calibrate shared science and technology policy, which should be anchored in a mutually beneficial commitment to secure, transparent, and sustainable innovation ecosystems. As Washington and Seoul seek to integrate science and technology diplomacy into their broader economic security agendas, the durability of these frameworks will depend on the continued alignment of their policy priorities, public-private partnerships, and institutional cooperation.

Looking toward the future of US-South Korea relations, the outcomes from this year’s APEC summit signal a constructive trajectory for bilateral strategic science and technology engagement—one that aims to enhance strategic competitiveness in an increasingly complex geoeconomic and technological landscape.

Kayla T. Orta is a nonresident fellow in the Indo-Pacific Security Initiative at the Atlantic Council’s Scowcroft Center for Strategy and Security.

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Nine justices, one global economy-shaking case. The Supreme Court expressed skepticism of the Trump administration’s authority to use tariffs under the International Economic Emergency Powers Act (IEEPA) during oral arguments on Wednesday. The outcome of the case, which will be announced in the coming months, will have wide-ranging ramifications for the tariffs US President Donald Trump has enacted so far and his ability to levy them unilaterally in the future. How are the justices likely to rule? And what will their ruling mean for global trade? Our geoeconomics experts provide their arguments below.

• Stephanie Connor: Contributor at the GeoEconomics Center’s Economic Statecraft Initiative, partner at Holland & Knight LLP, and a former senior official with the Office of Foreign Assets Control 
• Josh Lipsky (@joshualipsky): Chair of international economics and senior director of the GeoEconomics Center, and former International Monetary Fund advisor 
• L. Daniel Mullaney: Nonresident senior fellow with the Europe Center and GeoEconomics Center, and former assistant US trade representative

What is the case about? 

• The Trump administration’s solicitor general faced “tough questioning” from the justices, Stephanie tells us, on whether IEEPA “authorizes the president to impose tariffs, a form of taxation generally reserved for Congress under Article I of the US Constitution.” 
• The justices, says Josh, were “concerned about the limits” of the “sweeping power” of tariff authority under IEEPA and “how it could be used by future presidents to justify any kind of tax if a president deemed a situation to be an ‘emergency.’” 
• This skepticism, says Dan, is “primarily because of tariffs’ revenue function,” since Article I states that Congress has the exclusive power to raise revenue.  The Trump administration’s “arguments that the IEEPA tariffs were ‘regulatory’ tariffs, and not ‘taxes,’” says Dan, “fell relatively flat.”

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What did we learn from the oral arguments? 

• What stood out most to Josh was “how aware the justices were of the practical and foreign policy implications of their decision.” The justices, Josh points out, brought up issues and policies their decision will impact, including Russia’s war in Ukraine and Trump’s tariffs on India and Brazil. “This is a court very aware of the geopolitics they may be about to disrupt with their decision.” 
• The justices, says Stephanie, “did not take the bait” when it came to the larger question of whether a president’s emergency declarations are subject to judicial review, showing “considerable deference to the executive branch on such determinations.” So “whichever way the justices decide this case, the decision is unlikely to call into question” the president’s authority to determine a national emergency, she says.
• Discussion of the potential refunds of tariffs if the court sides with the plaintiffs was “limited,” says Dan, “aside from Justice Amy Coney Barrett suggesting that it would be a ‘mess.’”
• Dan also finds it “significant” that all four of the “swing justices”—John Roberts, Brett Kavanaugh, Neil Gorsuch, and Barrett—had skeptical questions for the Trump administration. Only two of them would need to side with the court’s three liberal justices to overturn the tariffs. “It seems more likely than not that this could be a 5-4 or 6-3 decision,” he adds. 

What’s next?

• Even if the Supreme Court rejects or limits the president’s authority to levy tariffs under IEEPA, Dan points out that “the administration has many tools available to continue imposing tariffs on the grounds of national security, unfair trade practices, balance of payments, or discrimination against the United States.” 
• Nevertheless, says Dan, “losing the extreme flexibility that the administration has claimed under IEEPA would make it harder to move quite as quickly” to enact tariffs as it has in the past few months. 
• “The whole world was listening and thinking what it means for them,” Josh tells us of today’s oral arguments. “For both companies and countries, the answer is more uncertainty: When will the court rule? How will it rule? What back-up tariffs get put into place? When does that happen?” Being left with these unanswered questions, he adds, is a “challenging way to run a global economy.” 
• “This is not academic,” says Josh. “There are hundreds of billions of dollars on the line and the president’s trade agenda may hinge on the outcome.”

Trump Tariff Tracker

The second Trump administration has embarked on a novel and aggressive tariff policy to address a range of economic and national security concerns. This tracker monitors the evolution of these tariffs and provides expert context on the economic conditions driving their creation—along with their real-world impact.

The post How might the Supreme Court reshape Trump’s tariffs?  appeared first on Atlantic Council.

One year in, Sheinbaum has made clear that she is not defined by their legacies or actions. Her mandate, and that of her National Regeneration Movement (Morena) party is rare since Mexico’s democratization at the turn of the century. In the June 2024 elections, the president’s party unlocked a lower chamber supermajority and a Senate majority, giving Sheinbaum a rare latitude to enact her agenda. And a year into her term, her approval rating remains high—78 percent, according to an Enkoll poll released this month.

Domestically: Quick yet targeted wins

What’s behind this approval rating? For one, quick and targeted wins. Early in her administration, Sheinbaum secured several quick but meaningful gains with key constituencies. For example, she enshrined several social programs as constitutional rights and enacted the Pensión del Bienestar para Mujeres, which expands pensions to women aged sixty to sixty-four. Early this year, Sheinbaum implemented a 12 percent minimum wage hike, except in Mexico’s more industrialized northern states, which saw a smaller adjustment given their already-higher wages. This nearly nationwide minimum wage hike surpassed Mexico’s 3.76 percent inflation rate, meaning it actually improves the purchasing power of the population.

Internationally: Pragmatic yet similar to AMLO

On the international front, Sheinbaum’s foreign policy has been characterized by pragmatism and assertiveness, but also a continuation of AMLO’s stance on sovereignty—that Mexico should adopt a policy of nonintervention in other countries’ affairs except for when their foreign policy priorities align. By many measures, she has successfully dealt with Trump. In comparison to her regional peers, such as the presidents of Brazil and Colombia, she has avoided major public clashes with her northern neighbor, keeping the relationship on track. 

By participating in newly created working groups, Mexico and the United States have deepened cooperation on security issues, especially counternarcotics. She has also made modest moves to highlight Mexico’s global role through her participation in international fora, including the Group of Seven (G7) summit in Canada, the Group of Twenty (G20) summit in Brazil, and Community of Latin American and Caribbean States meeting in Honduras.

Trade and tariffs

On the commercial front, perhaps her most notable move is her proposal to raise tariffs on almost 1,500 product classifications, including footwear, apparel, toys, and steel and aluminum, targeting non–free trade agreement countries such as China, India, and South Korea. While the proposed tariffs have been framed as a way to protect domestic industries, they have injected uncertainty into Mexico’s investment climate just months before the 2026 United States-Mexico-Canada Agreement (USMCA) review. Furthermore, recent statements by officials at the Economy Secretariat have emphasized that these proposed tariffs will depend on the results of negotiations between the United States and China, underscoring Mexico’s vulnerability to external trade policy.

What she hasn’t (yet) delivered

As many politicians have learned, past performance is no guarantee of future success. Sheinbaum still has five years left in her term, and a number of items remain on her to-do list, especially on the economic and security fronts, two of the Trump administration’s top priorities in the Western Hemisphere. 

On the economic front, Sheinbaum’s strategy has largely followed a model she describes as “Mexican humanism and social justice,” which has focused on welfare and direct cash transfer programs. These programs now represent an investment of 3 percent of the country’s gross domestic product. According to the president’s State of the Nation address in September, this has lifted 13.4 million people out of poverty since 2018—a key goal of AMLO’s “Fourth Transformation” campaign to reduce inequality. While unemployment has remained low at 2.6 percent and the government has attempted to shield consumer prices from significant increases through its program to combat food price inflation and scarcity, factors such as trade and tariff uncertainty have resulted in overall tepid economic growth. The International Monetary Fund projects that Mexico’s economy will grow 1 percent this year, far below the 2.4 percent growth for the Latin America and the Caribbean area overall.  

Industrial activity indexes in Mexico continue to exhibit a slowdown, and gross fixed capital investment has steadily declined over the past nine months, despite foreign direct investment reaching historic highs. Whether “Plan Mexico”—Sheinbaum’s core long-term economic growth strategy focused on private investment across fifteen development hubs—has the power to reverse negative trends and turn moderate outcomes into significant wins could shape the economic legacy of her administration. 

The security front, historically a challenge for Mexico and among the top priorities in the bilateral relationship with the United States, has also been marked by modest achievements amid a turbulent backdrop. Sheinbaum’s security strategy hinges on four pillars—addressing root causes of crime, strengthening the National Guard, increasing investigations and intelligence, and coordinating between state and local institutions. The National Guard, however, has become the key pillar, especially since control of the force was transferred to the Defense Secretariat, turning the formerly civilian force into the fourth military branch the day before Sheinbaum’s inauguration. The president now credits this move, coupled with community-based projects such as “Peace Fairs and Brigades,” with the 25.3 percent reduction in homicides and 20.8 percent national reduction of “high-impact crime.” 

While increased arrests, drug and arms seizures, the dismantling of clandestine labs, and cooperation with the United States on surveillance flights have resulted from the security strategy, questions remain regarding how much these achievements have actually disrupted organized criminal networks. Homicides are down, but the number of missing people has increased by over 31 percent since 2022. The Defense Secretariat’s budget will be raised by 2.9 percent per the 2026 fiscal package, but the Secretariat for Security and Citizen Protection will lose 18.6 percent of its funding. The government is cracking down on transnational criminal organizations, but 63.2 percent of urban citizens still perceive their city as unsafe. The security realm remains ridden with contradictions, as territorial gains are scant and easily lost, creating vast opportunities for the Sheinbaum administration to refine its strategy over the next five years.

What to watch in year two and beyond

Beyond continuing the initial momentum on the economy, and building on some initial trade and security improvements, the Sheinbaum administration will face several important tests in the coming year that will start to determine her legacy. The most obvious one is the USMCA review, especially given Trump’s recent assertion that US trade talks with Canada are terminated.

On security, the big questions are whether US-Mexico coordination on fentanyl, counternarcotics, and arms trafficking deepens—via new and existing working groups or other mechanisms—and whether Sheinbaum is able to maintain that cooperation on Mexican terms, meaning with a limited foreign operational footprint. How she balances these two priorities, while maintaining her approval ratings, will bear direct consequences at home and abroad.

María Fernanda Bozmoski is director, impact and operations and Central America lead at the Adrienne Arsht Latin America Center at the Atlantic Council. 

Valeria Villarreal Martinez is an assistant director at the Atlantic Council’s Adrienne Arsht Latin America Center.

The post How long can Sheinbaum keep her first-year momentum going in Mexico? appeared first on Atlantic Council.

Is it a breakthrough, or just a break? US President Donald Trump said that he and Chinese President Xi Jinping reached agreement on “almost everything” in their meeting in Busan, South Korea, on Thursday. This included a one-year tariff truce, a reduction in overall US tariffs on Chinese goods, and a temporary pause on some new Chinese restrictions on rare-earth exports. “Almost everything,” however, did not include the fate of the social media app TikTok or larger questions around China’s market-distorting economic policies. Will the summit build momentum for a further reduction in US-China tensions? And how does Beijing view the meeting’s outcomes? Our experts break through the noise below.

• Josh Lipsky (@joshualipsky): Chair of international economics and senior director of the GeoEconomics Center, and former International Monetary Fund advisor 
• Reed Blakemore (@reed_blakemore): Director of research and programs at the Global Energy Center 
• Melanie Hart: Senior director of the Global China Hub and former senior advisor for China in the State Department’s Office of the Undersecretary for Economic Growth, Energy, and the Environment 
• Markus Garlauskas (@Mister_G_2): Director of the Indo-Pacific Security Initiative at the Scowcroft Center for Strategy and Security and former National Intelligence Council official 

What they agreed to

• The summit, Josh tells us, “delivered real results.” Beijing succeeded in getting tariff rates reduced to similar levels as its Asian neighbors, which he says is a “a welcome victory” for China’s struggling economy. Meanwhile, China agreed to resume importing US soybeans, which Josh says “will alleviate some of the pressure the administration had been feeling from farmers.” 
• Trump, Reed says, “secured an important pause in China’s exploitation of its leverage in rare earth element supply chains,” adding that Beijing’s agreement to roll back export controls for a year “provides some urgently needed relief” to the United States. 
• The meeting offered “no surprises,” Melanie points out, with expected outcomes such as China putting forward initiatives to crack down on fentanyl precursors that “it offered earlier this year” and the United States “ratcheting down tariffs accordingly.” 

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Remaining concerns

• The deal should be treated as “a moment of relief, but not a solution,” Reed tells us. This is because China was able to use export restrictions as a “valuable lever in trade negotiations” and can be expected to use this same tactic again. 
• Even with the one-year truce in place, “the scale of supply chain influence China displayed,” restricting not just raw materials but also manufactured components, says Reed, “will likely remain a source of uncertainty for the private sector.” 
• Even the “wins” from the summit “just get us back to where we were before the US-China trade wars of the spring,” says Josh, who notes that “China still faces higher tariffs than it did when Trump came into office,” and many of the thorniest issues in the bilateral relationship were left undiscussed. 
• This includes the issue of Taiwan, which according to Trump, Xi did not bring up at all during the meeting. While there may now be a truce of sorts on trade, Markus says, “there is no ‘truce’ in the ongoing struggle for the future of Taiwan.” 
• “The Chinese Communist Party’s intimidation campaign to subjugate” Taiwan will continue, Markus tells us in between meetings in Taipei. However, despite concerns that the United States would go wobbly, “it also seems that Washington’s support for maintaining the status quo of Taiwan’s self-rule will do so as well.” 

What’s next?

• “China and the rest of the world will be watching” next week’s Supreme Court hearing on the challenges to Trump’s tariff authority, says Josh. But whatever the court decides, he adds, “Trump won’t fully relinquish what he sees as the best tool in his economic arsenal—and that means a trade truce is likely the best either side can hope for in the near future.” 
• Reed expects the Trump administration to “continue to aggressively pursue supply chain partnerships” such as the ones brokered with Australia and Japan, and that there will be renewed interest among the Group of Seven (G7) to better coordinate supply chain security during meetings this week. If Washington fails to do this, Reed warns, “negotiating with Beijing to secure these brief moments of supply chain relief will become the norm.”
• One “major win” for Beijing coming out of the meeting, says Melanie, lies in next year’s scheduled US-China talks. “China’s biggest concern with Trump is his unpredictability, and Beijing is using an extraordinary lineup of pre-scheduled 2026 meetings to box him in,” she writes. “Trump’s planned visit to Beijing in April,” says Melanie, “gives China the opportunity to script the next interaction and to press for a new wave of US concessions over the coming months.” 
• While Chinese leaders “know exactly what they want ahead of these 2026 summits” with the United States, says Melanie, “there is still no indication that the US side has the same strategic clarity. The White House will need to prioritize developing it—fast.” 

The post Trump and Xi brokered a truce in the trade war. Will it hold? appeared first on Atlantic Council.

Click to jump to an expert analysis:

Josh Lipsky:  A trade truce, if they can keep it

Matthew Kroenig: This relationship will get worse before it gets better

Melanie Hart: Beijing is wielding the power of the calendar to its advantage 

Jeremy Mark: China has the advantage as talks continue—and the US risks losing the leverage it has

Tressa Guenov: The US needs to up its game to counter Chinese espionage

Markus Garlauskas: With “Taiwan is Taiwan,” Trump dispels fears he will fold to Xi on Taiwan

Reed Blakemore: The G7 must be ready for China to try this export control tactic again

Kit Conklin: A floor for the US–China trade relationship—for now

Joseph Webster: Promises of an Alaska-to-China energy acceleration may be overblown 

Dexter Tiff Roberts: Even the biggest victories from the meeting could prove hollow

A trade truce, if they can keep it 

The long-awaited meeting between Trump and Xi delivered real results—and a lot of stepping back from ledges both sides created over the past year. China walks away with approximately the same tariff rate as most of its Asian neighbors, a welcome victory that will ensure its exports continue to provide ballast to a struggling domestic economy. The United States gets soybean purchases, which will alleviate some of the pressure the administration had been feeling from farmers—as a bipartisan vote against tariffs in the Senate showed this week. Key questions surround China’s one-year pause on rare earth export controls, including whether US allies will get the same exemption. Europe will be trying to negotiate a similar arrangement this week, but without the tariff leverage Trump has wielded effectively.  

Meanwhile, it appears at least at this point there is no loosening of US export controls on high-end chips, something that was rumored throughout the day yesterday and created fears in Washington (as well as London, Tokyo, and Brussels) that China would be able to supercharge its artificial intelligence (AI) capabilities.  

But many of these wins just get us back to where we were before the US-China trade wars of the spring. In fact, China still faces higher tariffs than it did when Trump came into office. And many of the most difficult issues in the relationship were left to be discussed another day. But will that day come? As we’ve seen over the past six weeks, it only takes one misstep or misinterpretation on either side for another round of tit-for-tat escalation and a full-blown trade war between the world’s largest economies.  

Next week brings a critical Supreme Court hearing on the challenge to the president’s tariff authority—the very authority he’s used to levy tariffs on China and dozens of other countries. China and the rest of the world will be watching closely. But no matter what happens, Trump won’t fully relinquish what he sees as the best tool in his economic arsenal—and that means a trade truce is likely the best either side can hope for in the near future. 

—Josh Lipsky is the chair of international economics at the Atlantic Council and the senior director of the Atlantic Council’s GeoEconomics Center. He previously served as an advisor at the International Monetary Fund.

This relationship will get worse before it gets better 

The United States and China are locked in what will likely be a decades-long rivalry that includes significant economic, technological, ideological, diplomatic, and military dimensions. Whether China buys a “tremendous amount of soybeans” is not the central issue and will not resolve the significant underlying issues at dispute between Washington and Beijing. 

As just one example, shortly before meeting with Xi, Trump made an unspecified threat to start nuclear testing in response to the nuclear activities of China and Russia. It is unclear whether Trump meant nuclear explosive tests (which the United States has not done in decades) or the testing of nuclear delivery systems (which the United States does regularly). 

Either way, expect the bilateral relationship to get worse before it gets better.  

—Matthew Kroenig is vice president and senior director of the Atlantic Council’s Scowcroft Center for Strategy and Security and the Council’s director of studies.

Beijing is wielding the power of the calendar to its advantage

The Trump-Xi meeting in Beijing delivered no surprises. As expected, China is rolling out the fentanyl measures it offered earlier this year, and the US side is ratcheting down tariffs accordingly. Both sides are pausing planned measures, with more clarity on the US side than the Chinese side on what that pause really means. China maintains the ability to yank back every concession it provided to the United States.  

