Agora Strategy Executive Briefing on Thailand Executive Summary Thailand – despite being a U.S. ally – de facto practices “bamboo diplomacy” by pursuing flexible and pragmatic bilateral relations with America, China and other powers, swaying in multiple directions over time in line with its national interests. Tensions between the Thailand’s old political establishment and pro-reform groups will likely negatively affect political stability for the foreseeable future. Rising global protectionism and concerns over political instability are set to limit GDP growth to around 2.5%, considerably lower than that of its neighbours. Implications for International Business To mitigate pressure from the U.S. and China, Thailand is actively seeking to expand its business relationships with Europe which opens opportunities for European businesses, specifically in green mobility, green tech and renewable energy, infrastructure and transport, digital industries, biotechnology as well as the healthcare industry. The risk of further political instability in Thailand, including the risk of a coup d’etat, remains heightened; international businesses are well advised to practice continuous risk monitoring and associated scenario building, engage in corporate diplomacy, form strong partnerships with local firms, and, if possible, diversify across multiple Southeast Asian countries. While international businesses (including from China) have flocked to Thailand in the context of “China+1” in recent years, there is now a need to hedge against potential disruptions under Trump 2.0 by expanding geographic and operational flexibility across the region to avoid lock-ins. State of Play Generally, Thailand continues to grapple with political instability, restrictions on freedom of expression, and the influence of conservative elites over democratic processes. The country’s Prime minister Paetongtarn Shinawatra, in office since 2024, currently faces two major hurdles in domestic politics: First, she needs to manage the fractious internal politics of an often disparate 12-party coalition. Second, she needs to bridge the general political divide between the old establishment of royalty, bureaucracy and military, and the Pheu Thai Party (PTP) she has been leading since October 2023 and other reformist forces. If she fails either task, wider political instability, and with it the risk of a coup d’etat, will likely increase. Political instability notwithstanding, the current government has put a strong focus on sustaining economic growth as well as bringing about a more equitable income distribution to increase domestic consumption (Thailand has Asia’s highest rates of income inequality). Policies to reduce it include prolonging a debt moratorium for small scale farmers and doubling the minimum wage. Furthermore, the government tries to reduce over-dependence on the tourism sector by investing more in green and high-tech sectors and related infrastructure. However, high U.S. tariffs are likely to force the government to reallocate some public spending to counter their impact. Internationally, Bangkok currently seeks to diversify its economic dependence on the US and China by advancing trade and investment negotiations with other international partners. Thailand recently became a BRICS partner country and began accession talks for OECD membership in 2024, the second Southeast Asian country after Indonesia. Following a period of strained relations after Thailand's 2014 military coup, the EU and Thailand have revitalized their relations, most notably by reviving negotiations for an EU-Thailand Free Trade Agreement. The EU is Thailand's fourth-largest trading partner, and some analysts have suggested that the agreement could potentially double Thailand's trade with the EU. Moreover, Thailand is an important regional hub. It is particularly competitive in manufacturing due to its strong automotive, electronics, and agribusiness sectors as well as associated suppliers and supply chains. To be sure, in logistics, Singapore –also the region’s undisputed financial centre – and increasingly Malaysia, outperform Thailand. However, Thailand has become an attractive destination for international firms’ "China+1" strategy, by which they couple investments in China with a second facility in another Asian economy. The country offers a strong manufacturing base, membership in multiple free trade agreements (including with Japan, Australia, and China), and access to other markets in Asia and beyond Asia. Key Issues Geopolitics Thailand is a major non-NATO ally of the U.S., which suggests close strategic alignment with Washington. However, in reality, Thailand’s strategic posture is best described as hedging or “bamboo diplomacy”. Bangkok has maintained close relationships with the U.S. and China whilst avoiding over-reliance on either. This has allowed Thailand to simultaneously maintain close security and economic ties with the U.S. and deepen its economic relationship with China. Throughout the last decade, however, Bangkok’s relations with Beijing have expanded from mainly economic, including in the field of security and defence with arms purchases and joint naval exercises: From 2019 to 2023, China accounted for 44% of Thailand's major weapon imports, more than doubling its share compared to the previous five-year period. Relations with the U.S., in turn, have cooled because of a freeze of U.S. aid in response to the 2014 coup d’etat and U.S. criticism of Thailand’s democratic backsliding. While U.S. policymakers understand that Thailand is not “choosing China”, but rather trying to hedge, they view Thailand’s ties with China with concern. Therefore, Washington’s strategic focus has been on other allies, notably the Philippines, Australia and Japan. The EU and Thailand have decided to resuscitate negotiations for an EU-Thailand Free Trade Agreement to be completed by the end of 2025. In its immediate neighborhood, Thailand enjoys generally cooperative relations with Laos, for which it serves as a major investor in hydropower projects and other infrastructure. Ties to Cambodia have been marked by territorial disputes in the past but have recently improved as the result of an agreed freezing of the disputes and growing economic interdependence. Bilateral cooperation has since intensified in the fields of trade, investment, energy and border management. Relations with Myanmar, in contrast, have significantly deteriorated since the coup there in 2021 and the ensuing civil war. Thailand has