These are my ideas, based on many engagements with our Geopolitical Intelligence Group. They may not reflect “consensus” within the group, but they are my best take on possible, or even probable events, which would move markets.

I’ve chosen to ignore China/U.S. trade, as we cover China and the U.S. regularly. It is the most important issue and is always front and center for us. Instead, I will focus on some other potential geopolitical events that would impact markets. We won’t touch on India in this piece, as it is less “geopolitical” and more economic, though we try to bring it up in meetings given the importance of India.

Peace Through Strength

Of all the events, some sort of “Peace Dividend” seems to be the most likely.

“Measured Response” and allowing “lines in the sand” to be crossed have been two issues facing the U.S. in terms of deterrence. As General Ashley likes to say:

• Our enemies used to fear us and respect us.
• Our enemies respect us, but no longer fear us.
• Our enemies may no longer even respect us.

Deterrence is tricky to manage. Trying to force those to do what you want via the threat of violence, but not actually needing to resort to violence, is difficult. How do you carry a big stick and convince people that you are willing to use it?

There is a big opportunity to resolve the two major “hot wars” in the world right now:

• Russia and Ukraine are stuck in a bloody quagmire. Neither side can “win” for long, and both sides have set “victory” conditions that will be nearly impossible to achieve. Through coercion, threats, and maybe some carrots, both sides should be able to get pushed into something resembling a truce (if not peace). Europe won’t like any resolution (as they are much more focused on potential future Russian aggression than we are in the Unted States).
  • Releasing the Russian dollar reserves (split between Ukraine and Russia) should create a great opportunity in the region. Normally the rebuilding effort is hampered by the lack of funds. That should not be an issue now. Ukraine needs to get its commodity production back to 100% – requiring a lot of investment. Ukraine needs to rebuild its civilian infrastructure to get people to return. Probably less opportunity in Russia, but Ukraine and Poland are likely to experience economic booms (and inflation). It might be what Europe needs to boost its economy.
  • Poland, regardless of how NATO and Europe want to treat Russia and Ukraine post any deal, will be at the heart of any strategy. Poland has stepped up during the war and has impressed many involved on both the war and humanitarian fronts. Look for growth in Poland.
• Iran is weak. Iran tried to attack Israel, twice, and failed to do much damage either time. It has not been able to protect its proxies in the region. Israel struck Iran with precision and impunity. Much of the Middle East, especially those nations trying to shift their economies away from oil, seemed to have stuck to an “Iran is our enemy” script and have not turned completely against Israel. Finally, the events in Syria do nothing to improve Iran’s image.
  • This is a region that is rapidly trying to diversify its economy and was on the verge of signing the Abraham Accords. These countries are well aware that fossil fuels will not “fuel” their economy (pun intended) going forward. From banking, to tourism, to data centers, they are looking to do more and more. If the hostilities between Israel and Iran (and its proxies) can end, then this region could be ripe for investment and growth! With Iran looking weak and with a lack of regional support, they will be under pressure to find a solution. While Israel is winning the war, they are far from winning public opinion, so they too may decide that it is in their best interest to take a deal rather than to push for more military gains.

I see both of these “deals” occurring in 2025 and being very good for global growth and trade. Due to the release of Russian dollar reserves (with some going to Ukraine), that is likely to be the bigger growth opportunity as it will be an incremental source of funds.

A Mexican Alliance

So far Trump has stuck to his border and tariffs narrative with Mexico. About two years ago, Pompeo brought up the concept of “ungoverned space” in Mexico. It had become such a hotbed of drugs (especially fentanyl) and potential terrorists coming across the border that it should be labelled as ungoverned space. This is what Afghanistan was labelled before the U.S. went in.

While that might be extreme, it seems that so many problems in Mexico can be tied to the cartels that there should be some way for Mexico and the U.S. to work together to eliminate or radically reduce the power of the cartels.

Maybe a little simplistic, but by dramatically reducing the power of the cartels, we would see that:

• More businesses would be able to set up manufacturing in Mexico. There are areas that are just not usable at the moment because they are controlled by the cartels. Opening up more regions would be helpful.
• Production costs in existing facilities should be lower. The cost of maintaining security should decline as companies don’t have to protect against the cartels (many plants in Mexico have security almost equivalent to a military base/prison).
• Good, safe jobs reduce the need for migration. If you can work in your own country, why would you leave? Yes, maybe there is more money to be made in the U.S., but for many, being able to stay with family and friends would outweigh that (this part might be a bit hopeful, but I think that it is a very possible future).
• The U.S. should benefit from a more secure border and policies being implemented to stem the flow of illicit drugs into the country.