The real story is a forward-looking one, and a major win for Beijing: China’s biggest concern with Trump is his unpredictability, and they are using an extraordinary line up of pre-scheduled 2026 meetings to box him in and force a degree of, if not quite predictability, at least plannability in US-China relations. We now know what 2026 will look like. Trump plans to visit Beijing in April, and Xi will visit the United States for the Group of Twenty (G20) summit in December (or at least dangle the possibility of that visit). The next fourteen months will be consumed with preparations for those two meetings. Moreover, Trump’s planned visit to Beijing gives China the opportunity to script the next interaction and to press for a new wave of US concessions over the coming months to lay groundwork for a “good” meeting. A similar dynamic will play out next fall.   

Chinese leaders are strategic, and their diplomats are strong. Just as in the run-up to this week’s meeting, they will know exactly what they want ahead of these 2026 summits, and exactly where their red lines are. There is still no indication that the US side has the same strategic clarity. The White House will need to prioritize developing it—fast. 

—Melanie Hart is the senior director of the Atlantic Council’s Global China Hub.

China has the advantage as talks continue—and the US risks losing the leverage it has 

The relatively bland readout issued by China’s Ministry of Foreign Affairs after the meeting contained one profound understatement attributed to Xi: “China-U.S. economic and trade relations have experienced ups and downs recently, and this has also given the two sides some insights (italics mine).” For Xi, one core insight since Trump launched his campaign of punitive tariffs and export controls against China has been how much leverage his country has over the US economy and the US president himself. Beijing’s tight grip on rare-earth exports revealed the depth of US industrial vulnerability in a globalized economy. And the cutoff of Chinese soybean purchases underscored Trump’s own political exposure at a moment in which polls reveal Americans’ deepening unhappiness with the state of the economy. 

However the White House chooses to portray the agreement in the coming weeks, there is no avoiding the fact that Beijing has tremendous advantages in the ongoing negotiations. The United States certainly still has its own leverage with China—especially in the realm of advanced semiconductors. But with semiconductor powerhouses such as Nvidia pressing the Trump administration to loosen controls on chip exports and China making rapid gains in the field, that US advantage could quickly evaporate. 

—Jeremy Mark is a nonresident senior fellow with the Atlantic Council’s GeoEconomics Center. He previously worked for the International Monetary Fund and the Asian Wall Street Journal.

The US needs to up its game to counter Chinese espionage 

Spying was not front and center at the meeting between Xi and Trump—at least according to the public readouts—but this should be an opportunity for Trump to take a clear and redoubled stance against China’s pernicious espionage activities and information operations against the United States and its allies. That adversaries spy on each other is, of course, not news (China recently accused the United States of a breach of its systems), but the diffuse nature of the Chinese espionage threat remains a serious challenge to US national and economic security that the Trump administration must address along with traditional trade and economic issues.  

On any given day, it is reasonable to assume that China is almost certainly conducting multiple espionage attacks or operations against US national security infrastructure, personnel, or other critical infrastructure. There are hundreds of open-source documented cases of traditional espionage by China or its apparent agents in recent decades. On the cyber side, massive Chinese telecommunications breaches such as Salt Typhoon—assessed by multiple US agencies to be ongoing to this day—may have netted data from every single American and affected some eighty countries worldwide, according to experts. China’s sustained cyber breaches of US water, energy, transit, and other critical infrastructure systems are also well documented.  

It is not hard to imagine China’s potential disruptive or coercive intentions with those infiltrations in the event of a military contingency or diplomatic crisis. China’s vast spying is not new, but AI’s exponential acceleration raises the stakes for the Trump administration. The Trump-Xi meeting is a reminder that the United States is behind and needs to up its game now against a determined and effective foe. 

—Tressa Guenov is the director for programs and operations and a senior fellow at the Scowcroft Center for Strategy and Security. She previously served as the principal deputy assistant secretary of defense (PDASD) for international security affairs in the Office of the Under Secretary of Defense for Policy.

With “Taiwan is Taiwan,” Trump dispels fears he will fold to Xi on Taiwan

TAIPEI—For days leading up to the summit, some commentators took it as a given that Taiwan would be on the agenda, while highlighting the risk that Xi would seek to use trade issues as leverage to extract concessions from Trump on Taiwan. Their speculation appeared to be validated when a Chinese government spokesperson warned just a day before the meeting that China would not rule out the use of force to bring Taiwan under its control—an ominous formulation that was not new, but a departure from a softer tone that Beijing had struck days before.

Meanwhile, international media reporting was rife with worries that Trump might change the US position on the status of Taiwan, even citing the fears of unnamed officials in the White House, despite Secretary of State Marco Rubio having already dismissed the idea of Taiwan being a bargaining chip in the talks. Taipei wisely played it cool, with Foreign Minister Lin Chia-lung projecting confidence and dismissing these fears as unfounded.

Then, when Trump himself was pressed by a reporter not long before the meeting, he also spoke dismissively: “I don’t know that we will even speak about Taiwan . . . There’s not too much to ask about. Taiwan is Taiwan.” After the summit, Trump related that “Taiwan never came up,” suggesting that Xi hesitated, perhaps realizing that he did not have the leverage to get his way. 

Though there may now be a “truce” of sorts on trade, as Josh Lipsky assesses, there is no “truce” in the ongoing struggle for the future of Taiwan. The Chinese Communist Party’s intimidation campaign to subjugate the small, but strategically key, island democracy will therefore continue. Fortunately, it also seems that Washington’s support for maintaining the status quo of Taiwan’s self-rule will do so as well.

—Markus Garlauskas is the director of the Indo-Pacific Security Initiative of the Scowcroft Center for Strategy and Security.

The G7 must be ready for China to try this export control tactic again 

Trump returns to Washington having secured an important pause in China’s exploitation of its leverage in rare earth element supply chains. An agreement to walk back China’s export controls to pre-September 29 levels for one year provides some urgently needed relief.  

Yet while a cooling of temperatures in the rare earth supply chain is critical, there is a lesson to be learned in how China used export restrictions as a valuable lever in trade negotiations. Not only can one expect Beijing to use a similar tactic should US-China trade tensions resurface over the course of the next year, but it appears for now that the walk back applies strictly to the United States, with Europe and other Western partners still exposed to Beijing’s supply chain leverage as they negotiate their own deals. Further still, the scale of supply chain influence China displayed earlier this month by implementing export controls well beyond raw ores and precursors to manufactured components will likely remain a source of uncertainty for the private sector. The durability of this temporary pause and the subsequent risks of supply chain controls emerging once more will remain a top-of-mind issue.  

This underscores the need to treat this deal as a moment of relief, but not a solution. Expect this administration to continue to aggressively pursue supply chain partnerships such as those recently announced with Australia and Japan. Meanwhile, as Group of Seven (G7) energy ministers meet this week in Toronto, critical mineral supply chains will be at the top of the agenda, with ambitions to better coordinate supply chain security among the G7 members becoming a major priority. If the G7 can find the right mix of coordinated investment, trade tools, and market supports, the opportunity for true supply chain resilience is possible. Otherwise, negotiating with Beijing to secure these brief moments of supply chain relief will become the norm—and come at the expense of a number of other priorities in the US-China relationship.  

—Reed Blakemore is director with the Atlantic Council Global Energy Center, where he is responsible for the center’s research, strategy, and program development.

A floor for the US–China trade relationship—for now 

Welcome to the new era of supply chain warfare, where geoeconomics are the frontlines of great power competition. The new US–China trade deal is a temporary cease-fire, not détente. Beijing has agreed to suspend its planned export controls on rare-earth elements—a move that had threatened to severely disrupt global manufacturing and reaffirmed China’s dominance in critical mineral supply chains. In exchange, Washington has paused the expansion of export restrictions on Chinese subsidiaries and eased select measures targeting the maritime, logistics, and shipbuilding sectors.   

The deal sets a temporary floor for the US–China trade relationship, restoring a measure of predictability for industries navigating two competing economic systems. Yet it leaves the structural imbalances of that relationship largely intact. China retains significant leverage over rare-earth refining and processing, while the United States will continue to deploy economic security tools to safeguard control over critical and emerging technologies. These enduring realities point toward the eventual return of trade and national security barriers that will surpass the scope of this agreement. For example, there is no scenario in which the US Department of Defense and US defense industrial base should rely on China for critical minerals, even if Beijing’s export controls are delayed for twelve months.   

As the Trump administration recalibrates its economic security strategy, both sides are likely to reimpose targeted restrictions—driven less by market efficiency than by strategic necessity. In the months ahead, the contest will continue to unfold in the gray zone between trade and security, where control over supply chains increasingly defines hard power. Global policymakers and industry leaders should prepare for renewed volatility in the year ahead. 

—Kit Conklin is a nonresident senior fellow at the Atlantic Council’s GeoTech Center.

Promises of an Alaska-to-China energy acceleration may be overblown 

Many in the energy community will breathe a temporary sigh of relief at Beijing’s pausing of critical mineral controls for a year. But elsewhere, the Trump-Xi meeting in Busan produced more sizzle than steak. 

Trump stated that “a very large scale transaction may take place concerning the purchase of Oil and Gas from the Great State of Alaska.” There are many reasons to be skeptical that a transaction will occur, or that it will be large-scale, however.  

Even if such an oil deal materializes, it would be insignificant: Alaska produced only 421,000 barrels per day of crude oil in 2024, or 3 percent of total US output. Any deal with China over Alaskan crude won’t materially impact the US oil and gas complex.  

China is also very unlikely to make large purchases of Alaskan liquefied natural gas (LNG). While an Alaskan project would enjoy advantages due to lower shipping distances and canal fees, industry analysts at Rapidan Energy hold that the Alaskan LNG project is not viable, as the second phase alone is projected to cost sixty billion dollars. That’s because Alaska lacks the infrastructure to compete with other players, such as US Gulf Coast states. Alaska has limited natural gas production, challenging geography, a small labor pool, and would require a long greenfield pipeline plus imported steel for both the pipeline and liquefaction facility. 

Additionally, China never fulfilled its “Phase 1” purchase commitments, including for LNG, in a prior iteration of the trade war. US-to-China LNG shipments may well rise in the coming months and years, but they will be determined by market factors such as supply and price, not optics. 

—Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center, a nonresident senior fellow at the Atlantic Council’s Indo-Pacific Security Initiative, and editor of the independent China-Russia Report.

Even the biggest victories from the meeting could prove hollow

A temporary trade truce with no real breakthroughs. That’s the best characterization of the first Xi-Trump face-to-face meeting since 2019.

That hasn’t stopped the US president from trying to spin it as a grand success, calling the meeting “amazing” and rating it a “twelve” on a scale from one to ten, speaking to reporters on the plane back to Washington. Even in his introductory comments before discussions began, Trump exuded positivity, calling Xi “a great leader of a great country” and a “great friend.”

Xi had a much less enthusiastic demeanor, barely smiling during the meeting. And when he stressed the importance of cooperation, he also cautioned that the two countries must avoid “falling into a vicious cycle of mutual retaliation.”

Xi’s most transparent attempt to make nice was his comment that China’s development “goes hand in hand” with the US president’s “vision to ‘make America great again.’”

The biggest victories—Beijing delaying for a year its plans to radically expand its controls over rare earths and Washington postponing plans to implement the “50 percent rule,” a move that would have put sanctions on a far larger list of Chinese companies by including their subsidiaries—could prove hollow.

The United States can always sanction new companies. And the rare earth licensing rules that Beijing put in place earlier this year haven’t gone away, which allows China to slow-walk permits for exports once again. Other supposed victories, such as China’s promise to purchase soybeans, just return things to the status quo of the last few years.

Finally, Trump’s comment that Chinese officials would be talking more to Nvidia going forward, and that Washington would only serve as a “referee,” hinted of a possible further loosening of restrictions on the sale of advanced semiconductors, which would be a huge win for Beijing.

— Dexter Tiff Roberts is a nonresident senior fellow at the Atlantic Council’s Global China Hub and the Indo-Pacific Security Initiative, which is part of the Atlantic Council’s Scowcroft Center for Strategy and Security. He previously served for more than two decades as China bureau chief and Asia News Editor at Bloomberg Businessweek, based in Beijing.

The post Experts react: What does the Trump-Xi meeting mean for trade, technology, security, and beyond? appeared first on Atlantic Council.

Online Event Tue, October 28, 2025 • 5:30 pm ET

Congressman Raja Krishnamoorthi on the Trump-Xi meeting and a strategy for China

AN #ACFRONTPAGE EVENT—Ahead of the Trump-Xi meeting, US Congressman Raja Krishnamoorthi, ranking member of the House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party, shares his views on the trajectory of the US-China relationship and his vision for a winning US strategy amid global competition.

China Economy & Business National Security Politics & Diplomacy

US President Donald Trump “has leverage” with Chinese President Xi Jinping, said US Congressman Raja Krishnamoorthi (D-IL). “He needs to be able to use it.” 

Krishnamoorthi spoke at an Atlantic Council Front Page event on Wednesday, ahead of Trump and Xi’s meeting in South Korea, saying that he hoped Trump would “show strength” at the meeting and use his leverage to “curb” certain Chinese Communist Party (CCP) practices. He pointed to Beijing’s dumping practices, intellectual-property theft, and use of forced labor—practices he said allow China to monopolize markets, then wield that power “as a source of coercion for other purposes.” 

The congressman argued that the US president “has some trump cards” that can help in negotiations, the biggest card being US market access. “The CCP desperately wants access to the American market,” noted Krishnamoorthi, who is also the ranking member of the House Select Committee on the Chinese Communist Party. 

But Trump shouldn’t grant complete access, Krishnamoorthi cautioned, particularly when it comes to high-end semiconductors. “We should do everything in our power to maintain restrictions . . . on the export of those semiconductors,” he warned, because of the technology’s role in military tools and surveillance. 

Below are more highlights from the conversation, moderated by Matthew Kroenig, vice president and senior director of the Atlantic Council’s Scowcroft Center for Strategy and Security, in which Krishnamoorthi outlined the outcomes he’d like to see from the meeting and his take on US policy toward China.

Triple play

• Krishnamoorthi said that there are three “wins” on the table for Trump to take. One would be “stability in the trading relationship,” such that, for example, “farmers here in Illinois aren’t seeing zero purchases of their soybeans” by China. 
• “Another win,” he continued, “would be making sure that we do something about their practice of dumping.” 
• One final win, according to Krishnamoorthi, could be “concrete steps to lower the export of fentanyl precursors, which are fueling our fentanyl epidemic in the United States.” 
• Krishnamoorthi said that if Trump can reach some sort of deal on TikTok, he should make sure it abides by the law passed last year by Congress that mandates ByteDance own less than 20 percent of the new entity taking ownership of the social media app in the United States. 
• The congressman said that he thinks Xi will offer up “massive new investments in the United States,” but warned that if such deals get finalized, the Committee on Foreign Investment in the United States (which screens such investments) “needs to work better.” He suggested legislation to “beef that up” and “make it more efficient and effective.”

Show of strength

• Krishnamoorthi warned that Trump should be careful not to “sell out” US allies—including Taiwan, Japan, South Korea, and the Philippines—in pursuit of any deal. “Our superpower,” he said, relies on “our alliances, friendships, and partnerships in the region.” 
• Taiwan, he added, should be “off the table” as a topic of discussion, and Krishnamoorthi advised the president to remain “firm” in maintaining the One China policy and sticking to the United States’ Six Assurances to Taiwan. 
• Krishnamoorthi added that he is “concerned” about how the United States is “lowering” its “deterrence” against the CCP’s methods of aggression. For example, he pointed to US delays on the shipments of arms to Taiwan and reports that the Trump administration told the Taiwanese president not to transit through the United States earlier this year. 
• “We are basically signaling to the CCP and to Xi Jinping that somehow our commitments to stability in the region and our commitments to Taiwan are wavering,” the congressman warned. 
• “Xi Jinping is no slouch, and we have to expect that he is going to try to take advantage of any weakness that we might show either in what we say or what we do,” he said. 

What US policy is getting wrong on China

• Krishnamoorthi warned that Trump’s Liberation Day tariff announcement “was a disaster” because, in addition to starting a trade war “we weren’t ready for,” it “pushed our friends, partners, and allies away.” 
• The congressman also raised questions about the US approach to the technology race with China, arguing that the Trump administration’s health and science funding cuts and measures to limit immigration, including of highly skilled individuals, “are basically hurting our technology ecosystem in a profound way.” 
• “Our [tech] leadership is eroding because we’re not investing in ourselves,” he argued. “The CCP notices that, and that’s in part why they’re trying to poach talent from us” in the form of a new specialized visa, he added. “We’ve got to fix that . . . It’s vital for winning the strategic competition with the CCP.” 

Katherine Golden is an associate director of editorial at the Atlantic Council.

Watch the event

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On October 29, Matthew Kroenig, Atlantic Council vice president and Scowcroft Center senior director, was quoted in The Hill on President Trump’s meeting with Chinese President Xi Jinping. He argued a more comprehensive economic strategy for China is needed beyond short-term summit talks.

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Matthew Kroenig

Vice President and Senior Director, Scowcroft Center for Strategy and Security

Scowcroft Center for Strategy and Security

China Defense Policy

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All of this was telegraphed over the past few months as the Chinese Communist Party prepared for this week’s fourth plenum of its Central Committee. While the initial headlines in foreign coverage from the meeting focused on the purge of several senior military and provincial officials, the communiqué, true to form, focused on the achievements of the last five-year plan and the party’s vision for the next half decade. It was, as is typical, short on details of how the blueprint will be implemented or funded. Those policies supposedly will be elaborated in legislation to be presented to the National People’s Congress at its annual gathering in early 2026. But overall, the “key tasks” in the document were remarkably similar to those outlined in 2021, at the beginning of the last five-year plan, as Gerard DiPippo of the RAND Corporation outlines in a table comparing the two.

All of this is good news for sectors of the Chinese economy that are at the heart of the government’s focus on “high-quality development” and “self-reliance and self-strengthening in science and technology.” This policy has driven China’s very successful drive to global leadership in green technologies, such as solar power and electric vehicles, and its dominance of strategically important rare-earth supply chains. Now Beijing will aim to extend those achievements into such fields as advanced semiconductors, biotechnology, and quantum computing.

It is also good news for a vast range of Chinese manufacturers that have helped power China’s rise into an export powerhouse over the past generation but are now worried about their place in an economy facing massive industrial overcapacity, slackening domestic demand, falling producer prices, and anemic profits. The plenum demonstrates that Beijing’s ambitions now extend beyond cutting-edge industries to those threatened with decline. It is necessary to “maintain a reasonable proportion of manufacturing,” the plenum communiqué declares. “It is necessary to optimize and upgrade traditional industries.” Reading between the lines, the leadership is signaling to struggling manufacturers—and local governments that often support them—that it has their backs. 