faced a huge influx of refugees and fighting has occasionally spilled onto Thai territory. To maintain regional autonomy amid great power rivalry, Thailand has in the past a policy of putting the ASEAN group of Southeast Asian countries at the centre. It has tried to leverage platforms like the ASEAN Regional Forum and the East Asia Summit to shape regional agendas on trade, development, and connectivity. This “ASEAN centrality” fits nicely with Bangkok’s hedging strategy between the U.S. and China. However, ASEAN norms of non-interference and consensus decision-making have limited Thailand’s ability to move forward on regional issues it deems important, especially on Myanmar. In practice, therefore, Thailand increasingly choses coalitions of the willing over ASEAN to influence regional issues. Thailand is not party to the conflicts in the South China Sea or the Taiwan Strait. Any military involvement is therefore unlikely. However, an escalation in the South China Sea or the Taiwan Strait would almost certainly disrupt maritime trade routes through which a significant portion of Thailand’s trade flows. Diplomatically, its hedging strategy would almost certainly come under immense pressure. It is likely that Washington would pressure Bangkok to fulfil its alliance obligations, including the use of Thai military installations such as U-Tapao. So far, Thailand has tried to avoid becoming a pawn in a great power conflict. Geoeconomics Thailand is Southeast Asia’s second largest economy and is considered a major regional trade and manufacturing hub. The country offers a range of incentives to attract foreign direct investment (FDI), especially in strategic sectors like advanced manufacturing, digital industries, biotechnology, and green energy. These include tax-related incentives such as exemptions or reductions on corporate income tax or import duties. They also include non-tax incentives such as liberalizing foreign ownership, eased visa and work permit processes, access to infrastructure, logistics, and data access support, and faster customs clearance and project approvals. Thailand has also taken some steps to align with international environmental, social, and governance (ESG) as well as due diligence standards, particularly as demands by global investors and trading partners increase. Its approach combines regulatory reforms, voluntary frameworks, and market-driven adaptations. Also, Bangkok is preparing to align with standards such as the EU Corporate Sustainability Due Diligence Directive or the German Supply Chain Act. However, the country’s response is uneven across sectors and enforcement of compliance remains inconsistent. Thailand also is one of the largest indirect beneficiaries of U.S. tariffs against Chinese companies, as many of the latter sought alternative manufacturing bases in non-tariffed countries. As a result, exports from Thailand to the U.S. strongly increased since 2017. This has earned it the ire of the second Trump administration: The 36% tariff the country now faces is among the highest among Southeast Asian nations. Additionally, Thailand’s role in manufacturing exposes it to significant knock-on effects from global trade disruptions—even if it is not the primary target. Furthermore, Thailand would also be affected by a further decrease in economic growth in China due to a further reduction in Chinese demand for Thai components (e.g., plastics, chemicals, agri-commodities) as China is Thailand’s largest export market. Relocation or diversification to Thailand in the context of the China+1 strategy to mitigate exposure to the Sino-US trade war can be beneficial for European companies. Thailand’s government offers considerable support to investors, especially in key economic sectors. The conclusion of a free trade agreement with the EU would furthermore reduce tariffs, improve protection of intellectual property, and enhance regulatory cooperation. However, European companies must also consider Thailand’s fragile domestic politics, its structural predicaments (i.e. lack of skilled labour or compliance risks due to lax enforcement), as well as the negative impact on Thailand of the Chinese Market. Lastly, a further reconfiguration of global supply chains and trade policies under Trump 2.0. looms large on the horizon.

Dean’s Comment on the meeting between President Trump and Federal Chancellor Merz by Ambassador (ret.) Dr. Peter Ammon From the outset of his chancellorship, Friedrich Merz made it clear that he intended to take control of German foreign policy himself, guiding the country through geopolitical uncertainty with a steady hand. His face-to-face meeting with President Trump in the Oval Office, under the scrutiny of a partly hostile press corps and ideological hardliners such as Vice President Vance, was widely regarded as the first significant trial of his leadership on the global stage.   Germany is the main driver of the EU’s substantial trade surplus with the United States. A wide array of other contentious issues loomed over the meeting: Germany’s perceived free-riding on defence in the past; diverging positions on Russia and Ukraine; and clashing interpretations of democracy and free speech. Observers feared a political ambush reminiscent of those faced by Presidents Zelensky and Ramaphosa.   Merz wisely focused on managing expectations beforehand. Nobody anticipated that he could resolve Trump’s ongoing trade war with the EU during the meeting — an issue that was largely outside his direct control. For the German side, avoiding open confrontation while maintaining essential transatlantic ties — without appearing obsequious — would already be considered a major success.   Meanwhile, Trump is navigating a precarious phase of his presidency. His promise to end the Russia–Ukraine war in 24 hours remains unfulfilled. His global trade wars have stalled. Once-powerful alliances with tech giants such as Elon Musk and Tim Cook of Apple are showing signs of strain. To make matters worse, the bond market is issuing early warnings of an impending recession coupled with inflation.   Against this backdrop of fragility, Trump presented a conciliatory stance towards the Chancellor. He may have had little appetite for escalating tensions with the German chancellor, especially since Germany overtook Japan at the end of last year to become the world’s largest creditor nation. Trump even called Merz a friend and expressed his appreciation of US–German relations. What more could Merkel and Germany have asked for?

