This and the next-following post will report highlights from an hour-and-a-half presentation by Admiral Jim Stavridis, who tackled the definition of the current balance of world power and the impact of that balance on current and future global markets. Lest you sense this will be a superficial meander, let me list the speaker’s background: four star admiral, principal aide to Rumsfeld, head of NATO, Chair of the Rockefeller Foundation, dean of Fletcher School of Law and Diplomacy, presently is a sitting public company, director and Vice Chair of Carlyle Group (an investment fund with diversified ownership of tech and non-tech businesses). Anyone can be wrong about anything, but he surely has the background to command our attention.
The USA: The largest US trading partner by far is the European Union. US relations to day are under some strain due to tariffs (see my prior recent post), Greenland, and cost of supporting NATO. Greenland seizure has some strategic logic but it has been owned by Denmark for 700 years, so likely that “crisis” will pass as Europe has “stood up.” Tariffs seem destinated to settle at 15% for EU, both ways. EU and US positions on Ukraine at this moment seem to be coming together in a joint proposal.
The Pacific: Arena is full of democracies which is good: Japan, South Korea, Taiwan, Singapore, Philippines, Australia, New Zealand. Tariffs stress but not “serious.” Allies to US are bonded by risk / hedge against China.
China: Important to US by reason of supply chain and as a purchasing client. Trump currently planning to visit China (and Xi to US). Do not panic today. Will China invade Taiwan, a perceived risk. Not likely in next 5-10 years and after that we shall see. Unless Taiwan announces it is independent! Chinese military is large enough but not easy to invade over water and Taiwanese topography difficult. Chinese nilitary is untested, not having fought since 1949 in any significant way. Forces are not broadly deployed; they lack seasoned generals; capturing the chips industry may well not be viable reason to invade as chip suppliers are diversifying around the world; the world having come to defense of Ukraine is an object lesson, as are sanctions thereby triggered against Russia commercially. And after a few years the landscape may change anyway.
“Global South”: He includes Africa, South America: commercial importance coming for Brazil, Nigeria, particularly India. This diverse area is coming into its own. Big changes in production, markets. Brings half the world’s population on-line which increases gross human capital which is always a plus (more brains at work): area holds 3.5 Billion people. India is a key element; just announced was a tariff deal with the US in the 15%-18% range if India eschews Russian Oil. He also sees India in favorable light as a “democracy”–no mention of past Modi issues.
“Russia”: Evil dictatorship, bringer of death, killer of political opponents and journalists. Trump is beginning to recognize this. Invasion of Ukraine united Europe, drove northern Europe into NATO, drove all Europe to boost military spending. (Fascinating note on military spending: US budget even before Trump’s recent announcement at a vast proposed increase is $900B; Russian $150B; China $250B; EU at $500B is larger than China and Russia combined.)
Iran: Iran in next few years will change regimes, rejoin the world.
Venezuela: Note speaker also was once head of US Southern Defense forces. With Maduro gone and the acting president showing promise, this may prove not to be a problem He trusts Rubio and thinks he can handle this (and Cuba). And US military action would not be a big deal, will not upset world economy or order. Everyone in South America understands that the US may invade and it has not mattered to the world. In the past 150 years the US has sent armed forces into South and Central American countries 56 times. Still could go sideways but if oil companies over the next 3-5 years step in, assume risk (most not there how), assist country economy, things will be further helped.
Overall, the US still has substantial viable alliances around the world and “the system is holding.” It is vital for US foreign policy and thus for US business to understand the current and evolving world situation. The next post will discuss how boards of directors, informed by the foregoing, should act in connection with setting corporate policy.