That support was highlighted by a front-page article during the plenum in the People’s Daily, the government’s mouthpiece, that highlighted visits that Chinese President Xi Jinping has made to “traditional” manufacturers in recent months to inspect their upgrading efforts. “The real economy cannot be lost,” Xi is said to have declared during one factory visit.

Such high-level support can only mean bad news for China’s trading partners, because they now will bear the impact of an increasing reliance on exports. That prospect will add greater weight to next week’s scheduled meeting in South Korea between US President Donald Trump and Xi. 

As China’s economy has slowed over the past few years, its exports have surged to the point that its global trade surplus may hit a record $1.2 trillion this year, nearly double its $676 billion surplus in 2021. This flood of exports has come at a moment when US demand for Chinese goods has dropped sharply because of trade tensions and Trump administration tariffs—all of which translates into sharp increases in shipments to other countries. As a result, many governments are feeling pressure from their own manufacturers to take action against Chinese exports, with Mexico threatening to impose automobile tariffs. A continuing Chinese export surge—powered by increased government support—could be devastating to manufacturers in countries lower down the development ladder that have been trying to occupy market niches that uncompetitive Chinese companies might be forced to abandon.

The other loser from the plenum would appear to be the Chinese consumer, whose struggles have been mounting since the COVID-19 pandemic hit China in 2020 and government policies pulled the rug out from under the property market in 2021. The government’s harsh lockdowns during the pandemic undermined consumer confidence, and the collapse of the property bubble wiped out considerable household wealth. Joblessness—especially among millions of recent college graduates—has mounted, and many working- and middle-class people have struggled to make ends meet. The communiqué this week states that the government “must promote high-quality and full employment, improve the income distribution system, provide education that satisfies the people, strengthen the social security system, promote high-quality development of the real estate industry, accelerate the development of a Healthy China, promote high-quality population development, and steadily advance equalization of basic public services.” 

But similar promises are included in most public statements from high-level meetings these days. The reality is that China’s people increasingly find themselves left out in the cold when it comes to Beijing’s spending priorities. Moreover, with local governments already under severe fiscal constraint after years of profligate borrowing and unpaid bills, many grassroots officials will undoubtedly see that the plenum document continues to give pride of place to Xi’s emphasis on industrial development—and not to the kinds of reforms that might improve the lives of China’s citizens in the near future.

Jeremy Mark is a nonresident senior fellow with the Atlantic Council’s GeoEconomics Center. He previously worked for the International Monetary Fund and the Asian Wall Street Journal.

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The reasons for the recent downturn 

The downward trend began three years ago—before the Trump administration took office. In September 2022, at his first United Nations General Assembly speech, Petro condemned the anti-drug efforts that have been a cornerstone of bilateral ties. This began a period of tensions between the two historically stalwart allies in which relations deteriorated further. During an April 2023 Capitol Hill visit, for example, Petro got into tense exchanges with US members of Congress Mario Diaz-Balart (R-FL) and Maria Elvira Salazar (R-FL). 

And now, in the past month, tensions have come to a head. On September 15, the United States decertified Colombia as cooperating to fight drug trafficking – although it did grant a national interest waiver to maintain aid and security cooperation. Several days later, Petro took to the streets of New York City during the United Nations General Assembly to call for the US military to disobey the US president. And thus, for the first time in thirty years, the US State Department revoked the visa of the Colombian president. Add to that the latest Trump-Petro exchanges, which sprung from the US strikes on boats in the Caribbean. The background here: Petro accused the US government of “murder,” saying a wayward Colombian fisherman was killed in an airstrike, and Trump responded by calling Petro an “illegal drug dealer” as he revoked US aid to the country. Both parties are at a new low that would have been unimaginable at any point since bilateral ties were strengthened in 2000 with the launch of Plan Colombia. 

The longer-term story of cooperation 

In fact, the US-Colombia partnership has historically been more than just a bilateral relationship. In 2022, to celebrate two hundred years of US-Colombia diplomatic ties, the Atlantic Council’s Adrienne Arsht Latin America Center commissioned a series of essays and released a book titled Allies. In it, Kiron Skinner, who served at the US Department of State as the director for policy planning in the first Trump administration, wrote that Colombia had become “an indispensable security partner to the US, training police and prosecutors in Latin America and other regions.” That essay went on to acknowledge that “US intelligence and security cooperation with Colombia bore positive results for both countries over the past two decades.”

That cooperation—built over decades—is what should define the relationship. Intelligence sharing has led to the disruption of illicit trafficking routes, the dismantling of armed groups, and the strengthening of operational ties that have borne fruit in Colombia and in broader US efforts to impede narcotics smuggling.

China is another concern. In Allies, then Senator Roy Blunt (R-MO) wrote: “Colombia will be an excellent partner in countering the influence of our competitors. Chief among these competitors is China.” Two years later, Colombia, in another about-face from longstanding policy, joined the Belt and Road Initiative. And in August, Colombia signed an agreement with China to even further advance bilateral cooperation.

The trade and investment ties at stake

Petro’s pullback from the United States may be politically beneficial with some limited sectors in Colombia, but Colombians still see the United States as their principal ally, even though their preference for the United States has dropped. And that US preference is also seen among Colombia’s businesses—and the US businesses that export to Colombia. Strong people-to-people ties define the relationship as well as strong commercial ties.

Perhaps most notable in the commercial sphere is that the United States has a trade surplus with Colombia, and trade has continued to deepen. Since the US-Colombia Trade Promotion Agreement entered into force in 2012, Colombia’s exports of crude oil, coffee, flowers, avocados, bananas, apparel, and light manufacturing have increased to maximize favored tariff preferences. Likewise, US agricultural exports to Colombia have surged, hitting nearly five billion dollars in 2024—up over 20 percent from the previous year and the highest increase among the top twenty-five export markets for US agriculture. Two-way trade supports people and businesses in both countries.

Colombia has, for instance, become the fifth largest destination for US yellow corn in the world and the largest in South America, accounting for more than one billion dollars per year. This is all thanks to the benefits of the current bilateral free trade agreement. In terms of investment, the United States is the top source of foreign direct investment into Colombia, with an average of $2.5 billion going into the country each year since the free trade agreement started back in 2012. A deteriorating relationship between Washington and Bogotá could put this trade at risk.

Amid this accelerating decline in bilateral ties, both sides should remind themselves of the historical importance of this relationship in security, commercial, and broader geopolitical terms. That is ultimately what led to decades of bipartisan support for the relationship in the United States. As Colombia gears up for presidential elections in 2026, resurrecting a stronger bilateral relationship will be a top foreign policy issue across campaigns. Rightfully so. This is a relationship that cannot be lost. There’s way too much at stake.  

Jason Marczak is vice president and senior director at the Atlantic Council’s Adrienne Arsht Latin America Center.

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Despite spiraling global debt, US-generated trade frictions, and stubborn inflationary pressures, global growth has held up far better than most feared when the same group met in April. The IMF this week raised its 2025 global growth forecast to 3.2 percent, up from 2.8 percent in April, as the world economy thus far has shrugged off worst-case scenarios of runaway tariffs and cascading financial shocks.

Yet that relief comes with an anxious edge: Momentary stability seems less durable in a world threatening to break into fragments, as global trade growth of 2.4 percent (and declining) is running behind overall global growth figures—a departure from long-running trends that many economists reckon is unsustainable.

The crisp autumn air in Washington this week has been thick with “what-ifs?” 

• What if we are only seeing a temporary reprieve before tariff-driven inflation and slowdowns bite harder? 
• What if the tariff war escalates with China, with Beijing having announced sweeping new export controls on rare earths and President Donald Trump threatening to instate a 100 percent tariff on Chinese goods?
• What if mounting public and private debt, now above 235 percent of global gross domestic product, becomes a debt shock as growth stumbles and interest payments rise—hitting emerging markets and poorer nations hardest?
• What if monetary tightening, inflation pressures, and fiscal fatigue ultimately undermine economic expansion? 
• What if trade fragmentation—regionally oriented supply chains, eroding global trading systems—confounds conventional models and results in everyone growing more slowly?

The IMF itself warned that markets may be underestimating risks tied to tariffs, debt, and financial vulnerabilities. “Buckle up: Uncertainty is the new normal, and it is here to stay,” said Kristalina Georgieva, managing director of the IMF, in her keynote speech ahead of the annual meetings. “Before anyone heaves a big sigh of relief, please hear this: Global resilience has not yet been fully tested.”

In particular, she pointed to that reliable harbinger of global uncertainty: surging global demand for gold. “Spurred by valuation effects and net purchases—partly reflecting geopolitical factors—holdings of monetary gold now exceed one-fifth of the world’s official reserves,” she said.

To be sure, Trump administration officials don’t have a lot of patience for those wringing their hands about potential economic dangers. They see US growth as stronger than expected (and a product of their policies), they regard global growth as resilient, and they see that tariffs have proven far less inflationary than doomsayers predicted. With most global policymakers balancing between relief and anxiety, count Trump officials more as triumphant.

On the other side stand European and other global financial leaders who see economic tensions building and believe that debt, China, tariffs, artificial intelligence (AI) uncertainties—or some toxic mix of all that—could bring about a tipping point. European Investment Bank (EIB) President Nadia Calviño goes even further, saying this week at the Atlantic Council that she has “the impression that the rest of the world is moving on” from reliance on US decisions, especially on issues such as trade and climate. “There’s a very strong commitment to the multilateral framework, very strong determination to pursue win-win partnerships around the world.” The EIB’s own survey shows that Trump tariffs are slowing down investments, but that the pain is being felt more by US companies than European ones, “which are proving to be quite resilient for the moment.” 

Few conversations this week didn’t either begin or land on AI as an accelerant both of economic growth and fragility. But you would have been disappointed if you were listening for great new ideas about how best to regulate, shape market structures, and ensure the technological dividends of AI spread beyond the United States, China, and a handful of other locations where AI is entering the business bloodstream most rapidly.

Georgieva spoke about how most countries lack regulatory, ethical, or labor frameworks to cope with rapid AI diffusion. Many central bank governors and finance ministers agreed that AI, and the fourth industrial revolution it represents, could have as large an impact on the sources of global growth and employment as did the first industrial revolution, which moved so much of humanity from farmlands to factories. 

Beginning roughly in 1760, the Industrial Revolution was a period that moved the world to more widespread, efficient, and stable manufacturing processes. New knowledge and innovation resulted in vast economic growth, as economic historian Joel Mokyr, who won the 2025 Nobel economics prize on Monday, and others have documented and examined. This revolution also accelerated political change, giving birth to communism, fueling modern capitalism, and creating the economic and social conditions that were the context for two world wars and the Cold War that followed. The economic, political, and societal impact of AI will be no less—and just as uncertain in its impacts on everything from economic competition to the future of war.

The Atlantic Council’s GeoEconomics Center was created for just this kind of period, working alongside more than a dozen of our centers with the conviction that one can’t separate macroeconomic forces from national security impacts. In that spirit, the Council brought together seventy meetings in Washington this week—convening dozens of central bank governors and finance ministers.

That IMF-World Bank crowd will leave town this weekend with uncertainty about what the world will look like when they return in the spring. What’s clear is that they, particularly Trump administration officials, have agency in either building upon the scenarios that have brought momentary relief or further contributing to global anxieties.

By the close of this week’s meetings, the prevailing sentiment settled on something like this: We’ve been luckier than expected, but luck isn’t a sustainable policy response. Delegates’ cautious optimism was tempered by their knowledge that an external shock or a series of policy missteps could tilt the balance rapidly. I heard more than one voice describe this moment as the calm before a storm, or a lull before a calamity, depending on the actions of world leaders in the weeks ahead. 

Georgieva listed several reasons the world economy has withstood strains from multiple shocks thus far: Improved policy fundamentals have cushioned against shocks. The private sector has adapted as trading conditions have changed. Tariff hits turned out to be less than initially feared, as most countries avoided tit-for-tat trade wars with the United States. And supportive financial conditions, including attractive interest rates, have provided added resilience. What’s unclear is how long these advantages can last. 

Over the next six months, what I’ll be watching is whether big AI investment bets pay off, whether trade tensions turn worse, whether debt cracks deepen, and whether markets can sustain equity valuations equal to the internet bullishness of twenty-five years ago. I’ll also want to know whether leaders can find a sufficient sense of common cause to steer us through any trouble.

This week’s consensus was that business as usual is over—due to factors ranging from Trump’s tariffs and AI to global economic fragmentation and geopolitical conflict. There also was a rough consensus that if the world is to reach a new equilibrium and avoid a major crisis, then it would require the full attention of policymakers and international institutions to manage a fast-changing and increasingly fractured world. 

Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on X @FredKempe.

This edition is part of Frederick Kempe’s Inflection Points newsletter, a column of dispatches from a world in transition. To receive this newsletter throughout the week, sign up here.

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Georgieva’s warning came as the global economy continued to prove resilient against global shocks ranging from the United States’ tariff-rate changes to an artificial-intelligence investment boom that many believe is a bubble at risk of bursting. And while the global economy has done better than many feared, risks still linger. As Georgieva put it: “Uncertainty is the new normal, and it is here to stay.” An example of that played out just days before the annual meetings, when US President Donald Trump threatened to impose 100 percent tariffs on Chinese goods, but backtracked shortly after.

We sent our experts to the IMF and World Bank headquarters to sort through all the uncertainty and glean a sense of what may lie ahead for the global economy—and what policymakers should do about it. Below are their insights, in addition to highlights from our own conversations with economic leaders about how they plan to navigate tumultuous times.

This week’s expert contributors

October 17 | 5:42 PM ET

The world must be open and honest about the benefits of the Bretton Woods system

We’ve come to the end of another IMF World Bank Week at the Atlantic Council, concluding seventy events here. We’ve started with the beginning at the IMF on all the themes coming into these meetings, and it’s so different than what we were with when we first came here six months ago, ten days after Liberation Day. I wanted to take a moment, as we sit here and reflect back on everything we heard from the finance ministers, the central bank governors, our analysts, our experts, our team, and try to take it in and understand what’s happened.

Because in the day-to-day flow of IMF WEO reports and upgrades and downgrades and inflation and back and forth on Argentina and everything that’s flying on US and China and the trade wars and rare earths, I think we’re losing sight of what’s actually happening in the global economy. It’s the difference between an earthquake and a series of fractures. Six months ago, at the spring meetings, was an earthquake. US President Donald Trump shook the global economy with Liberation Day, and the question facing these ministers, these governors, and the people they represent was whether the global economy would ever be the same, and whether we were going back to a pre-Bretton Woods system, a time where these institutions didn’t exist.

And then six months passed, and Liberation Day tariffs paused, and some came back and some didn’t and some deals were struck, and so we came into these meetings, these annual meetings, with everyone mistakenly breathing a sigh of relief because they thought that things had changed and reverted to status quo.

But think about where we are. The effective tariff rate in the United States is 17 percent. It started at 2.5 percent in January. We got back to the Liberation Day level, but we got there slowly. So each of these things that’s happened over the past six months, what’s happened on tariffs, what’s happened on central bank independence, growing debt problems (we’re in a government shutdown here in Washington), all of them are fractures.

No single one is an earthquake, but in totality, it adds up to the same thing. And the difference of how these ministers reacted this week versus six months ago is night and day because they want, understandably, for things to be as they were and no one wants to speak the hard truths that things are changing fundamentally. They are not going back to the way things were, and everyone has to confront that openly and honestly, because if we don’t speak those hard truths, they are going to rear their heads in a painful way, one way or the other.

The crunch points are coming. A year from now, we’ll be in Thailand. The IMF will have to revisit its quota process, and there’s no room for compromise right now between the United States, Europe, India, China, and the world’s other large economies. The issues are building around the world, not just on trade and tariffs: on debt, on AI, on job loss, all of these issues are what the ministers talk about quietly and privately but don’t want to address openly because there are no good answers. There’s no good explanations for how the global economy has shifted, but there is a fundamental truth that is hard to reconcile with.

Henry Morgenthau, when he addressed the Brent Woods conference at the opening of that conference in 1944, said we have to be partners, not bargainers. But let’s face it, the United States wants to bargain and deal with every other country in the world bilaterally, and that is not why these institutions were created in the first place. They were created on the premise that if we operated collaboratively, not bilaterally but multilaterally, we would deliver better results for the people in our own countries and the world.

And we all know that that system was imperfect over eight years, but if we break down to a simple bargaining premise of might-makes-right economic leverage over one country can be exercised, we might not like what we find back in the United States. That was the lesson this week with China and its rare earth decision. Opening this up will have cost, and there’s a reason the system was built in the first place.

I think the rest of the world has to be open and honest about the benefits of that system. No one seems to want to defend it. Everyone wants to say what’s wrong about it, and there certainly are things that are wrong. No one wants to say that multilateralism is a good thing, that international cooperation is a good thing, that not bullying your friends and allies is a good thing, but these are truths.

These are truths we’ve always known in this country—that central bank independence is a good thing and leads to more prosperity. This is fundamental to what makes a strong economy and what makes a healthy society. And we cannot separate out, as the ministers and governors would like to do, our geopolitics and our economic policy. There are National Guard troops outside this building all week. You don’t hear that anywhere in this building throughout the week. We have a government shutdown. We have a situation going on around the world. We have flare-ups all over, but those are not issues the ministers want to confront because it’s not core to what they see as the immediate objective, which is stability, but stability for stability’s sake, while technology is changing rapidly and the shifts are happening all around us, will ultimately lead to instability.

So our work here, our goal at the Atlantic Council, is to tell the hard truths that are sometimes difficult to tell. This is the role of these institutions, and we will play a constructive role in doing it.

The one thing about macroeconomics and data is that the numbers usually don’t lie. Now, there’s questions about that, and we’ve debated some of them here, but we need to put the data out there and let the facts speak for themselves. We need to be transparent about our economies. We need to show what’s actually happening around the world, and only then can we have an honest conversation about the tectonic shifts that are happening in the global economy and how every country has to adapt to this new reality and stand by their values and stand by the process and stand by the system that has led to the prosperity that has brought us to this prolonged period of global peace unseen any time before in history.

October 17 | 4:26 PM ET

Unease, uncertainty, and a struggle for direction

This year’s IMF-World Bank Annual Meetings reflected profound unease about a shifting global economic order and uncertainty over the roles of the two multilateral institutions.

Discussions took place amid continuing trade tensions and a stark divergence in the direction of the world’s major economies.

The United States is placing its chips on the rapid buildup of artificial intelligence (AI) and digital finance, with AI-driven capital investment now overshadowing slowing activity in other sectors. China continues to rely on manufacturing exports, masking weaknesses in the domestic economy. European growth is recovering slowly while it faces the dual challenge of maintaining its open-market model and financing a defense buildup in response to Russian aggression. Meanwhile, public debt keeps increasing, and concerns about government bond markets is creating a bit of unrest in financial markets.