Agora Strategy Executive Briefing on Geopolitics of AI Executive Summary The United States under Trump has made AI dominance a top priority, repealing AI safety rules and adding 70 Chinese entities on an export blacklist for AI chips. The EU has eventually started to shift away from its overt focus on AI regulation towards a competitiveness agenda to spur innovation within the Single Market. China experiences an AI boom after DeepSeek’s moment with the Hang Seng benchmark index for tech stocks surging by more than 40% since mid-January. Implications for International Business The race to lead in AI provides opportunities, such as industries reaping productivity gains from the adoption of AI systems in their operations and benefiting from public investments that seek to drive innovation at home. At the same time, complex and fragmented national AI regulations can lead to legal risks while export controls on advanced AI chips are likely to restrict the flow of technological goods. State of Play AI as a determinant of national power Recent developments have demonstrated the fundamental shift that AI is causing on the global security and economic landscape, from AI-enabled drones in Ukraine to AI innovations awarded two Nobel Prizes in 2024. As a result, some governments aim to achieve supremacy over AI development. The United States has outpaced other countries, currently developing 70 percent of the world’s notable AI models. China is catching up, as indicated by the release of DeepSeek’s R1 model. In addition, the EU aims to become an AI continent by simplifying its tech rulebook and setting up AI factories that provide computing resources to European innovators. The EU’s push for AI innovation has been partly prompted by technological breakthroughs in the United States and China, as well as by the lack of European alternatives. The UAE and Saudi Arabia have also identified AI as a key driver of their economic diversification from hydrocarbons, with Abu Dhabi having launched an investment firm with a target size of $100 billion to push for AI dominance.   Moreover, these developments have provided a geopolitical role for major corporations. Google has lifted its ban on using AI for developing weapons, while Meta has announced $65 billion investments on AI this year, with the aim to build the world’s largest AI data center. With these decisions, firms aim to become strategic actors themselves in the AI race. This tech-driven world could provide significant benefits to other international businesses too. Across the banking industry, the technology could deliver up to $340 billion annually, while in retail the impact could reach up to $660 billion. However, companies will need to navigate through the geoeconomic risks of the AI race, such as export controls and complex regulations. State of Play The geopolitical implications of AI and technology The military use of AI-enabled weapons is growing. Ukraine’s military has deployed AI-equipped drones to strike Russian critical infrastructure. American AI systems have been used to identify airstrike targets in Syria and Yemen. Such rapid AI advancements could lead to further breakthroughs and create geopolitical tensions. For one, AI lowers the barrier for malign actors, including terrorist groups, to develop and produce chemical or biological threats by providing detailed instructions for assembling viruses. For another, AI applications pose severe risks for governments as they can tip the military balance in favor of adversaries. To mitigate this scenario, governments aim to spur innovation and maintain their position in the cutting-edge of technological development. The US Stargate project aims to achieve that by investing $500 billion over the next four years towards building new AI data centers for OpenAI. In the EU, President von der Leyen announced €200 billion of public and private investments to boost the continent’s AI competitiveness. While it is uncertain if these investments will yield concrete results, governments clearly aim to develop and secure sovereign AI capabilities that will provide security and economic benefits.   In addition to AI development efforts, governments often aim to impede the progress of their adversaries. Washington has imposed a series of economic restrictions on China, such as blocking Chinese providers from direct access to the advanced semiconductors required for frontier AI development. The Netherlands and Japan, who hold a strategic position in the global semiconductors value chain, have aligned with these restrictions, directly affecting firms such as ASML, which sourced 26 percent of its sales from China in 2023. In January 2025, the United States not only expanded export controls to more countries but also introduced further restrictions on AI model weights – the parameters containing a model’s capabilities. This is likely to impact US providers like Nvidia and AMD which are faced with significant revenue threats. Besides absolute restrictions, a series of countries face limits on the number of AI chips that can be deployed within their jurisdictions. For example, countries like the UAE, India and Mexico cannot import more than 7 percent of Nvidia’s or AMD’s AI chips. These policies have amounted to a new form of technological protectionism, in which America makes use of economic statecraft and its diplomatic relationships to preserve its advantage. DeepSeek’s CEO himself has described these restrictions as the most significant challenge that his company faces. Geoeconomic risks and opportunities in the AI race The integration of AI into the geopolitical calculus of nation states generates both political and financial risks. Jurisdictions have adopted regulatory frameworks to implement guardrails and ensure the safe deployment of AI systems, such as the EU’s AI Act, which addresses AI systems with a potentially adverse impact on people’s safety or fundamental rights. For example, it bans systems that exploit vulnerabilities of individuals or use manipulation, while strictly regulating systems deployed in sensitive areas such as education, law enforcement and critical infrastructure. Failure to comply can lead to fines of up to 7 percent of a company’s global annual turnover or €35 million, whichever is higher. This has prompted companies such as Meta, OpenAI and Apple to delay the launch of some AI products in the EU market. At the same time, other jurisdictions such as the United Kingdom and the United States have opted for differentiated regulatory frameworks. In the latter alone, the number of pending AI-related bills at both the federal and state level has risen to 781 in 2025. Such regulatory divergences can increase the cost of compliance and impose legal uncertainty on international businesses. In Colorado for example, developers need to conduct AI Impact Assessments which can differ significantly in the types of AI systems that are covered and the required obligations in comparison to the EU’s conformity assessment. Finally, countries and regions with a low level of AI preparedness, including limited connectivity infrastructure and AI talent, will not be able to reap the military and economic benefits of AI and risk falling behind.   There are also significant opportunities that the AI race presents for companies. Firstly, the mobilization of public investments creates financial opportunities for experimentation and the adoption of AI within traditional industries. The EU plans to dedicate €20 billion of its AI investment portfolio to a European AI Fund which will direct resources for AI research, innovation and diffusion. Secondly, governments are ushering a simplification agenda to be able to compete with their rivals. London aims to establish ‘AI Growth Zones’ to streamline the planning approval process for AI data centers and facilitate the provision of clean energy sources. Currently, businesses in the EU must navigate a complex patchwork of 27 distinct corporate regimes. In 2026, the EU plans to introduce a ‘28th regime’ to offer an alternative harmonized legal system that firms can opt into and benefit from harmonized corporate requirements. Thirdly, businesses stand to benefit from the competition between AI providers. McKinsey reports that 42 percent of organizations see cost reduction from AI implementation and 59 percent experience revenue increases. Therefore, the race between AI providers to develop better and cheaper products can have direct positive impacts for both large corporations and small businesses.

In the Agora Strategy Group geopolitics podcast “The Future of Power”, Dr. Timo Blenk (CEO) invites decision-makers from diplomacy, business, politics and the military to discuss current geopolitical developments on a monthly basis. The core of this project is to provide information about the influences of these developments and to create a sound basis for decision-making.   This month's guest is Admiral (ret.) Joachim Rühle, four-star member of the German Armed Forces and a renowned military expert! In the 29th episode of our politics podcast, Dr. Blenk and Admiral Rühle talk about the future of the German Armed Forces and take a closer look at the world from a military perspective!   This month's highlights Maritime trade routes: Chokepoints, military protection & economic importance German Armed Forces 2.0: between modernization, personnel problems and opportunities Global perspective: Chinese capacities, the future of Ukraine & the NATO elephant     In-house announcements   All other episodes of the podcast Agora Strategy website Agora Strategy on LinkedIn Current projects, publications & events of the Agora Strategy team Agora Strategy Institute Executive M embership Agora Strategy Executive Briefing: US policy reversal Agora Strategy Executive Briefing: The Geopolitics of AI   You can also find our podcast with subtitles on youtube: https://www.youtube.com/watch?v=DXNkhSRVgE0

In the Agora Strategy Group geopolitics podcast “The Future of Power”, Dr. Timo Blenk (CEO) invites decision-makers from diplomacy, business, politics and the military to discuss current geopolitical developments on a monthly basis. The core of this project is to provide information about the influences of these developments and to create a sound basis for decision-making.   This month's guest is Prof. Jörg Rocholl, President of ESMT Berlin and Chairman of the Advisory Board of the German Federal Ministry of Finance! In the 28th episode of our podcast, Dr. Blenk and Prof. Rocholl talk about geoeconomics and the future of the German economy!   This month's highlights Trump(onomics): Tariffs, academic freedom & legal uncertainty New partnerships: India & a German China strategy Economic miracle 2.0: between resilience, bureaucracy reduction & opportunities      In-house announcements   All other episodes of the podcast “Agora Strategy Group” website “Agora Strategy Group” on LinkedIn Current projects, publications & events of the Agora Strategy team Agora Institute Executive Membership Agora Strategy Executive Briefing: The Geopolitics of AI Agora Risk Report 2025 You can also find our podcast with subtitles on youtube: https://youtu.be/IRBDHaYG84s

In the Agora Strategy Group geopolitics podcast “The Future of Power”, Dr. Timo Blenk (CEO) invites decision-makers from diplomacy, business, politics and the military to discuss current geopolitical developments on a monthly basis. The goal of this project is to provide information about the influences of these developments and to create a sound basis for decision-making.   This month, two in-house experts from the Agora Strategy Institute, former Ambassador Dr. Peter Ammon and Dr. Cornelius Adebahr, share their analysis! In the 27th episode of our podcast, Dr. Blenk and former Ambassador Dr. Ammon as well as Dr. Adebahr talk about the current developments in the USA and their effects on the world!   The most important topics of the month The USA in transition: Trumpnomics, ideology & autocratic tendencies The great power game: strength, lost soft power and the art of the “deal” And Europe? New alliances and old questions about nuclear weapons     House announcements All other episodes of the podcast Agora Strategy website Agora Strategy on LinkedIn Current projects & events of the Agora Strategy team our COO, Fabian Vetter im brandeins Magazin Agora Strategy Risk Report 2025 Agora Strategy Institute Executive M embership Dean's Comment: Dr. Peter Ammon zu Trumps Comeback You can also find our podcast with subtitles on youtube: https://www.youtube.com/watch?v=J1rgypOzy2o