Delegates from smaller countries surely used the meetings to point to the resulting spillovers. Apart from the general exhortations to mutual cooperation, however, there were no tangible takeaways in the concluding documents coming out of the meetings.

A US call to get back to basics

Yet, delegates walked away with one bit of clarity. After dreading a possible US withdrawal during the spring meetings, delegates now got a clearer idea of the priorities of the Bretton Woods institutions’ major shareholder. Treasury Secretary Scott Bessent repeated his pointed call for the IMF and World Bank to return to their core mandates: that is, helping countries strengthen their private sector growth and maintain macroeconomic and financial stability.

The World Bank translated this impetus into an elegant shift toward a “jobs, jobs, jobs” agenda, refocusing its existing private sector work to deliver more immediate benefits for developing countries. The IMF, by contrast, looked as though it lacked a clear north star—guarded in tone, generic in its advice, and preoccupied with avoiding friction with major shareholders. In the face of “Knightian uncertainty,” even its highly valued World Economic Outlook forecasts have a shorter half-life than usual.

A risky bet on Argentina

And there was Argentina, of course, an evergreen topic for annual meeting conversations. The unprecedented US intervention in favor of the Argentine peso carries exceptional risks, both for the reputation of the US Treasury and the IMF, which could be asked to discreetly provide the funds for Argentina to repay the United States and, less discreetly, may get stuck with the blame for a failed adjustment program in the first place. Much is therefore at stake in Argentina’s midterm elections, which may or may not deliver the intended boost for the president’s reform program.

What comes next

For the World Bank, success will rest on the successful execution of its jobs agenda. It may find partners in the developing world more willing to engage this time. Zambia’s President Hakainde Hichilema, for example, neatly summed up how his country hopes to boost domestic activity in the face of declining foreign aid. “Seek ye [own] growth” is his mantra, an effort which the World Bank will no doubt gladly assist.

On the IMF’s side, discussions on quota and governance reform remain gridlocked, with major shareholders seemingly uninterested in meaningful changes. However, the forthcoming Article IV consultations with the United States and China will be a chance for the institution to redeem its reputation as a credible and impartial assessor of its members’ economic policies and their spillovers.

And by the annual meetings in Thailand next year, the then-completed surveillance and conditionality reviews will provide a clearer picture of how the institution will reinterpret the mandate of its core activities—economic surveillance and program lending.

October 17 | 1:52 PM ET

Megan Greene: It could be time to ‘slow down’ the Bank of England’s rate-cutting cycle

October 17 | 1:31 PM ET

Concerns over debt dominate the annual meetings once again—but this time, it’s major economies keeping officials up at night

It should come as no surprise that debt is dominating the conversations at this week’s annual meetings. The IMF has been clear in raising the alarms around the current dangerous trajectory, with global public debt set to hit 100 percent of global gross domestic product (GDP) before the end of the decade. 

Reining in unsustainable debt-to-GDP ratios is always a key piece of IMF surveillance work and countries use this convening in Washington to show the Fund—and private investors—why their markets are stronger than they might appear on paper. But what’s different this time around is which part of the economy is causing the most concern. It’s not the typical emerging markets that are keeping the IMF up at night. In the Fiscal Monitor it released this week, the IMF flagged Italy, France, Canada, and of course, the United States as having rising debt risk and warned that this financial turmoil (perhaps exacerbated by political dysfunction in some countries) could spiral into a “doom loop.” 

The interesting thing to me is how often I heard a similar concern raised privately by emerging market finance ministers and central bank governors. In the series of meetings we held this week, debt came up again and again, with these countries’ officials concerned about the United States and Europe. It’s a strange and concerning twist on the usual way debt plays out through the IMF and World Bank meetings, and perhaps a signal of what finance officials fear could end up being a problem which, like the global financial crisis, starts in advanced economies but doesn’t end there.

October 17 | 12:28 PM ET

The World Bank’s Christine Qiang on AI infrastructure

Frank Willey, assistant director at the Global Energy Center, speaks with Christine Qiang, the World Bank’s director of digital foundations, about how the World Bank and other international financial institutions support the global adoption of artificial intelligence.

October 17 | 11:01 AM ET

A grim picture for global public debt, but the IMF and World Bank are here to help

It used to be a running joke that the IMF stands for “It’s Mostly Fiscal.” And indeed, before the global economy was hit by a series of major shocks, that was the case—the IMF placed strong emphasis on its fiscal policy advice.

This year’s annual meetings are bringing that focus back. The IMF’s latest Fiscal Monitor, released on Wednesday, presents a sobering picture: global public debt is expected to reach 100 percent of global GDP—the highest level since 1948, when the world was rebuilding after the devastation of World War II.

Today, 3.4 billion people—about 40 percent of the world’s population—live in countries where governments spend more on debt servicing (interest payments) than on either education or healthcare. The main drivers of rising government expenditures are increased defense spending, aging populations, and high borrowing costs.

With scarce resources, spending efficiency becomes critical. Governments must rethink how to use public money smarter—through enhanced public finance management, strong debt management frameworks, credible medium-term fiscal rules, and greater transparency. As always, both the IMF, through its capacity development and Article IV policy advice, and the World Bank, through its development assistance, stand ready to help. Policymakers should make full use of these tools and focus on achieving fiscal sustainability for this and future generations.

After all, no one wants to live in a world where interest payments occupy the top line of the national budget.

October 17 | 10:54 AM ET

The World Bank’s Boubacar Bocoum on value creation for local industries

Alexis Harmon, assistant director at the Global Energy Center, is joined by Boubacar Bocoum, lead mining specialist at the World Bank.

October 17 | 10:49 AM ET

Turkish Central Bank Governor Fatih Karahan warns that the digital lira should be designed carefully—or else risk financial stability

October 17 | 9:03 AM ET

What lies ahead on day five of the IMF-World Bank annual meetings

October 17 | 7:00 AM ET

Dispatch from Washington: Is this the calm before the economic storm?

When the world’s finance ministers and central bank governors roll into town for the annual meetings of the International Monetary Fund (IMF) and the World Bank, it’s a good time to take the measure of the global economic mood. The best way to view this week’s gathering is through a split screen of relief and anxiety. 

Despite spiraling global debt, US-generated trade frictions, and stubborn inflationary pressures, global growth has held up far better than most feared when the same group met in April. The IMF this week raised its 2025 global growth forecast to 3.2 percent, up from 2.8 percent in April, as the world economy thus far has shrugged off worst-case scenarios of runaway tariffs and cascading financial shocks.

Yet that relief comes with an anxious edge: Momentary stability seems less durable in a world threatening to break into fragments, as global trade growth of 2.4 percent (and declining) is running behind overall global growth figures—a departure from long-running trends that many economists reckon is unsustainable.

The crisp autumn air in Washington this week has been thick with “what-ifs?” 

• What if we are only seeing a temporary reprieve before tariff-driven inflation and slowdowns bite harder? 
• What if the tariff war escalates with China, with Beijing having announced sweeping new export controls on rare earths and President Donald Trump threatening to instate a 100 percent tariff on Chinese goods?
• What if mounting public and private debt, now above 235 percent of global gross domestic product, becomes a debt shock as growth stumbles and interest payments rise—hitting emerging markets and poorer nations hardest?
• What if monetary tightening, inflation pressures, and fiscal fatigue ultimately undermine economic expansion? 
• What if trade fragmentation—regionally oriented supply chains, eroding global trading systems—confounds conventional models and results in everyone growing more slowly?

The IMF itself warned that markets may be underestimating risks tied to tariffs, debt, and financial vulnerabilities. “Buckle up: Uncertainty is the new normal, and it is here to stay,” said Kristalina Georgieva, managing director of the IMF, in her keynote speech ahead of the annual meetings. “Before anyone heaves a big sigh of relief, please hear this: Global resilience has not yet been fully tested.”

Read more

Inflection Points

Oct 17, 2025

Dispatch from Washington: Is this the calm before the economic storm?

By Frederick Kempe

At the IMF-World Bank annual meetings, cautious optimism about the global economy was tempered by what could come next.

Economy & Business International Financial Institutions

EBRD President Odile Renaud-Basso on private capital mobilization in Ukraine

Finance leaders’ word of the week: Jobs

The World Bank’s Lisa Finneran on encouraging and scaling innovation

Visa’s Todd Fox on how fragmentation is impacting payments innovation

Ukrainian Finance Minister Serhiy Marchenko on the future of the IMF’s lending to Kyiv

‘The rest of the world is moving on’ after US strikes at multilateral order, says European Investment Bank’s Nadia Calviño

IFC Director of Research Paolo Mauro on venture capital in emerging economies

Economy and Trade Minister Amer Bisat: ‘There’s just not going to be prosperity without the sovereignty of the state’

The IMF’s message is clear: The time to prepare for AI adoption is now

Commerzbank’s Verena Bitter on trends in transatlantic investment

Pakistan’s finance minister on his country’s devastating flooding—and the government’s reforms in response to it

What to expect on day four of the IMF-World Bank meetings

Read day three analysis

October 16 | 6:15 PM ET

EBRD President Odile Renaud-Basso on private capital mobilization in Ukraine

European Bank for Reconstruction and Development (EBRD) Odile Renaud-Basso speaks with Nicole Goldin, head of equitable development at the UNU-Centre for Policy Research and a senior fellow at GeoEconomics Center, about the EBRD’s investments in Ukraine’s economy and the current state of private capital mobilization.

October 16 | 5:52 PM ET

Finance leaders’ word of the week: Jobs

We’re nearly through IMF-World Bank week, and it is at this point when our experts usually begin to mark the divide between the conversations happening at the World Bank and the International Monetary Fund. But this week, for economist Nicole Goldin, it’s not the differences that are striking—it’s one major similarity.

“The World Bank is making a can’t-miss reorientation around jobs, but they are not alone in that,” Nicole tells me. “The IMF managing director and her colleagues are also talking jobs.” 

So why would the IMF want to join the World Bank in ensuring that people everywhere have (and take) employment opportunities? Nicole, who previously delved into jobs data, policy, and strategy as a World Bank lead economist, shares one reason: Heavy debt, and paying the mounting costs associated with it, “is one of the biggest challenges to macroeconomic stability,” Nicole tells me. “One policy prescription we hear from the IMF is generating domestic revenues. Jobs are critical to this, to expanding the tax base.” 

Another reason: AI has the potential to make the financial system more efficient and generate between 0.1 percent and 0.8 percent in global economic growth, as Georgieva noted this morning. But Nicole points out that “countries need the right talent and a technologically skilled workforce to capitalize on new industries and seize digital dividends from deploying AI.” 

The third reason is particularly relevant at a time when youth protests are leading to the ousting of leaders around the world: “Without economic opportunity, lost ambition and aspiration can fuel conflict and fragility and destabilize markets.” 

October 16 | 5:30 PM ET

The World Bank’s Lisa Finneran on encouraging and scaling innovation

The Global Energy Center’s Ken Berlin speaks with Lisa Finneran, director of innovation at the World Bank about the Bank’s initiatives with governments around the world aimed at driving private-sector innovation.

October 16 | 4:25 PM ET

Visa’s Todd Fox on how fragmentation is impacting payments innovation

Todd Fox, the president of Visa’s Economic Empowerment Institute, joins Atlantic Council Assistant Director Alisha Chhangani to discuss the impact of regulatory fragmentation on digital finance at the Atlantic Council’s World Bank content hub.

October 16 | 3:31 PM ET

Ukrainian Finance Minister Serhiy Marchenko on the future of the IMF’s lending to Kyiv

October 16 | 12:00 PM ET

‘The rest of the world is moving on’ after US strikes at multilateral order, says European Investment Bank’s Nadia Calviño

October 16 | 11:54 AM ET

IFC Director of Research Paolo Mauro on venture capital in emerging economies

Charles Lichfield, director of economic foresight and analysis at the GeoEconomics Center, speaks with Paolo Mauro, director of the International Finance Corporation’s (IFC) Economic and Market Research Department about the IFC’s priorities and recent trends in venture capital in emerging markets.

October 16 | 11:29 AM ET

Economy and Trade Minister Amer Bisat: ‘There’s just not going to be prosperity without the sovereignty of the state’

October 16 | 11:11 AM ET

The IMF’s message is clear: The time to prepare for AI adoption is now

Per IMF research, around 30 percent of jobs in advanced economies will be negatively affected by artificial intelligence (AI)—meaning potential income or job losses. Policy leaders must get ready for what’s coming, and the sooner they start preparing, the better. 

Yesterday, I moderated an IMF-World Bank Week panel tackling this issue, where I spoke with two IMF officials, Era Dabla-Norris, the deputy director of the Fiscal Affairs Department and Giovanni Melina, deputy division chief of the structural and climate policy division in the Research Department. 

Our conversation explored the risks and opportunities stemming from the rapid rise of AI. If implemented correctly, AI could boost global economic growth by 0.1 to 1.5 percent. But there will be both winners and losers. 

The IMF has made preparing for these shifts a top priority. To put things in perspective: in the latest World Economic Outlook, the word AI appears more than thirty times, while climate appears only seventeen times. In its AI Preparedness Index, the IMF assesses 170 countries on their readiness for AI adoption—benchmarking them across categories such as human capital, digital infrastructure, and energy supply. 

Most importantly, the IMF is here to help with policy advice. Its message is clear—the time to act is now. Governments must start rethinking unemployment benefits, adjusting taxation to encourage job augmentation rather than automation, and reskilling their labor forces. There’s a lot to be done—but if your country wants to stay ahead in the AI race, there’s no better time to start than today.

October 16 | 10:50 AM ET

Commerzbank’s Verena Bitter on trends in transatlantic investment

Charles Lichfield, the GeoEconomics Center’s director of economic foresight and analysis, talks with US Representative for Commerzbank Verena Bitter about the transatlantic investment climate.

October 16 | 10:43 AM ET

Pakistan’s finance minister on his country’s devastating flooding—and the government’s reforms in response to it

October 16 | 9:03 AM ET

What to expect on day four of the IMF-World Bank meetings

The ‘torn umbrella’ problem for developing countries in debt

The next phase in Argentina’s recovery—and the US role in it

The World Bank’s Luis Benveniste on education and the labor market

Spain’s Carlos Cuerpo responds to Trump’s tariff threats over NATO spending: ‘We’re making good on our commitments’

Behind the scenes with the Atlantic Council at the World Bank during the annual meetings

Mastercard’s Dimitrios Dosis on digital infrastructure and inclusive growth

The World Bank’s Manuela Francisco on turning economic analysis into outcomes

The World Bank’s Lisandro Martín on the upcoming Jobs Indicator

The overlooked views of developing countries

Ireland’s Paschal Donohoe on why his neutral country is ramping up its defense spending

A number worth thinking about this wek: 3.4 billion

How the World Economic Outlook sets the tone for today’s IMF-World Bank meetings

Read day two analysis

October 15 | 7:28 PM ET

The ‘torn umbrella’ problem for developing countries in debt

For the size of the problem that is sovereign debt, the response from the global community always seems to be not enough. 

Today, the IMF convened the Global Sovereign Debt Roundtable, and this week, it has been adamant about the roundtable’s role in addressing the plight of heavily indebted developing countries. It’s an issue that has risen to the top of the international agenda since I left the IMF, just before the COVID-19 pandemic.  

But the patchwork effort to help the most indebted countries is flawed, and we’re seeing why in the opening days of these Annual Meetings. The all-important first chapter of the IMF World Economic Outlook only genuflects toward the Group of Twenty Common Framework for debt restructuring (which has consistently amounted to less than promised) and the Global Sovereign Debt Roundtable, which is supposed to address the rules of the road for creditors. The Global Financial Stability Report also says little about the issue, although it does discuss how Eurobonds. issued by so-called frontier economies—those nations that before the pandemic were making progress toward emerging market status—now are expected to offer yields of over 10 percent.  

Behind closed doors, the verdict on the international community’s commitment to low-income country debt is decidedly negative. At a roundtable I took part in yesterday, I heard considerable skepticism about both the debt restructuring process and the Global Sovereign Debt Roundtable consultations. As my colleague Nicole Goldin pointed out, developing countries spent $1.4 trillion on debt service payments last year. Countries that together represent over half the population send more money to creditors than they spend on their own people’s health, education, and other needs. Officials worry that a global slowdown or unexpected shocks could send many countries into default. 

For low-income countries, the approach seems like a torn umbrella: It will help in a light rain, but in a storm, it will be useless. 

October 15 | 5:14 PM ET

The next phase in Argentina’s recovery—and the US role in it

The Atlantic Council hosted Argentina’s delegation to the annual meetings for an hour-long discussion of the country’s economic policies. Economy Minister Luis Caputo and Central Bank President Santiago Bausili took stock of Argentina’s efforts to normalize fiscal and monetary policies, a process that was successfully pursued over the past two years, resulting in a primary fiscal surplus and a significantly improved central bank balance sheet.

They expressed confidence that the exchange rate would continue to depreciate normally within the widening band while inflation was on a gradually declining path. They also characterized US support as instrumental in stabilizing foreign exchange markets ahead of the midterm elections later this month. Details on such support are close to being finalized, and the central bank president emphasized that there would be a close link to the IMF’s current program framework with Argentina.

Caputo explained that the Milei administration’s expectations for the midterms remain conservative, focused on winning more than a third of seats in either house of Argentina’s Congress. This would be sufficient to sustain a presidential veto of legislation that is not in line with the administration’s policy goals. The lack of an absolute majority has not been an obstacle to new reforms in the past, and the minister was confident that the reform momentum would continue. 

Caputo also reported a significant increase in US companies’ interest in investing in Argentina, especially in the mining and energy sectors. OpenAI is also reported to be weighing a $25-billion investment in Argentina, potentially providing a major growth impulse to the still sluggish economy.

October 15 | 3:29 PM ET

The World Bank’s Luis Benveniste on education and the labor market

Nour Dabboussi, associate director of the Atlantic Council’s MENA Futures Lab, is joined by World Bank Global Director of Education Luis Benveniste for his take on education reforms, the future of the labor market, and the role of the private sector.

October 15 | 2:46 PM ET

Spain’s Carlos Cuerpo responds to Trump’s tariff threats over NATO spending: ‘We’re making good on our commitments’

October 15 | 12:20 PM ET

Behind the scenes with the Atlantic Council at the World Bank during the annual meetings

Juliet Lancy, a young global professional at the GeoEconomics Center, gives a tour of the Atlantic Council’s pop-up studio, where it records and broadcasts events and interviews during the IMF-World Bank annual meetings.

October 15 | 11:38 AM ET

Mastercard’s Dimitrios Dosis on digital infrastructure and inclusive growth

Alisha Chhangani, an assistant director at the GeoEconomics Center, speaks with Dimitrios Dosis, president for Eastern Europe, Middle East, and Africa at Mastercard, about the potential for digital infrastructure to drive inclusive growth.