The impact of Trump's foreign policy on Europe Download the report: Executive summary The uncertain geopolitical environment entails significant economic risks for Germany and Europe and  is worsening the investment climate in key regions of the world . The risk of a trade war between the United States and China  is a particularly serious issue. The escalation of violence in the Middle East has, for the time being, destroyed the economic opportunities that arose from the Abraham Accords and the India-Middle East-Europe Economic Corridor initiative. This concerns, among other things, the development of green energies. The second term in office of US President Donald Trump brings considerable uncertainties about the future security policy of the United States. This applies in particular to the future development of the war in Ukraine and the tensions surrounding Taiwan. Trump's approach to foreign and security policy is characterized by a fundamental contradiction:  On the one hand, he stresses international engagement in the sense of “peace through strength,” which relies heavily on military and economic power. On the other hand, he promised his voters that in future he would keep the US out of wars and conflicts. Trump's   personnel decisions so far when it comes to the foreign policy positions in his administration do not indicate an isolationist turn in US foreign and security policy, but rather a robust internationalism . Nevertheless, this shows little regard for multilateral institutions or the interests of allies. The erosion of liberal democratic principles will intensify during the second Trump administration. The attempt to soften democratic restrictions domestically is likely to go hand in hand with a declining self-restraint on the part of the US  in terms of power politics at the international level. This development particularly affects NATO with its democratic values and decision-making processes. An opportunity for a  short- and medium-term easing of security tensions  is emerging at the start of the second administration when it comes to ceasefires or an interim agreement to end the wars in Gaza and Ukraine . In both cases, however, there are so far no prospects for long-term stabilization or even a solution  to the underlying conflicts. The security environment  in Europe, the Indo-Pacific region and the Middle East has become significantly more volatile  in recent years. China, Russia and Iran have increased their military spending considerably and at the same time intensified their military cooperation. From their perspectives, there is currently an opportunity to revise the existing regional and international order, including by force . However, the example of Iran shows that revisionist states can also overestimate their own capabilities. Implications for businesses can be found in the report (Download above)

Materials policy instead of climate protection Download the report: Executive summary The new administration in the United States is placing an unexpectedly strong focus on fossil fuels : It has declared an “energy emergency,” accelerated the approval of permits for new liquefied natural gas terminals and loosened restrictions on oil and gas drilling. At the same time, it is reducing support for green energies  and could dismantle the Inflation Reduction Act (IRA): The only low-carbon energy sources and technologies eligible for funding are nuclear energy, the geothermal energy used for fracking and the latest battery technology. The announced elimination of climate subsidies and repeal of climate protection regulations will likely slow down the   reduction of US emissions in the coming years:  Instead of the planned 37 percent, it would only be 25 percent by 2030 compared to the base year 2005. A number of multinational companies  are already rethinking  their investments  in renewable energies and the green technology sector in the US, while numerous government measures are being challenged in court. The return of the United States to fossil fuels benefits China  as the leading superpower in renewable energy technologies and in electric mobility. The US government is taking an  aggressive approach  to raw materials , which are important for the energy transformation and for military applications: A sovereign wealth fund will enable access to mineral-rich Greenland and to rare earth minerals in Ukraine through investments in foreign mines and political pressure. President Donald Trump's declaration that the US was again withdrawing from the Paris Climate Agreement  is primarily symbolic, as US energy policy, even under his predecessor, was primarily economically motivated. Furthermore, the US only accounts for approximately 11 percent of global emissions. However, other countries such as Argentina or Indonesia could follow the US example. The freezing of all US funding for international aid, in particular the dismantling of the United States Agency for International Development (USAID), is also having an impact on the global funding of low-carbon energy . For example, the US is no longer supporting any solar projects in Ukraine or Africa. Finally, the various tariffs announced by the US are not only creating uncertainty among companies , but also destroying   European-American cooperation  on climate change, for example on joint measures on the Carbon Border Adjustment Mechanism. Implications for businesses can be found in the report (Download above)