October 15 | 11:10 AM ET

The World Bank’s Manuela Francisco on turning economic analysis into outcomes

Bart Piasecki, an assistant director at the GeoEconomics Center, talks with Manuela Francisco, global director of economic policy at the World Bank, about the Bank’s Country Growth and Jobs Report.

October 15 | 11:07 AM ET

The World Bank’s Lisandro Martín on the upcoming Jobs Indicator

Lize de Kruijf, a program assistant at the GeoEconomics Center’s Economic Statecraft Initiative, speaks with World Bank Department of Outcomes Director Lisandro Martín on the Bank’s upcoming Jobs Indicator. 

October 15 | 11:04 AM ET

The overlooked views of developing countries

One of the perpetually overlooked events of the Annual Meetings is the gathering of finance ministers and central bank governors from emerging market and developing economies known as the Intergovernmental Group of Twenty-Four, or G24. Unlike its Group of Twenty (G20) counterpart, which brings together the world’s largest economies, the G24 serves as a voice for smaller countries—one that normally isn’t heard as the meetings proceed. In my twenty-plus years in the IMF Communications Department, the twice-yearly G24 press conferences were normally treated as an afterthought in planning, and mainstream media rarely gives attention to its communiques.

Which is too bad, because the G24 statement usually contains a plain-spoken summary of the issues that are on the front burner for countries that represent a vast swath of the world’s population. If the watchwords of these annual meetings are “uncertainty” and “opportunity,” the G24 only has room for the former. The communique issued yesterday highlights “humanitarian suffering,” “trade tensions,” “high debt burdens and rising debt-servicing costs” and the continuing need for “climate action.” (In the all-important first chapter of the World Economic Outlook, whose publication yesterday overshadowed the G24, climate change is relegated to the final paragraph.)

Underlying it all is concern about falling exports and declining foreign-exchange earnings, all of which add up to “constrained” growth, “magnifying risks” to macroeconomic stability, and a bleaker medium-term outlook. With development assistance from the advanced economies declining, the G24 offers up a proposal for the IMF to “consider exploring a mechanism for the regular issuance of Special Drawing Rights (SDRs) to better support” developing countries. The IMF tried that after the COVID-19 pandemic, but most of the SDRs ended up in the coffers of the largest economies. The idea of an SDR issuance to low-income countries was also discussed at yesterday’s IMF Week seminar on “a global response to sovereign debt pressures and climate change.” It remains to be seen whether the views of the G24 will resonate as the powerhouse economies of the Bretton Woods institutions settle in for their deliberations this week—or whether the group will remain a voice in the wilderness.

October 15 | 11:00 AM ET

Ireland’s Paschal Donohoe on why his neutral country is ramping up its defense spending

October 15 | 9:58 AM ET

A number worth thinking about this week: 3.4 billion

The IMF-World Bank Annual Meetings are officially in full swing, and if there’s a topic on everyone’s mind, it’s debt. The topic of climate change, on the other hand, is on many minds, but it isn’t making its way into many conversations this week—one exception being a conversation I led yesterday, in partnership with the Heinrich Böll Foundation and SOAS University of London.  

These topics are top of mind for good reason. I, like most economists, like to go “by the numbers,” so here is one number that shows why many of us in Foggy Bottom are thinking about debt and climate change: 3.4 billion.

That figure represents nearly half the world’s population. It’s also the number of people living in developing countries whose governments spend more on their debt service than they do on health or education, according to a report released this year by the United Nations Conference on Trade and Development (UNCTAD).

This same figure is also the midpoint of the estimated range (3.2-3.6 billion) of the number of people living in areas disproportionately experiencing the effects of climate change, including rising sea levels and weather events such as extreme heat, droughts, and floods.

The implications are staggering. In 2024, developing countries spent $1.4 trillion in debt service payments. The money spent servicing debt is money that cannot be spent investing in people and prosperity: not only in health and education, but also in infrastructure, energy, technology, and the services needed for economic growth and equitable development. Combined with dwindling official development assistance and reduced trade and foreign direct investment, developing countries—including some of the most vulnerable to climate change—lack the fiscal space to invest in mitigation, adaptation, or resilience.

Debt dynamics and other financial trends factor prominently in today’s World Economic Outlook and Global Financial Stability Report and they will spark discussion (case in point: check out our discussion yesterday “decoding” the reports only hours after they launched). They are certainly worthy of all the talk, but it is important not to lose sight of the human toll—the ultimate costs to the lives and livelihoods of 3.4 billion people that must be urgently addressed.

October 15 | 9:36 AM ET

How the World Economic Outlook sets the tone for today’s IMF-World Bank meetings

Good numbers, but a gloomy forecast, for the global economy

Saudi Finance Minister Mohammed Aljadaan sounds the alarm on the world’s ‘very serious’ debt challenge

What to know about the World Bank’s new AgriConnect initiative

Europe may be losing momentum for realizing the single market, says Irish Central Bank Governor Gabriel Makhlouf

What Trump 1.0 trade negotiators think about the second administration’s tariff strategy

US-China trade spat moves supply chains to top of mind

What to expect at today’s IMF-World Bank meetings

Read day one analysis

October 14 | 6:47 PM ET

Good numbers, but a gloomy forecast, for the global economy

Today, the International Monetary Fund released its highly anticipated World Economic Outlook (affectionately abbreviated “WEO”). And as I tuned in to the launch from IMF headquarters, I noticed a glaring contrast between the report’s upgrade to global growth forecasts and its overall gloomy tone, reflected in the headline: “Global Economy in Flux, Prospects Remain Dim.” 

Our top numbers cruncher, Hung Tran, tells me that’s kind of the point. Hung worked at the IMF for six years, during which he had a hand in these kinds of reports. The IMF is trying to tell us, he says, that the economy is faring “better than feared,” but “worse than what we need.” 

On the positive side, Hung points to upgraded economic growth estimates for countries such as the United States, India, and China. This is due in part, he adds, to the world’s relative restraint from deploying retaliatory tariffs against the United States. 

But on the grimmer side, Hung notes that the WEO lists a number of “downside risks,” from a “possible slowdown in the AI boom” to “high public debt” to “pressure on central banks,” which could destabilize financial markets. But “the WEO emphasizes the importance of policy and policy cooperation,” without getting to the roots of the problem, Hung says: “US protectionism and Chinese mercantilism.” That, he says, is what is “squeezing many countries in the rest of the world.” 

“To say that we need good policies and cooperation is not a solution,” Hung warns. 

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October 14 | 4:23 PM ET

Saudi Finance Minister Mohammed Aljadaan sounds the alarm on the world’s ‘very serious’ debt challenge

October 14 | 12:35 PM ET

What to know about the World Bank’s new AgriConnect initiative

Charles Lichfield, director of economic foresight and analysis at the Atlantic Council’s GeoEconomics Center, outlines the three most important things to know about AgriConnect, a new initiative from the World Bank as the institution aims to pivot to its “new north star”: creating jobs.

October 14 | 12:26 PM ET

Europe may be losing momentum for realizing the single market, says Irish Central Bank Governor Gabriel Makhlouf

October 14 | 10:39 AM ET

What Trump 1.0 trade negotiators think about the second administration’s tariff strategy

OCTOBER 14 | 10:30 AM ET

US-China trade spat moves supply chains to top of mind

The IMF-World Bank Annual Meetings have kicked off following another rupture in the US-China trade relationship after Beijing’s tightened export restrictions on rare earth elements (REE) last Thursday. As one of the most important trade relationships in the world enters a new period of uncertainty, expect supply-chain management to now play a bigger role than ever.

China’s announcement strikes at the heart of US dependence on REE supply chains: China controls around 70 percent of rare earth extraction, 90 percent of refining, and 93 percent of magnet production (which uses rare earths) worldwide.

As of December this year, companies will be required to secure permission before exporting any product with more than 0.1 percent of its value attributable to a rare earth originating in China. In effect, the policy extends Beijing’s control of the supply chain much further downstream, reflecting a mechanism the United States has previously used to control chip exports—even companies manufacturing and selling products outside of China would theoretically need authorization if the product’s REE content falls above the designated value. A ban on the export of any rare earths to foreign militaries further complicates the supply-chain picture; for example, it is unclear whether a company such as Boeing or General Motors—both of which produce goods for the defense sector—are counted as such. These restrictions are also not specifically designated against the United States, giving China the latitude to use its REE export dominance against other countries should it deem necessary.

To date, the Trump administration has been aggressive in attempting to manage wider risks associated with China’s supply-chain dominance. The administration has consistently worked to secure non-Chinese sources of REE including resource development opportunities in negotiations with Ukraine, the Democratic Republic of Congo, and Greenland. This summer’s major deal (led by the Department of Defense) with MP Materials represents another effort to improve domestic supply-chain resilience. Yet bringing these opportunities online at scale takes time, and as a result, REE have been an important lever in trade negotiations with China. Case in point: A framework agreement toward a US-China trade deal this past June included a drawdown in REE export restrictions that China had announced over the past several months.

That’s possibly why Thursday’s announcement had been met with such an aggressive White House response, in the form of a proposed 100 percent retaliatory tariff on China and talk of canceling a meeting between US President Donald Trump and Chinese President Xi Jinping. And while Trump has walked back his threats, the exchange still largely resets trade negotiations back to where they were earlier this year, with supply chains caught in the middle.

There are two observations from these latest flare-ups that will be of use to the officials descending upon Foggy Bottom this week, some wanting to talk trade on the sidelines of the annual meetings. First, it is clear that risks to global supply chains are entering a new phase. While China’s Ministry of Commerce aimed to clarify the scope of these new restrictions on Sunday, whether (or how) China will enforce these new and powerful tools is still unclear. China’s willingness to use such tools will continue to be hard to ignore, even if wider trade tensions cool. Second, Washington’s pursuit of alternative sources for REEs now bears even more urgency—and opportunity. Though China dominates REE supply chains, REEs themselves aren’t necessarily rare. But accessing them and integrating them into the economy requires thoughtful and precise supply-chain partnerships. Other countries may find that their own REE resources can help enhance their trade negotiations with the United States on the basis of alternative supply-chain development. It will take time for alternative resources to alleviate the US dependency on China, but the need to reduce China’s REE dominance, its leverage in trade negotiations, and its risk to US national security will weigh increasingly heavy as the US administration continues to work to address its trade-balance concerns.

October 14 | 9:02 AM ET

What to expect at today’s IMF-World Bank meetings

Why you won’t hear enough about the Gaza peace plan at IMF-World Bank week

Expect IMF-World Bank meeting debates over China, the US, Ukraine, and more—behind closed doors

As the trade war resumes, China may be keeping one eye on Trump and one on the Supreme Court

Jobs and AI to dominate the IMF-World Bank Annual Meetings

The five important issues at the IMF-World Bank Annual Meetings

OCTOBER 13 | 5:30 PM ET

Why you won’t hear enough about the Gaza peace plan at IMF-World Bank week

The IMF-World Bank Annual Meetings kicked off today, on the same day that US President Donald Trump visited Israel to mark the implementation of phase one of his Gaza peace plan.

On the surface, the two events seem completely disconnected, but anyone who has been part of international finance over the past two years knows the opposite is true.

On October 8, 2023, I landed alongside my Atlantic Council colleagues in Marrakesh for that year’s IMF-World Bank Annual Meetings. Throughout the airport, our hotel, and the conference venue, television news played the horrific images of October 7 on loop, and the world’s finance ministers and central bank governors were asked for their thoughts on the unfolding war. They largely demurred, arguing that it was too early to tell if there would be any economic repercussions. I criticized that response at the time.

Fast forward to the 2024 spring meetings. Two days before the meetings began, Iran launched hundreds of drones and missiles toward Israel. The markets reacted sharply, and the risk of a wider war trickled into every conversation. But the threat passed, markets rebounded, and the world’s finance ministers went back to business.

Now, here we are again. Financial leaders will discuss tariffs, debt, a US government shutdown, the growth of artificial intelligence, the future of the dollar, the bailout in Argentina, and more. But the one thing they likely won’t talk about is the cease-fire in Gaza.

Economists have been trained for decades to separate the worlds of macroeconomics and geopolitics, despite time and again being reminded that’s not how the world works. Just look back to Russia’s invasion of Ukraine, which triggered the most sweeping sanctions response in history.

Events over the past few years remind us why the Bretton Woods institutions were created in the midst of World War II: to deliver economic prosperity in the hopes of fostering peace. But in recent decades, the world’s financial leaders have focused solely on the prosperity part (with mixed results) and have sometimes forgotten the larger goal.

To continue to earn the trust of the member countries they serve, these institutions must remember their roots. 

OCTOBER 13 | 11:15 AM ET

Expect IMF-World Bank meeting debates over China, the US, Ukraine, and more—behind closed doors

Once again, the International Monetary Fund (IMF) and World Bank Annual Meetings will unfold against a turbulent global backdrop. In their speeches and prepared statements, delegates will raise concerns about the global economic outlook, fret about rising fiscal deficits and hidden risks in private equity and crypto markets, and make the case for their own policy efforts in front of the global community. A joint communiqué is unlikely, in part because both the United States and China will not agree to language aimed at reining in their isolationist or mercantilist tendencies for the benefit of the rest of the world.

But this is not what observers should focus on most this week. Instead, it’s worth closely watching for a hint of what is happening behind closed doors. There, conversations will focus on the few areas for which the two institutions still enjoy the support of their major shareholders—not the least because the IMF’s and World Bank’s considerable financial resources look ever more appealing to finance ministers who are running out of fiscal space at home.

The United States and the IMF

To begin with, most delegations will be keenly interested in Washington’s relationship with the Bretton Woods twins. US Treasury Secretary Scott Bessent signaled support for the institutions at the spring meetings this year, recently firmed up by the US intervention in the Argentine peso. But while policymakers may talk of partnership, the power asymmetry within the IMF remains evident.

There is a possible upside to greater US engagement—including improved cooperation on major lending cases and a push for the IMF to strengthen its surveillance arm, a core mandate much neglected in recent years. Similarly, the United States could collaborate with the two Bretton Woods institutions to ensure that countries meet their loan conditions, enabling timely repayment. The administration might even convince Congress to ratify the 2023 quota increase, shifting the fund’s finances to a more permanent capital base.

But there is also a risk. Already reeling from the dissolution of the US Agency for International Development, many delegates are bracing for US demands to cut climate and, perhaps, development programs at the IMF and World Bank, which could lead to substantial friction with emerging market and developing countries. Moreover, there are concerns that the United States could politicize both lenders’ loan operations, exposing all shareholders to the risks of misconstrued lending programs.

Read more

Econographics

Oct 13, 2025

Expect IMF-World Bank meeting debates over China, the US, Ukraine, and more—behind closed doors

By Martin Mühleisen

Behind closed doors, delegates are likely to tackle questions around Washington’s relationship with the IMF, China’s economic performance, and the role of the Bretton Woods institutions.

China Financial Regulation

OCTOBER 12 | 4:36 PM ET

As the trade war resumes, China may be keeping one eye on Trump and one on the Supreme Court

The big question in Washington this weekend, following the latest exchange in the US-China trade war: What went wrong?

On Thursday, China announced sweeping new export controls on rare earths, and the following day, US President Donald Trump threatened to reinstate 100 percent tariffs on Chinese goods (on top of existing tariffs) and cancel his long-awaited meeting with Chinese President Xi Jinping.

That flurry of action came after a quiet summer, during which the world’s two largest economies put their trade war on hold and Trump said increasingly nice things about Xi. Just three weeks ago, the two leaders had what Trump called a “very productive” phone call, agreeing to finally meet face-to-face in South Korea at the end of October.

Then, on September 29, the US Department of Commerce issued the so-called “affiliates rule,” which—as an interim final rule—went into effect immediately, without full notice and comment. It placed export controls on thousands of foreign companies that are 50 percent owned or controlled by listed entities. Even though the rule doesn’t mention China, Chinese companies are on the lists, so the measure directly affects them.

Beijing viewed the move as a violation of the spirit of Geneva, where US Treasury Secretary Scott Bessent and his counterpart, He Lifeng, brokered a temporary truce in May. So on Thursday, China added five new elements to its rare-earth licensing regime. Remember, this is the same authority that caused supply shortages at Ford factories in Michigan in June—and arguably pushed Trump and Xi to the negotiating table in the first place.

Trump, of course, reached for his favorite tool in response: tariffs. And now, many are watching to see whether Asian markets dip on Monday into what could be their biggest drawdown in months. Trump, perhaps wary of the market reaction, posted on Truth Social on Sunday, “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment.”

But there’s something I think analysts are missing in all of this: the Supreme Court.

Read more

New Atlanticist

Oct 12, 2025

As the trade war resumes, China may be keeping one eye on Trump and one on the Supreme Court

By Josh Lipsky

The US president’s leverage with Xi Jinping could be undercut by the Supreme Court’s deliberations.

China Trade and tariffs

OCTOBER 10 | 9:28 AM ET

Jobs and AI to dominate the IMF-World Bank Annual Meetings

The GeoEconomics Center’s Sophia Busch and Bart Piasecki outline what to expect at the 2025 IMF-World Bank Annual Meetings.

OCTOBER 8 | 2:28 PM ET

The five important issues at the IMF-World Bank Annual Meetings

The International Monetary Fund (IMF) and World Bank are gearing up for their annual meetings next week. Amid increasingly high stakes, this year’s gathering has special significance, seeing as the United States, after having withdrawn from several other international organizations and agreements, still remains active in the two Bretton Woods institutions.

At these annual meetings, the IMF and the World Bank will face five important issues, which span both near-term economic prospects and more fundamental, longer-term challenges confronting the global economy.

1. Navigating growth—and inflation

Recent data show a rather resilient global economy, particularly in the United States. Despite concerns about rising tariffs and ongoing uncertainty, economic activity has held up since the second quarter of the year—so much so that 2025 gross domestic product (GDP) growth estimates have been recently revised upward, to 3.2 percent globally (according to the Organisation for Economic Co-operation and Development) and 2.5 percent for the United States (according to Goldman Sachs). Stock markets have also performed well, with the MSCI World Index posting a 14.3 percent return year-to-date, roughly matching the S&P 500’s 14.4 percent, though a price-to-earnings ratio of thirty (compared to a long-term average of nineteen) suggests the market valuation could be stretched. Global inflation has slowed noticeably, from 5.67 percent in 2024 to an estimated 4.29 percent this year. In the United States, the consumer price index growth rate fell from 3 percent in January to 2.3 percent in April, before rebounding to 2.9 percent in August.

But this resilience may not last. Evidence suggests that the good performance of the global economy and stock markets has been narrowly based, driven by a handful of high-tech corporations (the so-called Magnificent Seven) pouring money into artificial intelligence (AI) hardware, software, and data centers. In fact, according to JP Morgan Asset Management, AI-related capital expenditures have accounted for 1.1 percent of the 1.6 percent GDP growth in the first half of 2025. Such intensive investment could prove unsustainable, and a slowdown could ripple through the broader economy and stock markets. Meanwhile, US importers are likely beginning to pass more of the costs of tariffs onto retail customers, driving up consumer prices. If new tariffs keep coming, that would sustain the inflation process going forward.

It is up to the IMF to present a convincing analysis of the economy’s vulnerability to concentration risk (dependence on AI related activities) and the likely delayed effects of rising tariffs, which boost the likelihood of mild stagflation in the near future, especially in the United States; it is also up to the Fund to advise countries to adopt policies to mitigate this risk. This could be a challenge, especially when major economies can point to decent economic performance so far this year and may feel complacent.

Read more

Econographics

Oct 8, 2025

From US tariffs to Argentina’s crisis: The five important issues at next week’s IMF-World Bank Annual Meetings

By Hung Tran

The IMF and the World Bank will face five important issues, which span both near-term economic prospects and more fundamental, longer-term challenges confronting the global economy.

Argentina Financial Regulation

The post Behind the scenes of the IMF-World Bank Annual Meetings as leaders adjust to a new normal of uncertainty appeared first on Atlantic Council.

On Thursday, China announced sweeping new export controls on rare earths, and the following day, US President Donald Trump threatened to reinstate 100 percent tariffs on Chinese goods (on top of existing tariffs) and cancel his long-awaited meeting with Chinese President Xi Jinping.

That flurry of action came after a quiet summer, during which the world’s two largest economies put their trade war on hold and Trump said increasingly nice things about Xi. Just three weeks ago, the two leaders had what Trump called a “very productive” phone call, agreeing to finally meet face-to-face in South Korea at the end of October.

Then, on September 29, the US Department of Commerce issued the so-called “affiliates rule,” which—as an interim final rule—went into effect immediately, without full notice and comment. It placed export controls on thousands of foreign companies that are 50 percent owned or controlled by listed entities. Even though the rule doesn’t mention China, Chinese companies are on the lists, so the measure directly affects them.

Beijing viewed the move as a violation of the spirit of Geneva, where US Treasury Secretary Scott Bessent and his counterpart, He Lifeng, brokered a temporary truce in May. So on Thursday, China added five new elements to its rare-earth licensing regime. Remember, this is the same authority that caused supply shortages at Ford factories in Michigan in June—and arguably pushed Trump and Xi to the negotiating table in the first place.

Trump, of course, reached for his favorite tool in response: tariffs. And now, many are watching to see whether Asian markets dip on Monday into what could be their biggest drawdown in months. Trump, perhaps wary of the market reaction, posted on Truth Social on Sunday, “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment.”

Learn more about Trump’s novel tariff policy

Trump Tariff Tracker

The second Trump administration has embarked on a novel and aggressive tariff policy to address a range of economic and national security concerns. This tracker monitors the evolution of these tariffs and provides expert context on the economic conditions driving their creation—along with their real-world impact.

But there’s something I think analysts are missing in all of this: the Supreme Court.

Why did China feel it could respond so aggressively? Perhaps it miscalculated, expecting Trump to hold back. Or perhaps it is thinking past October. In the first week of November, the first case over the US president’s use of tariffs goes before the Supreme Court—within days, if not hours, of Trump and Xi’s scheduled (and not yet canceled) meeting in South Korea. 

The US president’s leverage for the meetings could be undercut in real time, depending on justices’ comments during oral arguments, which may indicate how the court will rule. The very tool Trump turned to on Friday, the 100 percent tariff threat on Beijing, might not even be available to him once the court makes its decision (likely in the coming months). 

And while the Trump team insists it has a range of backup plans, none is as potent as the US president’s trade powers under the International Emergency Economic Powers Act. That’s why the White House has leaned so heavily on the law.

Sometimes it’s helpful to take a step back and look at the whole board. If everyone is confused about why China made such a seemingly rash move, it’s worth asking what else they might be watching. My bet: They’re watching the Supreme Court.

Josh Lipsky is chair of international economics at the Atlantic Council and the senior director of the Atlantic Council’s GeoEconomics Center.

This post is adapted from the GeoEconomics Center’s weekly Guide to the Global Economy newsletter. If you are interested in getting the newsletter, email SBusch@atlanticcouncil.org.

The post As the trade war resumes, China may be keeping one eye on Trump and one on the Supreme Court appeared first on Atlantic Council.

In the long run, a weakened Russia and a Ukraine that succeeds in reclaiming as much of its occupied territory as possible is in line with Turkey’s interests, as it would reinforce Ankara’s strategic role in the Black Sea and the Mediterranean Sea. This would encourage both the United States and the European Union (EU) to include Turkey in bilateral and multilateral defense projects, as well as to supply Turkey with the military equipment it needs.

But in the short term, Turkey’s close energy cooperation with Russia presents a challenge. Trump’s demand that Europe and NATO allies end their energy trade with Russia, which he repeated both in his United Nations General Assembly (UNGA) opening speech and in front of the press with Erdoğan, is actually something that Turkey has been taking precautions about for a long time. However, Trump’s call to stop importing Russian oil comes as Washington and Ankara are expanding their energy cooperation. In the same week as the White House meeting, the United States and Turkey signed a Memorandum of Understanding on Strategic Civil Nuclear Cooperation and Turkey’s state-owned BOTAŞ signed a major agreement to import US liquefied natural gas (LNG). In addition to its agreements with US companies, Turkey has signed LNG deals totaling 15 billion cubic meters (bcm) with several global firms.

From now through 2028, Turkey could source up to 36 percent of the gas it imported from Russia in 2024 from new suppliers. This diversification is significant, as Turkey’s twenty-five-year, 16 bcm annual gas agreement with Russia is set to expire in 2026. This step will substantially weaken Russia’s position as a natural gas exporter to Turkey and increase Ankara’s bargaining power. However, in the near term, it does not seem likely that Turkey will completely end its energy relationship with Russia. Thus, the increasing energy and trade cooperation between Turkey and the United States should be read as both a furthering of Turkish-US bilateral relations and an effort to curb Russian influence.  

With political leadership in Turkey and the United States doing the groundwork, companies from both countries can explore opportunities to cooperate in the South Caucasus, Iraq, Syria, and Libya, potentially contributing to prosperity and peace in these areas.

Turkey’s efforts to diversify its energy sources

Long before Russia’s full-scale invasion of Ukraine, Turkey realized that Russia wouldn’t hesitate to use energy as a weapon. It learned this lesson when Gazprom cut Turkey’s gas supply by 50 percent during the harsh winter of 2016 in retaliation for the downing of a Russian jet. In response, Turkey took steps to ensure its own energy security while contributing to that of Europe.

Turkey significantly diversified its energy sources and mix by increasing renewables and importing LNG, becoming the second-largest importer of US LNG in Europe in 2017. It also increased its gas storage capacity, ranking second in Europe in terms of LNG regasification capacity in 2024, with three floating storage regasification units and two LNG terminals.

Turkey has also diversified its pipelines, with the Trans-Anatolian Natural Gas Pipeline (TANAP) delivering Azerbaijani Shah Deniz gas to Turkey since 2018 and the Trans-Adriatic Pipeline (TAP), operational since 2020, carrying that gas to Europe. This solidified Turkey’s role as a key transit country, especially after European countries reduced their Russian gas imports following Russia’s full-scale invasion of Ukraine.

Last year, Turkey increased its LNG purchases from the United States, both for domestic consumption and for trade with third countries. A major LNG import and trade deal was signed in 2024 between Turkey’s state-owned BOTAŞ and ExxonMobil, signaling a growing US share in the Turkish market over the next decade. In March of this year, Turkey also signed an agreement with US firms to develop its own shale fields.

During the UNGA meetings last week, the team led by Turkish Energy Minister Alparslan Bayraktar concluded additional energy deals. Turkish state-owned BOTAŞ and Mercuria signed an agreement for the import of approximately 70 billion cubic meters of US LNG over twenty years. This agreement also includes distributing US-sourced LNG to Europe and North Africa, contributing to a gradual shift in Europe from Russian to US gas. Similarly, the Memorandum of Understanding on Strategic Civil Nuclear Cooperation, signed during Erdoğan’s Washington visit, will contribute to Turkey’s energy security and reduce its dependence on Russian energy through the transfer of US small modular reactors and nuclear technology.

Lingering dependence on Russia

Despite Turkey’s efforts to reduce dependence on Russian gas, imports from Russia increased after 2022. According to Turkey’s Energy Market Regulatory Authority (EPDK), Russian gas accounted for 39.5 percent of total gas imports in 2022, 42.27 percent in 2023, and 41.3 percent in 2024.

After halting crude oil and petroleum product imports from Iran in 2019, Turkey has increasingly relied on Russia for oil. According to EPDK data, the shares of imports from the top two suppliers, Russia and Iraq, were respectively: 40.75 percent and 26.39 percent in 2022, 51 percent and 20 percent in 2023, and 66 percent and 9.8 percent in 2024. This increase is likely due to two reasons: First, European countries purchased Russian oil indirectly through Turkey. Second, the Kurdistan Regional Government of Iraq (KRG) halted oil exports over the past two-and-a-half years due to a revenue-sharing dispute between the central Iraqi government and the KRG that resulted in an arbitration case in the International Criminal Court between Turkey and Iraq. Now that this issue has been resolved, oil exports through Turkey’s Ceyhan port have resumed. Combined with the EU’s commitment to halt imports of Russian fossil fuels by the end of 2027, this could lead to a significant decline in Turkey’s oil imports from Russia in a few years.

US-Turkey cooperation in challenging regions

The United States’ efforts to support US business interests in regions where US military presence has declined provide opportunities for energy cooperation with Turkey in third countries. Trump’s fossil fuel-friendly policies are encouraging US oil and gas companies to enter new markets, creating an opportunity to collaborate with Turkish firms.

Turkey played a key role in Azerbaijan’s victory over Armenia in 2020 and the return of Nagorno-Karabakh to rule from Baku in 2023, providing critical military and strategic support. Turkey advocated the opening of the so-called “Zangezur Corridor,” which it sees as part of the Middle Corridor, linking Azerbaijan to Nakhichevan and ultimately to Turkey—thereby connecting Europe to Central Asia and eventually to China. However, Armenia delayed implementation of the corridor provision from the 2020 deal, likely due to concerns from Russia and Iran, as well as due to Azerbaijan’s insistence that it get the control of the road without Armenian border or customs checks on Armenian territory. After US mediation, the corridor was rebranded the Trump Route for International Peace and Prosperity, which could check Russian and Iranian influence in the region. If the project succeeds, the US and Turkish companies which have already played a significant role in regional infrastructure projects are expected to collaborate in building and operating the route.

Turkey also played a major role in the overthrow of the Bashar al-Assad regime in Syria. Throughout the Syrian civil war, Turkey secured a key region near its border in cooperation with Syrian opposition forces and is expected to play a critical role in strengthening the new regime’s military and administrative capacities. If successful, a US-mediated agreement between the Syrian Democratic Forces (SDF) and Syria’s interim government, as well as efforts to broker an agreement between Israel and Syria, would reduce tensions in the country. Turkey and Gulf countries are expected to contribute significantly to Syria’s reconstruction, including via energy projects. In May, Turkish, US, and Qatari companies signed a $7 billion agreement to build natural gas and solar power plants in Syria, aiming to meet much of the country’s energy needs with a combined 5,000 megawatts over the next three years.

In Iraq, with the mission of the US-led Global Coalition to Defeat ISIS nearing its end, US troops are shifting from Baghdad and western Iraq to Erbil. In 2024, Turkey deepened ties with Baghdad by providing military training and capacity-building, conducting joint exercises, and lending support in areas such as electronic warfare and cybersecurity. Given its long fight against the Kurdistan Workers’ Party (PKK), and its support for the KRG’s Peshmerga during ISIS’s occupation of Iraq from 2014 to 2017, Turkey has over one hundred military installations in the KRG as of 2024.

Both Turkey and the United States played a critical role in resolving the oil revenue dispute between Baghdad and the KRG, thus enabling the resumption of operations for US and Turkish companies in Iraq. In May, the KRG signed major oil and gas deals with two US companies during their visit to Washington.

Turkish and US companies are expected to work more closely with both the KRG and the Iraqi federal government on new energy and infrastructure projects. Given Turkey’s extensive military presence in the KRG and its recent diplomatic initiatives—including Foreign Minister Hakan Fidan’s meeting with Iran-backed militias in Iraq last month—Turkey seems poised to play a leading role in ensuring security and stability in the region, in partnership with the United States.

Recent developments suggest that Libya is emerging as another area of potential energy cooperation between Turkish and US companies. Turkey has shifted from solely supporting the Tripoli-based Government of National Unity to also engaging with the Benghazi-based administration in eastern Libya led by Khalifa Haftar. The first sign of this shift came in April, when Haftar’s son Saddam visited Turkey and met with the Turkish defense minister and senior military officials. This engagement has made it more likely that Benghazi’s parliament will approve Turkey’s 2019 exclusive economic zone agreement with Tripoli. This would mark a milestone for Turkey’s sovereign rights and energy exploration efforts in the Eastern Mediterranean. Following Turkish intelligence chief İbrahim Kalın’s meeting with Haftar in Libya in early September, there are growing rumors that Haftar may soon visit Turkey.

Through its maritime and defense cooperation agreements with the Tripoli government, Turkey has established itself as a key political and military actor in Libya, operating from two military bases—a naval and land base at Misrata and an air base at Al-Watiya —since May 2020. It currently supports the Tripoli-based government’s forces, including by providing unmanned aerial vehicles, troops, military advisors, electronic warfare systems, air defense units, and tactical missiles. Turkey’s broader goal is to leverage this military footprint to support the reconstruction of Libyan state institutions, facilitate national reconciliation—a policy promoted by the Turkish Defense Ministry under the slogan “One Libya, one Army”—and ensure Turkey’s economic rights in the Eastern Mediterranean.

In August, Libya’s National Oil Corporation (NOC) signed a memorandum of understanding with ExxonMobil. Given ExxonMobil’s prominent role in Eastern Mediterranean gas exploration, cooperation between the NOC, ExxonMobil, and Turkey’s BOTAŞ appears increasingly likely.

***

Looking across all these regions of cooperation, a clear pattern emerges: In areas of past or ongoing conflict where US companies are looking to establish or expand their presence, Turkey is playing a crucial role in ensuring the security and stability necessary for trade and investment. Moreover, Turkey is expected to collaborate with US firms in these regions. As Turkey increases energy collaboration with Washington, diversifies its energy imports away from Russia, and increases its military presence in regions where the United States is reducing its footprint, a new model of US–Turkey cooperation is emerging. This model is based on shared commercial interests, strategic regional presence, and burden-sharing that leverages the United States’ and Turkey’s complementary soft and hard power capabilities.

Pınar Dost is a nonresident fellow at Atlantic Council Turkey Program and a historian of international relations. She is also the former deputy director of Atlantic Council Turkey Program. She is an associated researcher with the French Institute for Anatolian Studies.

The views expressed in TURKEYSource are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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At these annual meetings, the IMF and the World Bank will face five important issues, which span both near-term economic prospects and more fundamental, longer-term challenges confronting the global economy.

1. Navigating growth—and inflation

Recent data show a rather resilient global economy, particularly in the United States. Despite concerns about rising tariffs and ongoing uncertainty, economic activity has held up since the second quarter of the year—so much so that 2025 gross domestic product (GDP) growth estimates have been recently revised upward, to 3.2 percent globally (according to the Organisation for Economic Co-operation and Development) and 2.5 percent for the United States (according to Goldman Sachs). Stock markets have also performed well, with the MSCI World Index posting a 14.3 percent return year-to-date, roughly matching the S&P 500’s 14.4 percent, though a price-to-earnings ratio of thirty (compared to a long-term average of nineteen) suggests the market valuation could be stretched. Global inflation has slowed noticeably, from 5.67 percent in 2024 to an estimated 4.29 percent this year. In the United States, the consumer price index growth rate fell from 3 percent in January to 2.3 percent in April, before rebounding to 2.9 percent in August.

But this resilience may not last. Evidence suggests that the good performance of the global economy and stock markets has been narrowly based, driven by a handful of high-tech corporations (the so-called Magnificent Seven) pouring money into artificial intelligence (AI) hardware, software, and data centers. In fact, according to JP Morgan Asset Management, AI-related capital expenditures have accounted for 1.1 percent of the 1.6 percent GDP growth in the first half of 2025. Such intensive investment could prove unsustainable, and a slowdown could ripple through the broader economy and stock markets. Meanwhile, US importers are likely beginning to pass more of the costs of tariffs onto retail customers, driving up consumer prices. If new tariffs keep coming, that would sustain the inflation process going forward.

It is up to the IMF to present a convincing analysis of the economy’s vulnerability to concentration risk (dependence on AI related activities) and the likely delayed effects of rising tariffs, which boost the likelihood of mild stagflation in the near future, especially in the United States; it is also up to the Fund to advise countries to adopt policies to mitigate this risk. This could be a challenge, especially when major economies can point to decent economic performance so far this year and may feel complacent.

2. Managing the “dual shock”

Many countries are currently grappling with a “dual shock”: rising US tariffs on one hand and China exporting its industrial overcapacity on the other. In response to declining shipments to the United States, China has redirected exports to third countries, which is set to boost its overall trade surplus to a record $1.2 trillion this year. Put simply, after helping to hollow out the US manufacturing base, Beijing is now starting to do the same to other economies—including Europe and emerging markets that rely on a manufacturing-for-export growth model. These countries are increasingly squeezed by US protectionism and Chinese mercantilism.

How will the IMF guide its members? Will it encourage a “back to basics” approach, based on mutually beneficial policies that reduce external and fiscal deficits, promote free and largely balanced trade, and create growth opportunities for developing countries? Or will it focus on designing second-best solutions—in response to the problems that its two largest member states are creating?

3. Doubling down or easing off on Argentina?

In a scene of déjà vu, the IMF is once again dealing with Argentina’s socioeconomic crisis—shortly after the institution approved its twenty-third assistance package to the struggling nation in April. The twenty-billion-dollar loan comes on top of the $43 billion that Argentina still owes, making the country the largest lending risk exposure of the IMF. President Javier Milei has managed to turn a 5 percent fiscal deficit in 2023 into a 0.3 percent surplus in 2024, and he has reduced annual inflation from nearly 300 percent in early 2024 to under 40 percent today. Argentina’s GDP growth is projected to reach 5.5 percent this year. Yet, Milei’s coalition just suffered a major defeat in an election in Buenos Aires ahead of the midterm polls in late October, shaking investor confidence and triggering a sudden run on the peso, which remains overvalued when adjusted for inflation.

It is not clear how the IMF will deal with the unfolding currency crisis. Will it change its conditionality on the Argentina program to make it more socially and politically sustainable? Or will it double down on the current program, especially given the United States’ promise of a twenty-billion-dollar currency swap line to support Argentina?