Agora Strategy Executive Briefing on US policy reversal Executive Summary The current dynamic between Russia and the United States is likely to have negative short-term consequences for Ukraine but is unlikely to overcome deep-rooted mistrust of the West or structural economic problems in Russia. If the Trump administration's goal is to coax Russia out of its partnership with China, it risks misjudging the latter’s solidity, leaving Washington vulnerable to being manipulated by Russia. Irrespective of its specifics, a U.S.-Russia deal on Ukraine will have far-reaching consequences for great power relations across the globe, including for China’s stance on Taiwan and the potential nuclearization of Japan and South Korea. Implications for International Business Trump’s unprecedented advances to Putin do not change the Russian economy’s fundamental dynamics and risks. Businesses should exercise caution and avoid prematurely reconfiguring their investment approach towards the Russian market and supply chain strategies based solely on the current diplomatic dynamics. Companies should focus on maintaining diverse supply sources, identifying new avenues for acquiring raw materials and rare earth elements, and developing robust strategies to mitigate the risks posed by escalating trade wars – and, potentially, new military conflicts. State of Play America making advances to Russia at Ukraine’s cost The apparent recalibration of American-Russian relations continues with neck-breaking speed. In fact, U.S. President Donald Trump is keen to meet his Russian counterpart, Vladimir Putin, considered a pariah in the West until recently after his assault on Ukraine, without receiving any concessions. Yet, a genuine thaw is by no means guaranteed, as both sides have drastically different expectations: While Russia wants U.S. acquiescence on the expansion of its sphere of influence in Europe, beginning with maximalist demands on Ukraine, the Trump administration wants to use Russia in its confrontation with China, peeling off the Sino-Russian relationship to isolate Beijing. Until both parties realize the limits of their rapprochement, actual alignment will be difficult – and many initiatives will rather cause frustration. The short-term effect on Ukraine of this potentially long-term realignment will largely depend on how President Volodymyr Zelensky can navigate his personal relationship with Trump. The latter has suspended and then reinstated military and intelligence assistance to Ukraine, underscoring his incalculability and his ruthlessness. The threat of another holdup, even if not felt immediately on the battlefield, will hang over the coming negotiations. Under any scenario, the main – if not sole – burden of supporting Ukraine is now on Europe's shoulders. China, in contrast is capitalizing on the US-European divide to steer the EU away from a confrontational stance in their relations.   Key Issues Geopolitical implications for Europe and the world The resumption of direct negotiations holds greater significance for Russia than for the United States. Moscow stands to gain several strategic advantages: a widening rift between Washington and its European allies, potential leverage over Ukraine, and a restored superpower status no longer isolated by the West. While Trump himself may see a gain in projecting the image of a peacemaker, this is largely symbolic. More concerning is the – not yet confirmed – assumption that his goal is the subjugation of Europe, no longer “whole and free”, under the thumb of two global powers. The pressure on European capitals, nonetheless, is real: If, over the past decade or so, Russia and China sought to divide Europe, now the United States is in that game, too.   As a first step, Washington will attempt to impose a 'peace deal' on Ukraine, with little European and involuntary Ukrainian involvement. While this may not fully satisfy Russia's objectives, a ceasefire combined with the lack of robust security guarantees for Ukraine and a forced leadership change in Kyiv would give Moscow enough of a victory and provide it with a pause to rebuild its military capabilities for future action. The bigger picture revolves around Trump’s alleged ‘reverse-Kissinger’ strategy, i.e. the attempt to isolate China by cozying to Russia. However, despite sending soft signals, Moscow will not abandon Beijing; rather, it will try to outplay Trump.   In fact, China’s strategic importance for Russia cannot be overestimated. Going far beyond shared grievances about U.S. dominance, there are solid reasons for close Sino-Russian partnership: a long mutual border, economic compatibility, and non-democratic regime characteristics. Moreover, in the last three years, Russia has become highly dependent on China, which accounts for 40 percent of its imports and 30 percent of its exports. Reversing this economic dependence would require coordinated efforts by Americans and Europeans to increase bilateral trade with Russia, which is hard to envisage even under a pro-Russian Trump approach. At the same time, certain aspects of Trump’s handling of the war in Ukraine could be incorporated into a broader Sino-American agreement, including on Taiwan. Given his transactional, business-oriented approach to foreign policy, he might turn U.S. support for the self-governing island into a bargaining chip to secure concessions from China on other matters, such as reduced tariffs on American products, eased market access for U.S. companies, or commitments to increase imports of American produce. Concretely, Beijing might halt its investigations of companies like Google or agree to specific quantities of U.S. agricultural imports, as during the first trade war.   The consequences of such an unprecedented move would be far-reaching, ending any semblance of U.S. security guarantees in East Asia. This would push states like Japan and South Korea to ponder immediate nuclearization to establish a deterrent. Still, the demise of the rules-based, liberal world order need not be definitive. Although international institutions struggle with global conflicts, they maintain a role in regulating state behavior, as the continued pretense of democratic legitimacy by nations like Russia and China underscores.   