4. Dealing with the US administration’s agenda

In line with the Trump administration’s call to the IMF and World Bank to focus on their core missions, the institutions have toned down references to their activities regarding climate change, gender equality, inclusive growth, and sustainable development. It’s unclear, however, whether that will satisfy the United States—or whether Washington will push for even greater compliance with its agenda. 

A key question is how the World Bank will respond to US pressure to “graduate” middle-income countries from World Bank borrowing and end lending to China altogether. It also remains to be seen how Daniel Katz, recently approved by the IMF Executive Board to be first deputy managing director, will navigate his new role. Katz, who served as chief of staff to US Treasury Secretary Scott Bessent, has argued that the United States should work to limit China’s role at the IMF and the World Bank—a stance that closely mirrors the administration’s position.

5. Improving the sovereign debt restructuring process

Finally, the IMF and the World Bank have an opportunity to improve the sovereign debt restructuring process. Building on progress in the Global Sovereign Debt Roundtable, the IMF and World Bank should encourage parallel negotiations between debtor countries and their creditors—both official and private lenders—rather than sequential talks. Acting as an honest broker and providing necessary information to both negotiating groups, the IMF could help reduce delays and facilitate timely and fair restructuring agreements.

Participants and observers will closely follow this year’s annual meetings, including these five important issues. Doing so will help them better understand how the United States will continue to interact with other countries in the multilateral setting of the Bretton Woods institutions.

Hung Tran is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center, a senior fellow at the Policy Center for the New South, a former executive managing director at the Institute of International Finance, and a former deputy director at the International Monetary Fund.

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On October 7, Imran Bayoumi, associate director of the GeoStrategy Intiative, was quoted in the Washington Examiner on the meeting between Canadian Prime Minister Mark Carney and President Donald Trump. Bayoumi argued that Prime Minister Carney is hoping to negotiate a deal that would provide some tariff relief.

Staff

Imran Bayoumi

Associate Director

GeoStrategy Initiative Scowcroft Center for Strategy and Security

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In May 2025, the China Global South Initiative (CGSi), a collaboration between the Keough School of Global Affairs and the Atlantic Council Global China Hub, convened a group of twenty-two African environmental experts at the Peduase Valley Resort in Ghana for a three-day workshop on China’s environmental impact in West Africa. This policy workshop, hosted with the support of the Ford Foundation, included representatives from eleven West African countries—Benin, Burkina Faso, Cameroon, Cote d’Ivoire, Ghana, Liberia, Mali, Nigeria, Senegal, Sierra Leone, and Togo—and South Africa. Amid three days of comradery and collaboration, these experts worked together to draft policy memorandums on China’s environmental impact across the region. In the months following the workshop, we worked closely with the authors to curate three briefs—on mining and resource extraction, timber and wildlife, and fisheries and water resources—that identify the challenges and offer actionable policy solutions. We would like to recognize the excellent work of the co-authors who contributed their time and expertise to creating these briefs. In particular we would like to thank the group leaders Abosede Omowumi Babatunde, Ebagnerin Jérôme Tondoh, and Ebimboere Seiyafa and Awa Niang Fall, respectively, for their diligent work.

First and foremost, we would like to thank Caroline Costello, assistant director of the Atlantic Council’s Global China Hub, for her essential contributions to the workshop in Ghana and this collection of issue briefs. Her tireless efforts were truly essential to the success of the project. Ashley Bennett, events strategy program director of the University of Notre Dame’s Keough School of Global Affairs, provided critical logistical support across a dozen countries. Alexandra Towns at the Keough School and Cate Hansberry, Beverly Larson, and Jeff Fleischerat the Atlantic Council provided expert editorial support. Guidance from Notre Dame’s Pamoja Africa Initiative helped us identify contributors, and the Kellogg Institute helped support their participation. We would also like to thank the excellent staff of the Peduase Valley Resort for their hospitality during the May 2025 workshop. Last, but not least, we would like to thank our partner, the Ford Foundation, whose support made the workshop and these policy briefs possible. Ford is not responsible for the content of these policy briefs.

Executive summary

West Africa’s forests are vital for climate regulation, biodiversity conservation, poverty alleviation, and economic growth. They store carbon, protect watersheds, and sustain millions of rural livelihoods. However, accelerating deforestation, habitat loss, illegal wildlife trade, and unsustainable resource extraction—often linked to Chinese actors—threaten these critical functions. Chinese timber companies, agribusinesses, infrastructure developers, and wildlife traders have increasingly contributed to forest degradation across the region. Illegal logging— particularly of rosewood and other valuable timber in Nigeria, Ghana, Gambia, Mali, Côte d’Ivoire, Sierra Leone, and Liberia— has fueled widespread forest loss, including in protected areas. Driven almost entirely by Chinese demand, rosewood is now the world’s most trafficked illegal wildlife product in terms of both value and volume, surpassing ivory and rhinoceros horn combined. Though Chinese investments in the region’s timber industry have brought some economic benefits, the environmental costs far outweigh the local gains. Largescale land acquisitions and infrastructure projects frequently lead to forest conversion, erode community land rights, and put endangered species at risk of extinction. This policy brief examines the environmental and social impacts of Chinese exploitation of forests and wildlife in West Africa and offers recommendations to strengthen enforcement, promote accountability, and engage Beijing to address these challenges.

Background

West Africa contains some of the continent’s most intact tropical forests, which support more than nine hundred bird species and nearly four hundred species of terrestrial mammals.¹ The region is recognized as a global biodiversity hotspot and hosts 113 key biodiversity areas across countries such as Guinea, Sierra Leone, Liberia, Côte d’Ivoire, Ghana, Togo, Benin, Nigeria, and Cameroon.² However, these ecologically important regions are under increasing threat, with more than 265,000 hectares of forest lost in the past decade.³

A significant driver of this forest loss is the growing footprint of Chinese economic activity in the region. China’s involvement in timber extraction, agribusiness, infrastructure development, and wildlife trade has been linked to deforestation, biodiversity loss, and the breakdown of essential ecosystem services such as climate regulation, water provision, and carbon storage.⁴ The demand for valuable hardwoods, especially rosewood—driven almost entirely by the Chinese market—has led to widespread illegal and unsustainable logging, often in protected areas and forest reserves.⁵

Over the past two decades, Chinese investments in West Africa—estimated at more than $200 billion as of 2021—have expanded rapidly across various sectors.⁶ While these investments have spurred infrastructure development and trade, they have also caused serious environmental damage. In countries such as Ghana, Liberia, Nigeria, Côte d’Ivoire, and Sierra Leone, Chinese firms are frequently associated with both legal and illicit timber operations. In addition, Chinese-backed agribusiness ventures, particularly in rubber and palm oil, have led to extensive land acquisitions and deforestation, undermining traditional land tenure systems and disrupting local livelihoods.⁷

Chinese infrastructure and mining projects have opened previously undisturbed forest and conservation areas, fragmented habitats and weakened the ecological integrity of critical landscapes. These developments often erode community-based forest management practices and contribute to the marginalization of local populations.⁸

Despite existing legal and voluntary frameworks—including forest codes, environmental impact assessment laws, and international commitments such as Reducing Emissions from Deforestation and Forest Degradation (REDD+, developed by the United Nations Framework Convention on Climate Change) and the African Forest Landscape Restoration Initiative—many West African countries struggle with enforcement due to weak institutional capacity, underfunded regulatory agencies, corruption, limited monitoring, and political interference.⁹ In many cases, Chinese firms bribe local officials to push forward opaque timber and land deals.¹⁰ The co-optation of local elites further shields environmental offenders from accountability.¹¹

There is an urgent need for coordinated national and regional responses to address these challenges. Key policy priorities should include strengthening environmental governance, enhancing transparency in investment and land deals, securing community land rights, and holding Chinese firms accountable for environmental damage. Without these measures, the region’s forests—and the critical ecological and social benefits they provide—will remain at risk from unchecked Chinese firms’ exploitation.¹²

Evidence

The evidence of China’s role in accelerating deforestation and biodiversity loss in West Africa is substantial and alarming. Driven by surging demand for valuable timber and wildlife products Chinese firms have emerged as the dominant foreign actors in the trade. Even when there are existing protections for threatened tree species (e.g., the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), these logging activities, which are often conducted illegally or through weak regulatory channels, have far-reaching consequences for ecosystems and rural livelihoods.¹³

At the heart of the crisis lies demand for rosewood, a valuable tropical hardwood used in traditional Chinese furniture. According to the Environmental Investigation Agency, rosewood is now the most trafficked illegal wildlife product globally—by both value and volume—surpassing ivory, rhinoceros horn, and big cats combined.¹⁴ The value of rosewood exports from West Africa to China was estimated to have surpassed $2 billion between 2017 and 2022, with logs fetching on average more than $20,000 per metric ton in 2021.¹⁵ China’s domestic market demand drives rampant logging in West Africa, with an estimated 70 percent of logging in Ghana, 65 percent in Cameroon, and 56 percent in Nigeria classified as illegal.¹⁶ Despite an export ban, Ghana sent 540,000 metric tons of rosewood to China between 2012 and 2019—equal to six million trees or about 2,000 acres of forest loss.¹⁷

The financial losses attributed to illegal timber harvesting are staggering. The World Bank estimates that illegal logging deprives source governments worldwide of between $7 billion and $12 billion annually.¹⁸ In 2018, illegal deforestation cost countries approximately $4,000 per hectare in lost tax revenue, ecosystem degradation, and social conflict.¹⁹ Each year Nigeria loses $191 million to $383 million in tax revenues; Cameroon loses $51 million to $103 million; Côte d’Ivoire loses $38 million to $76 million; and The Gambia loses $4 million to $9 million.²⁰ The illegal rosewood trade—driven by corruption, the misuse of licenses to recover trees downed by storms or construction, and weak oversight – has been particularly profitable.

Criminal and extremist networks use profits from this illicit trade to fund their operations. As of 2020, more than 1 million trees were illegally harvested and sent to China from Senegal’s Casamance region, helping to fund separatist groups such as the Movement of Democratic Forces of Casamance.²¹ In Mozambique, the rosewood trade fuels al-Shabab militants linked to the Islamic State of Iraq and al-Sham (ISIS).²² Chinese smugglers source rosewood from Nigerian regions controlled by Boko Haram, allowing the group to profit.²³ In Mali, despite a 2020 national export ban, nearly 150,000 tons of rosewood—equivalent to 220,000 trees—were exported to China.²⁴ In Mali, al-Qaeda-linked Jama’a Nusrat ul-Islam wa al-Muslimin militants profit by controlling access to rosewood forests.²⁵

Corruption plays a central role in sustaining the illegal timber trade. Chinese companies often operate through shell firms or local agents to obscure accountability.²⁶ Regulatory enforcement remains underfunded and inconsistent, while laws requiring environmental impact assessments for logging are frequently bypassed or ignored. Forestry agencies and customs offices are often compromised by corruption.²⁷ One of the most egregious cases happened in Nigeria in 2017, when Chinese customs authorities intercepted 1.4 million illegal rosewood logs valued at $300 million, facilitated by nearly $1 million in bribes to Nigerian officials.²⁸ Chinese-funded infrastructure also contributes to deforestation.

Chinese-funded infrastructure also contributes to desforestation. Chinese-financed roads, ports, and dams often cut through protected areas, offering loggers access to previously unreachable forests. Operating through local intermediaries, Chinese timber companies extract high-value hardwoods such as rosewood, teak, and ebony either illegally or through legal loopholes. Based on geospatial analysis, approximately 10 percent of Ghana’s critical forest reserves and 11 percent of Côte d’Ivoire’s over-lap with Chinese-sponsored infrastructure.²⁹ One of the most contested cases is Ghana’s Atewa Forest Reserve, a biodiversity hot spot threatened by Chinese bauxite mining.³⁰ Despite strong civil-society opposition, the government proceeded with road construction in anticipation of mining operations, causing significant environmental degradation including forest fragmentation, incursions into conservation zones, and habitat destruction. Deforestation disrupts rainfall patterns, accelerates erosion, and increases the frequency of droughts and floods, undermining agricultural productivity in a region where 70–80 percent of rural livelihoods depend on farming.

Large-scale agricultural ventures compound these impacts. In Liberia, Côte d’Ivoire, Nigeria, and Cameroon, Chinese agribusinesses have cleared vast tracts of forest for rubber, palm oil, and rice cultivation. Free, prior, and informed consent policies are on the books in all of these nations, requiring consultations with indigenous peoples and local communities.³¹ But agribusinesses routinely ignore such requirements. In
Cameroon, Sudcam (a subsidiary of China Hainan Rubber Group) cleared more than 10,000 hectares between 2011 and 2018 and contributed to 45,000 hectares of deforestation.³² These enterprises displace communities without proper compensation.

In addition to timber, China’s demand for exotic wildlife has turned West Africa into a hub for global wildlife trafficking. Since 2015, Nigeria has been China’s primary source for ivory and pangolin scales. Between 2018 and 2023, seizures in Nigeria included more than 30 metric tons of ivory and 167 metric tons of pangolin scales, equivalent to at least 4,400 elephants and hundreds of thousands of pangolins, respectively.³³ While West African countries are signatories to relevant international frameworks like CITES, which monitors the trade in endangered wild animals and plants, in many West African countries sales continue due to weak enforcement, corruption, poor monitoring, and lack of effective local regulatory mechanisms.³⁴

China has responded to criticism of its global development and infrastructure initiatives by releasing voluntary environmental sustainability guidelines, including the 2017 Guidance on Promoting a Green Belt and Road and the 2021 Green Development Guidelines for Overseas Investment.³⁵These guidelines encourage Chinese firms to abide by host country laws, but they lack enforcement mechanisms. Similarly, China’s 2019 Forest Law discourages illegal timber imports but lacks provisions for supply chain oversight. Firms can evade prosecution by claiming ignorance of illegality.³⁶ A 2022 draft regulation aims to apply aspects of China’s domestic Forest Law to its international practices, but it lacks the enforcement mechanisms necessary to make the international supply chain traceable.³⁷

In short, China’s timber harvesting, infrastructure construction, agriculture investments, and wildlife trade have contributed significantly to deforestation and biodiversity loss in West Africa. The convergence of high domestic Chinese market demand, weak governance across West Africa, lapse enforcement within China, and corruption has created a perfect storm of environmental degradation. Addressing this behavior requires a strong political commitment to combat criminal activity and shift the incentives that drive the market for illegally traded wildlife products. To address the problem, African countries must coordinate policy responses across the local, regional, and international levels. For its part, China should adopt and strictly enforce mechanisms that ensure responsible practices toward West African forests and wildlife.

Policy recommendations

Improve oversight and compliance

• Disclose environmental and social impact assessments. To enhance transparency and facilitate oversight. West African governments should require all foreign investments in logging, agribusiness, and infrastructure to conduct and publicly disclose their environmental impact assessments. These results must be made available to relevant local authorities prior to project approval.
• Improve legal transparency. Publish a national land and concession registry that includes all foreign allocations and permits. Ensure contracts are clearly defined, legally binding, and aligned with national conservation laws. Update land tenure legislation to protect customary rights and require public registration of all foreign land concessions. Strengthen customs enforcement in African countries, shared border points, and Chinese ports to prevent the export and import of unverified timber and endangered species.
• Establish escrow accounts to ensure reforestation. Require licensed logging and agribusiness firms to deposit funds into escrow accounts dedicated to ecological restoration. Funds should only be released upon verification of reforestation or land rehabilitation by either a certified private institution or the relevant state agency, depending on relevant laws and regulations. If companies fail to restore the land, the funds should be redirected to local communities for remediation and compensation.
• Create national whistleblower systems. Develop national level secure, multilingual tools—such as short message service (SMS) platforms, mobile apps, and anonymous hotlines—for communities, nongovernmental organizations, and forestry workers to report illegal logging, land grabs, and wildlife crimes. Rather than rely entirely on global reporting platforms that may be inaccessible, national and local level platforms would enable faster and real time detection of illegal logging for prompt action by relevant subnational institutions. Enforce strong legal protections for whistleblowers and environmental defenders. Partner with international bodies such as Interpol, TRAFFIC (a network of two hundred experts on the trade of wild species), and CITES to verify and investigate reported violations.

Raise public awareness

• Support regional civil-society coalitions. Fund and strengthen regional and national coalitions of civil-society organizations that monitor Chinese forestry investments and expose violations of national laws and regulations. Recognize land governed and managed according to traditional community-based systems and build local capacity to negotiate fairer contracts. Equip community actors with tools including drones, Global Positioning System (GPS) devices, and mobile reporting apps to document and report illegal activities in real time.
• Train and protect environmental journalists. Work closely with local and transnational civil society organizations to provide training for local journalists to investigate the illegal timber trade, land seizures, and biodiversity threats linked to foreign investments. Training should focus on developing investigative methods, digital security, environmental law, and data-gathering. National and regional safety support programs should be made available to journalists, including emergency legal support, and encrypted communication platforms for those facing threats or harassment.

Regional cooperation

• Adopt a regional forestry code of conduct. The Economic Community of West African States (ECOWAS) should establish a binding regional code of conduct that sets minimum environmental and social standards for all foreign investments in terms of forests and biodiversity. This framework could be modeled on the Forest Law Enforcement, Governance, and Trade (FLEGT) polices of the European Union or United Kingdom, and include voluntary partnership agreements.³⁸ Collective regional action can encourage individual reform-minded leaders to act as a counterweight against corrupt local officials.
• Create a regional public forestry investment database. Establish and maintain an online database that tracks foreign licenses, timber exports, and environmental violations. Under ECOWAS auspices, this platform should become a regional information hub that documents licensing status, compliance records, and audit outcomes. The intention is to enable public oversight of Chinese and other foreign firms operating in forest and critical biodiversity areas.
• Enhance international coordination. Set up an ECOWAS task force to regularly exchange information on West African forest and wildlife resource exploitation. The task force would facilitate intelligence sharing on illegal timber trade routes and identify specific violations and bad actors. It could facilitate joint investigations into cross-border violations in shared forests such as the Upper Guinea region, which traverses Liberia, Côte d’Ivoire, and Guinea. The group would publish an annual report for ECOWAS members states and make specific recommendations to member countries. The task force could form a collective negotiation platform in collaboration with national forestry commissions to engage Chinese state-owned enterprises and private investors.
• Work with China. Create formal and informal dialogue channels among African environment ministries, ECOWAS, and Chinese embassies and companies to address logging violations and environmental disputes. To enhance contract transparency, the equitable sharing of benefits, and improve oversight, urge Beijing to make its Green Development Guidelines for Overseas Investment mandatory. West African governments should push China publicly and privately to implement timber supply chain tracing and to regularly publish customs data on timber imports into China.

Roland Azibo Balgah is professor of development studies at the University of Bamenda, Cameroon, and visiting professor at Sol Plaatje University, South Africa and University of Cologne, Germany. As a social economist, he researches on the human-nature sustainability nexus, with thrust on hazards, poverty and livelihoods, and sustainable development in Africa.

Caroline Costello is an assistant director with the Atlantic Council’s Global China Hub. Prior to joining the Atlantic Council, Costello worked on the U.S. Department of State’s International Visitor Leadership Program. In previous roles, she has taught English in Xiting, China; interned with the Peace Corps, the Department of State, and Save the Children; and served as the head of Learning Enterprises, an international volunteer program which sends students to teach English in underserved communities abroad.

Moses Fayiah is a forestry lecturer at the Department of Forestry and Wood Science, School of Natural Resources Management, Njala Campus, Njala University, Sierra Leone and has over 10 years of professional experience. He is also the executive director of Universal Consulting Services and the Forum for Environment, Biodiversity and Climate Change in Sierra Leone. His research interests include forest regeneration, sustainable forest management, climate change, forest policy and ecosystem restoration and conservation.

Jean-Luc Kouassi is an assistant professor of forestry and environmental management at the Felix Houphouet-Boigny National Polytechnic Institute (INP-HB) of Cote d’Ivoire with a decade of experience in cacao agroforestry, fire ecology, and GIS. His research explores the intersection of agriculture and sustainability, focusing on climate change mitigation, community empowerment, and sustainable landscape management.

Christine Ajokè I. N. Ouinsavi is a professor at University of Parakou (Benin), where she coordinates doctoral training in natural resources management, chairs the Scientific Committee of Natural Sciences and Agronomy, and leads the Forestry Studies and Research Laboratory. Her research focuses on ecology, agroforestry, climate change, biodiversity conservation, forest management and restoration in tropical regions. As former cabinet minister she led national policies in trade and education, chaired critical commissions, and participated in international negotiations.

Ebagnerin Jérôme Tondoh is an Associate Professor in in ecology and sustainable management of land at Nangui Abrogoua Universiy, Abidjan, Côte d’Ivoire. He has an extensive experience in stakeholder engagement, feasibility studies, and strategic planning. He is currently involved in projects for the sustainable management of tree-based cash crops agroforestry and other climate smart cropping practices. He is also in dialogue with various ministries responsible for forest, agriculture, and the environment in Côte d’Ivoire to provide science-based insights into their activities and develop integrated management plans for the sustainable management of agroecological landscapes.

Issue Brief Oct 6, 2025

Chinese fishing in West Africa: Responding to the environmental and social impacts

By Ebimboere Seiyafa, Awa Niang Fall, Ellis Adjei Adams, Kadidia Kane, Isa Elegbebe Olalekan, Kodjo N’Souvi, and Salamatu Joana Tannor

Chinese companies have rapidly expanded into West Africa’s fishing sector, often operating illegally in prohibited coastal waters.

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Issue Brief Oct 6, 2025

Chinese mining in West Africa: Responding to the environmental and social impacts

By Abosede Omowumi Babatunde, Richard Asante, Joseph Asunka, Joshua Eisenman, Fancies Egu Lansana, Sanusha Naidu, Igwe Ogbonnaya, Youmanli Ouoba, and Boukary Sangare

Chinese entities are expanding legal and illegal mining for minerals in West Africa.

Africa China

The Global China Hub tracks Beijing’s actions and their global impacts, assessing China’s rise from multiple angles and identifying emerging China policy challenges. The Hub leverages its network of China experts around the world to generate actionable recommendations for policymakers in Washington and beyond.

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The post Chinese demand for timber and wildlife in West Africa: Responding to the environmental and social impacts appeared first on Atlantic Council.

Until 2023, the domestic policy focus on boosting consumption was seen as an antidote to this problem. A charitable review of Turkey’s achievements would argue that its growth hasn’t been as badly affected by breakdowns in global trade as that of other countries. Nor is Turkey on the Trump administration’s “Dirty 15” list of markets that have a sizeable goods surplus with the United States, and on which the United States imposed an average tariff far higher than it did before Trump’s tariffs kicked in.

But that policy has brought its own problems—hyperinflation chief among them. It has also had negative consequences for Turkey’s trade balance, which is now firmly stuck in deficit with adjacent current account deficit challenges. The policy normalization under way since Turkey’s 2023 general election relies (among other internal shifts) on a rebalancing of the Turkish growth model, with a renewed emphasis on a trade balance supporting financial stability and rising living standards.

What can this mean in a world that is vastly different from the last time Turkey rode an export-led expansion wave? What clever policies need to be implemented to ensure Turkey harnesses opportunities and mitigates risks? This report will try to answer these questions.

Turkey in the global trade realignment

Over the past few months, the world has needed to adapt to the Trump administration’s high tariffs policy, which is more aggressive than markets and pundits expected. “Reciprocal” country-specific tariffs on any good imported into the United States start at 10 percent and often reach much higher. Given the administration’s self-professed goal of repatriating manufacturing to the United States, exemptions to this policy—even for essential inputs that are currently unavailable in the United States—are very rare.

For now, the Trump administration has shown an uncanny ability to anchor global debates and impose its tariffs without facing much retaliation. However, it seems the United States will remain a strange outlier with its completely different set of policies. Bilateral deals will sometimes bind partners into a specific rate for the United States (in return for a high US tariff lower than it otherwise might have been). But otherwise, markets are still following what has been the general practice of global trade for decades: Countries can set product-specific tariffs and balanced quotas applying to all World Trade Organization (WTO) members or they can enter bilateral trade agreements, which bring tariffs down and lift quotas if they apply.

The reassuring view broadcast by the Turkish government is that the Turkish economy is isolated from new US trade policy.¹ The government also argues that Turkey does 80 percent of the value of its trade with markets with which it has a free-trade agreement (FTA). At 31.2 percent of imports and 41 percent of exports,² the most important of these FTA partners remains the European Union (EU), whose customs union has included Turkey since 1995. The common external tariff policy could have put Ankara in a difficult position had the EU decided to retaliate against US tariffs. But it hasn’t.

Initially Turkey got the basic rate of “only” 10 percent but this was moved up to 15 percent when the EU managed to secure the same rate through the Turnberry deal. This is the bearable tariff rate Turkey will have to face for the foreseeable future, while having to apply slightly lower rates for US manufactured goods than before—as agreed between Trump and Commission President Ursula von der Leyen.

The less reassuring reality is that Turkey is trying to reverse its trade deficit at a time of global trade fragmentation. The International Monetary Fund (IMF) has shown that in the first decade of this century, when Turkish gross domestic product (GDP) accelerated rapidly, trade volume growth was 6.5 percent per annum on average and outpaced global GDP growth by more than  2 percentage points. This outpacing became negligible in the next decade: 3.7 percent trade growth for 3.5 percent GDP growth. In this decade, trade growth has been slightly behind GDP growth, and it might even start to become a drag in the next five years.

Several sticky factors entrench Turkey’s trade deficit. Turkey’s reliance on energy imports has been a key driver, especially in high price environments. This effect is currently muffled. On the other hand, Turkey can’t compete on wages and other production costs as much as the depreciation of the lira would usually imply. Frequent pay adjustments have been unavoidable considering persistent inflation. The monthly Turkish gross minimum wage of $817 is close to Romania’s $955 yet Turkey doesn’t enjoy the same access to the EU single market and continues to exhibit high inflation.

The pre-2023 focus on boosting consumption led to a surge in imports. Meanwhile, lower foreign direct investment (FDI) and an ever greater prevalence of real estate investments over more productive sectors have stymied modernization in Turkey’s manufacturing (see Chart 1). A sectoral study of the imports Turkey needs to produce its own exports shows that this dependency was on a downward trend from early 2013 until September 2019, but that it reversed after this date and the import dependency of exports started to increase rapidly.³ The highest import dependence of exports is observed in the manufacturing sector, including textiles, apparel, and basic metals.

It is imperative to reverse these trends to ensure Turkey can again benefit from its trade links, but the global context will make this more challenging than ever. The United States is adding barriers to its market, which will hamper growth in markets that import goods and services from Turkey. These include the EU but also markets which currently face much higher US tariffs, like China, India and Vietnam. Meanwhile, the output of China’s manufacturing capacity continues to far outstrip the country’s own needs.

Turkey’s trade deficit with China exceeded $30 billion in 2023. Ankara has already been taking targeted measures against cheap supply by primarily targeting Chinese electric vehicles through a flat 40-percent tariff and a minimum per vehicle price of $7,000. Investigations into Chinese solar panel components are ongoing and, in October 2024, Turkey imposed definitive anti-dumping duties on hot-rolled flat steel imports from China, Russia, India, and Japan to protect its domestic steel sector. These escalations have led to formal complaints and disputes at the WTO.

There are some encouraging, if very early and mixed, signs in Turkey’s latest Medium-Term Program, published on September 8. When examining the contribution of production factors to growth, the largest contribution to the 3.3 percent growth in 2024 came from capital stock and employment. In 2025, the main determinants of growth are expected to be total factor productivity and increases in capital stock. For the 3.3-percent growth projected in 2025, capital stock and total factor productivity are expected to contribute 1.3 percentage points and 2 percentage points, respectively. On the other hand, exports net of imports switched from enhancing growth in 2024 back to being a drag on growth in the fourth quarter (Q4) of 2024 and the first two quarters of 2025.

So nothing will fall into Turkey’s lap; it will need to fight for trade to contribute more positively to the economy. Section 2 will take a closer look at the opportunities Turkey should seize.

Opportunities for Turkey to seize

Turning trade into a reliable engine for Turkish growth and prosperity will take hands-on coordination between the Turkish government and firms. It is clear that Turkey cannot rely on its web of extant FTAs. There are opportunities for Turkey to seize by diversifying the substance and the geographic reach of its trade relations. The United States might have changed philosophies, but this doesn’t rule out bilateral trade deals with others. It so happens that the European Union, with which Turkey does almost $250 billion of trade every year, is even more committed to updating these agreements. 

Figure 2 emphasizes the European Union’s central role in Turkish global trade ties, especially as Turkey’s primary export market. This contrasts with major trade partners, such as Russia or China, where large deficits persist.

The long-professed goal of modernizing the customs union has yielded such little progress that it has become the subject of derision. The fact that Turkey and its main trading partner trade in goods and services from each other in a framework settled in the mid-1990s can seem absurd. As economies have evolved, the proportion of goods falling under the customs union has dwindled to only 37.9 percent of Turkey’s exports and 44.1 percent of EU exports.⁴ This does not cover agriculture (although bilateral trade concessions apply), services, or public procurement.

Volatile political relations have been the dominant reason why possibilities for modernizing this relationship have been left unexplored. The revival of High-Level Dialogues on Economics and Trade in 2024 was a good sign. The Turkish side has keenly argued that Brussels has been even more eager to make progress since Trump’s return to the White House. But the readout from the latest meeting in July 2025 still suggests an incremental approach to removing barriers by streamlining customs procedures and revising quotas for some agricultural goods.

How can the level of ambition be raised, bearing in mind the EU’s reticence to discuss free movement of workers or agriculture? Whether or not these qualify as modernizing the customs union, there are three areas in which feasible updates would positively affect Turkish trade.

First, there is a clear case for further alignment on emissions trading systems as Turkey prepares to launch its own in 2026. It is important that this alignment spares Turkey from the EU’s Carbon Border Adjustment Mechanism duties when the system moves into its next phase. The healthy supply of boron, chromium, thorium, tungsten, and cobalt provides the EU with another reason to keep Turkey “in the tent” on carbon emissions. It will also want to ensure Turkey can build out its processing capacities for these critical minerals in a way that is cost-effective. 

Second, although amendments were made in March 2024 to further align Turkish law with the General Data Protection Regulation (GDPR), the EU has not yet issued an “adequacy decision” on Turkish data protection laws. Discussions should aim to bridge any remaining gaps.

And third, geopolitical developments have revived interest in new security arrangements beyond the frozen accession process. Turkey’s role in NATO and the volatile European security landscape—especially concerning the war in Ukraine—make it a vital partner, but innovative partnerships between firms also need to be bolstered. The good news is that June 2025 saw the confirmation that Turkish firms will be able to access loans from the EU’s new fund for defense innovation.

Finally, both sides should continue to think of creative solutions to the disadvantage Turkey has in negotiating its own trade agreements. As part of the customs union, Turkey must currently align its external tariffs with those of the EU. When the EU signs a deal with a third country, Turkey most open its market on the same terms but this is not reciprocal, and the third country is not obliged to open its market to Turkish exports. Naturally, Ankara should not wait for a solution to this long-standing problem to enhance its other existing trade partnerships or initiate new ones.

Turkey’s size and geographic location are often presented as natural advantages, but these should not be taken for granted. Turkish leaders were frustrated by Turkey’s conspicuous absence from the India–Middle East–Europe Economic Corridor (IMEC) when it was first announced at the New Delhi Group of Twenty (G20) Summit in 2023, with US and EU backing. Trump has since signaled support for the project in his own way, even suggesting it could provide opportunities to reconstruct the Gaza strip.⁵ Turkey participates in other big and small connector projects, such as China’s Belt and Road Initiative and Iraq’s Development Road. It even plays a leadership role the Middle Corridor (or Trans-Caspian International Transport Route), which connects Europe and Asia via Turkey, the Caucasus, the Caspian Sea, and Central Asia.

The point is that Turkey’s role as a trade and manufacturing hub isn’t guaranteed and cannot be secured through geography and new infrastructure alone. Incentives like free ports already exist, but Turkish firms will also need to reach new markets—whether these are riskier, like Syria and Ukraine, or farther away. Syria rebuilding activity could provide a 0.6-percent boost to Turkish GDP.⁶ Turkish firms will also be the most willing to go into Ukraine first as soon as there is a ceasefire. They should bear in mind that they will not be eligible for EU funding—the major resource on which Ukraine will rely—if they have major activities in or with Russia.

Projects in the Middle East, Africa, and Southeast Europe already make Turkish construction contractors the second global force after China’s.⁷ The sector makes a positive contribution to Turkey’s trade surplus in services. The government and firms should use this good position to revive manufacturing sectors by aiming to produce a higher share of the construction firms’ inputs domestically. Supply of white goods and electronics, minerals, and construction materials can flow into Turkish-led construction projects. The same strategy could work with Turkey’s impressive trade surplus in medical services; the goal should be to produce more of the goods that this industry requires, instead of importing them.

The High Technology Investment Program (HIT-30), announced in July 2024, commits $30 billion in incentives to establish Turkey as a hub for modern manufacturing. The program pinpoints semiconductors, e-mobility, green energy, advanced manufacturing, healthy living, communication, and space technologies as the promising sectors. This is, of course, welcome as only 3.6 percent of exports are high-tech exports.⁸ While Turkey is already at the cutting edge on drone technology, catching up in enough other fields to affect the trade deficit noticeably is a tall order. Investment partnerships with foreign firms can help speed up the transition, provided these include some technology transfer. Turkey can continue to use the EU customs union to welcome investment from firms that want to sell into the EU. This is happening with Chinese electronic vehicle (EV) brand BYD, which is making a $1-billion investment. To improve the terms, Turkey must make sure it is welcoming investment from different sources.

Finally, on defense partnerships, the prowess of Turkish drones in the early stages of the war in Ukraine have created a considerable amount of interest. Sadly, residual US sanctions on the defense sector, dating back to Turkey’s purchase of a Russian S-400 missile system, continue to have a chilling effect. This needn’t remain so. In 2024, Turkey managed to get itself off the Financial Action Task Force’s gray list by making a limited number of regulatory and transparency reforms.⁹ Ensuring Western firms feel no reticence about partnering with Turkish firms should be a priority.

Stabilizing the domestic economy remains a precondition for rebalancing trade 

We have seen how Turkey is blessed with geographic, strategic, and workforce quality advantages that should enable it to continue seizing opportunities in otherwise challenging times for global trade. But we also know the record of the past 10–15 years has been patchy. International investors have been spooked by policy volatility. Opportunities to modernize the manufacturing base have been missed due to state-owned banks placing too much emphasis on consumer spending and high-visibility investment projects. Since 2023, the orthodox turn has gone some way toward alleviating these challenges. But it also comes with risks, especially because of high interest rates.

Many objectives have been squeezed into the Medium-Term Program, which was updated on September 8. They are, at least, coherent. The Turkish government currently aims to strengthen macroeconomic and financial stability to enable sustainable growth. This involves maintaining fiscal discipline and reducing inflation to single digits in the medium term. Ancillary goals include improving research and development (R&D) and innovation capacity, ensuring technological transformation with a focus on transition to a green and digital economy, strengthening human capital, further activating the labor market, improving the business and investment environment, and reducing informality in the economy.

Can Turkey do this?

The plan appears to be working on restoring current account and reserves. But this is also the result of good luck coming with lower energy prices. In the second quarter of 2024, the impact of disinflationary policies became more apparent and, for the first time in eighteen quarters, net exports of goods and services contributed more to growth than domestic demand did. And despite constant pressure to spend and raise wages, the government is slowing the pace of increase for both.

Still, it is alarming that the reshoring of manufacturing has not been seen as a source of growth for Turkish firms. A May 2024 S&P Global survey of Turkish manufacturers found just 22 percent expected growth from reshoring in the next twelve months, with 61 percent not expressing an opinion.¹⁰ Seventy-one percent of firms cited capital cost and availability as challenges to reshoring, while 64 percent cited labor availability. While a small minority also cited access to raw materials as a challenge, it’s clear that high interest rates and wage pressures—the price to pay for the much-needed macroeconomic policy normalization—are taking their toll.

The strategy espoused by Ankara and Turkish firms needs to be more holistic and take Turkey’s own import dependencies into account. Greening the economy is often cited as a way to reduce dependency on energy imports, and Turkey has some of the critical minerals required in its soil. But it shouldn’t neglect other resources that can be used as inputs in services exports. These include raw materials and semi-manufactured goods, such as steel and aluminum, refined oil products, and raw minerals and ores ranging from building materials like marble to industrial metals such as chromium, copper, and lead. Minerals and ores only accounted for a small percentage of total exports, but nearly half of shipments to mainland China.

In the end, Turkey’s ability to turn trade into a lasting engine of growth will depend less on geography or one-off projects than on the strength of its institutions and the consistency of its external partnerships. Transparent, predictable, and rules-based institutions are essential for attracting investment, upgrading production, and ensuring that trade contributes to financial stability rather than volatility. At the same time, maintaining constructive and forward-looking relations with the West, especially the EU and the United States, remains important. They are both Turkey’s largest markets and its most important sources of capital, technology, and credible alternatives to turn to as Ankara rightly courts investment from China.

The Atlantic Council would like to extend special thanks to Limak Holding for its valuable support for this report.

Staff

Charles Lichfield

Director, Economic Foresight & Analysis
C. Boyden Gray Senior Fellow

GeoEconomics Center

Economy & Business European Union

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