At global level, China will double down on its display as an anchor of stability compared to America under Trump. Its emergence as the primary provider of financial resources, coupled with its expanding global presence, will translate its economic leverage into political influence. Especially smaller countries in the Global South are likely to seek closer ties with Beijing, while middle powers will strive to avoid being caught in the superpower confrontation. European countries will need to adapt to this new reality by proactively engaging with China in third countries. At the same time, all countries will have to adjust to the new great power rules, from economic sanctions to imposed conflict resolution to outrights threats. This will foster regionalization, as middle powers seek a distance from conflictual power dynamics and establish regional frameworks with other states. The geoeconomics of a ceasefire and sanctions relief While a partial easing of U.S. sanctions against Russia is possible, complete removal remains improbable. Not only will Washington want to retain some leverage over the Kremlin; some sanctions have indeed been enshrined by Congress and are therefore difficult to undo. Nor is pressuring the EU to lift sanctions likely to succeed. Ukraine's economic recovery, in turn, will be severely challenged by the widespread damage to critical infrastructure. Moreover, a cessation of hostilities could trigger the eruption of social grievances that have been largely ignored or suppressed during the war.   Even if Trump manages to reach a deal with Putin, it will not significantly affect economic integration or competition in Eurasia. Russia has proven to be a state with a hazardous investment climate. Its economy, structurally transformed over the past three years, cannot easily return to pre-war conditions: Its dependence on China and on its own military industry, tied to the war against Ukraine, will remain significant. New laws and realities allow the Kremlin to seize the assets of any investor, even those who previously had guarantees from powerful figures. So, while Russia will continue to integrate its economy with countries it considers friendly, it will face problems since even China is reluctant to invest in unstable economies.   Even with an unexpected warming of U.S.-Russia political relations, the fundamental negative trends will remain. Europe should focus on diversifying suppliers, strengthening economic resilience, ensuring access to critical raw materials and rare earth elements, and formulating strategies to withstand new trade wars. To prepare, companies should invest in technologies that improve supply chain and agility and proactively seek partnerships with diverse nations to broaden their supplier base. Investments in defense industrial base and deterrence capabilities will also be crucial to safeguard peace in Europe. Businesses should also expect greater volatility of the major powers’ currencies, first and foremost the U.S. dollar, as well as of the U.S. stock market. Given China’s and Russia’s efforts to create tools for undermining American sanctions, including trade in national currencies, alternative payment systems, and mechanisms for sanctions evasion, companies should examine their current exposure to the U.S. dollar and the Chinese yuan. They should experiment with other currencies and payment hubs depending on their major export markets – tough costly, these measures help them prepare for further fragmentation of the global financial system.

Agora Strategy Institute Commentary on interdependence of European companies with the United States The return of President Donald Trump to the White House has sent shockwaves through international politics and global markets. At the same time, his “wood chopper” approach to U.S. institutions threatens the very domestic recovery he promised to his voters. Already, his approval ratings have stumbled as inflation is heating up again.   While the deliberate whirlwind of executive orders, press statements, and social media announcements rarely leaves a moment to pause and reflect, Trump’s address to Congress on Tuesday provided yet another warning: Businesses around the world must be prepared for a comprehensive restructuring of the global economic, financial and security order. In just a few short weeks, his administration has already implemented sweeping changes that are reshaping diplomatic alliances, economic policies, and global trade dynamics, thus destroying almost all good will and global soft power America had enjoyed for so long.   While alignment with Russia on European security and the Ukraine war may be the most profound disruption, his tariff-wielding approach to trade and his declared intent to pocket resources and infrastructure as he pleases, from Greenland to Panama shake-up the business world. From imposing 25% tariffs on steel and aluminum imports, to imposing trade restrictions on Mexico, Canada, and China and announcing tariffs on European goods within a month, the damage to business confidence, visible on the stock market, has already been done. Moreover, with the U.S. fiscal deficit becoming more and more unsustainable and counter-measures looming from trading partners, it is quite possible that Trumponomics will fail spectacularly and end in global stagflation.   These developments have created a volatile environment for businesses, governments, and international institutions. As protectionist policies take center stage, the transatlantic relationship faces renewed strain, with Europe grappling to maintain its economic interdependence with the United States while accommodating stark political divergences. The widening gap is problematic This widening gap between US politics and transatlantic business practices is problematic because it undermines the stability and predictability essential for robust trade. Protectionism and populism both create regulatory uncertainties that disrupt established supply chains and trigger sudden tariff hikes or policy shifts. Such volatility erodes mutual trust and hampers the economic interdependence that has long been a cornerstone of global prosperity, ultimately stifling innovation and growth on both sides of the Atlantic. The consequences of these political divergences are tangible for businesses US companies operating in Europe now confront a fragmented regulatory landscape with stringent data protection rules, higher environmental and labor standards, and other measures that differ sharply from the more market-oriented approach in America. These discrepancies result in higher compliance costs, increased legal uncertainties, and the risk of retaliatory trade measures that can disrupt established supply chains. Meanwhile, European businesses face the threat of abrupt US policy shifts and protectionist measures that unsettle longstanding trade flows and alter market dynamics. This imbalance can increase operational risks and raise barriers to efficient cross-Atlantic commerce.   To navigate these challenges on a political level, a balanced, pragmatic European approach that leverages robust diplomacy without compromising core values is needed. Instead of reacting impulsively to every provocative headline—a tactic that only plays into Trump’s strategy of manufacturing crises for media dominance—political and business leaders should focus on presenting accurate data and long-term strategies that help diminish the impact of manufactured controversies.   A key element in this strategy is the reinforcement of internal cohesion. The EU’s single market of 450 million consumers offers a strong foundation; initiatives like the Digital Single Market and the Capital Markets Union streamline compliance requirements and reduce bureaucratic red tape, creating a stable and predictable environment that attracts American investments. European businesses can take several concrete steps to adapt By investing in local partnerships and forming joint ventures with American firms, they can better understand and navigate the US regulatory framework while fostering lasting goodwill among local stakeholders. Diversifying supply chains and exploring alternative export markets, even as they maintain strong ties with the US for example at state level, can mitigate the risks associated with sudden regulatory changes or tariff hikes. Moreover, by investing in advanced compliance systems and developing dedicated legal teams to monitor policy shifts in real time, European companies can enhance their regulatory agility and adapt quickly to new challenges.   International business councils also have a crucial advisory role to play in this environment. They offer platforms for cooperation and knowledge sharing, acting as essential intermediaries that bridge the gap between divergent political climates and the practical realities of cross-Atlantic commerce. These councils facilitate regular dialogue among industry leaders and policymakers, helping to ensure that private sector concerns are considered in legislative processes, which in turn contributes to a more predictable regulatory environment. Investment carries risks However, increased investment in the United States also carries risks, as European companies may face increased regulatory scrutiny (if not occasional discrimination) and legal barriers there. The administration's focus on America First policies and “deal-making” could lead to the arbitrary enforcement of regulations. This creates an uneven playing field for foreign investors and an operating environment for European industry that does not guarantee fair business practices or tangible benefits. Instead, this environment may lead to increased dependency, compliance costs and potential litigation.   Outside of the US market, the administration’s ending of dis-encouraging American companies to use bribes in third countries is a worrying warning sign of more reckless competition in markets that European companies may turn to in search for alternatives to the US market. There is no size-fits-all solution, but options to prepare In the current climate of political divergence and protectionist policies, there is no one-size-fits-all solution. Instead, increased vigilance, sober long-term cost-benefit calculations, and an openness to react quickly and decisively are key factors for the way ahead. In addition, maintaining open channels of communication with policymakers is crucial. In order to influence the strategies of EU member states and the Commission to counter Trump’s policies, companies should make their voices heard in the European political arena.   Staying informed about both U.S. and EU regulatory developments allows businesses to anticipate and adapt to changes promptly. Given the current uncertainties, a thorough assessment of the risks associated with U.S. investments is imperative to ensure informed decision-making and strategic resilience.

In the Agora Strategy Group geopolitics podcast “The Future of Power”, Dr. Timo Blenk (CEO) invites decision-makers from diplomacy, business, politics and the military to discuss current geopolitical developments on a monthly basis. The goal of this project is to provide information about the influences of these developments and to create a sound basis for decision-making. In this 26th episode Dr. Timo Blenk speaks with Alexander Gabuev, director of the Carnegie Russia Eurasia Center, about the war in Ukraine, Sino-Russian cooperation and a possible Western answer. The most important topics of the month Crystal ball: Ukraine war and beyond Power dynamics in the Kremlin: The bear remains in control The Sino-Russian partnership: a geopolitical shift in the making Icy winds in the Arctic: players, interests and cooperation Existent but hard to quantify: Russian interference in Western democracies   House announcements Alle weiteren Folgen des Podcasts Agora Strategy Webauftritt Agora Strategy bei LinkedIn Current projects & events of the Agora Strategy team Agora Strategy Risk Report 2025 Agora Strategy Institute Executive Mitgliedschaft Dean's Comment: Dr. Peter Ammon zu Trumps Comeback You can also find our podcast with subtitles on youtube: https://www.youtube.com/watch?v=J1rgypOzy2o