I’m disappointed that so far we seem to be on a more “traditional” tariffs and immigration footing, but I am hopeful that logic (that seems so obvious) won’t continue to be defied.

Growth of BRICS and “Barter”

I do not see another “currency” evolving to replace the dollar. I do see a group of nations that may find it is convenient and profitable to trade with each other. This would be based on more of a “barter” system than it becoming any sort of single currency-based trading bloc.

There is nothing holding together this “bloc” from a political or moral standpoint. Having said that, I can see a clear path to them finding ways to work together to further their interests.

The main thing I see is:

• China finding countries which they import raw resources from that have significant trade deficits.
• China using their influence to sell goods to those countries.

From a simple trade perspective, it makes a lot of sense. Let’s develop more “back and forth” shipping. Let’s get you to buy our (China’s) cheap goods (rather than more expensive American brands). We, “China Inc.,” can come up with terms that are very attractive. We are seeing the importance of China in South America as several countries have seen a dramatic shift in imports from China (as opposed to from the U.S.), most noticeably in Brazil. Argentina, a recent success story on inflation and markets, has replaced Brazil with China as their main import nation.

I remain incredibly worried that analysts are missing the potential decline in sales to emerging market countries by Western brands, as China tries to reshape their economy to export their own brands. “BRICS,” as a “barter” system rather than a true economic bloc (which it will never be), seems to be working well on that front.

Shipping

This is a bit more far-fetched and probably more of a 2027 event, but companies need to question shipping viability.

Having suppliers use multiple/very diverse shipping lanes is likely to become increasingly important.

Even the simple “barter” system above could put pressure on the availability of shipping to the United States. China also has major investments in ports across the globe.

There are numerous “choke points” like the Strait of Hormuz where shipping can be disrupted.

It is increasingly difficult to watch China expand its Navy, ignore various international rulings, and assume that they will never pose a threat to shipping.

Avoiding shipping might also be an alternative (utilizing Mexico, Canada, and even Greenland).

Shipping doesn’t seem like a 2025 issue, but I think it is something that companies need to be thinking about and planning for.

At the moment, diversifying shipping lanes is relatively easy and low cost, since only a few people are thinking that way, but that could become expensive rapidly if it becomes a theme for corporations.

Panama, Greenland, and Canada

These three countries have been singled out by Trump for a variety of reasons.

• Greenland makes the most sense to focus on. Greenland has a wealth of natural resources and has been largely underdeveloped. During Trump’s first term, “Buy Greenland” caused a lot of ire and controversy. While how he approached it may have left a lot to be desired, the Wall Street Journal published multiple articles about China’s attempt to do just that (not to buy the country, but to acquire vital things like the airport, ports, mines, and energy production). Even if Trump’s actions do nothing more than spur Europe out of its stupor, some interesting things could develop.
• The Panama Canal got a lot of attention in the past year or so due to low levels of water, which made passing through the canal very difficult. That had nothing (presumably) to do with China’s influence in and around the Panama Canal, but it makes sense to focus on the vital passageway (see “Shipping” above). I’m not sure what can be done here, but it seems like the sort of thing that Trump thrives on – a “bad guy” (China), a “weak” player (Panama), and a “need” (secure shipping). This seems set up to be an “easy” win for Trump, though it will certainly test relationships with China (and Panama).
• I may not be impartial on this subject, but a 51st state is a non-starter and annoying (or beyond annoying to many). We don’t know whether there are some deals to be done, but the cross-border trade here is the most nuanced in the world. With an open border, stretching thousands of miles, there is a lot of cross-border trade that is expedient. From raw materials, to partially finished goods, to finished goods, there is a lot of trade going on here. This is more complex than the trade between China and the U.S. (and even there, we saw how China was able to establish factories in Mexico to subvert the tariffs). I am biased, but I suspect that an aggressive and dismissive approach to Canada could lead to problems rather than solutions.

Cyber

Three things have come up a lot in the past year or two on cyber, where, to be honest, little progress has been made.

• The potential for “kinetic” responses. The official policy of the U.S. still seems to be “name and shame” criminals. Since many of the criminals (smartly from their perspective) reside in jurisdictions without extradition treaties to the U.S., there are very few consequences if you are caught. Deterrence (crime and punishment) does not seem to work if “name and shame” is the public policy. Yes, it is often very difficult to attribute any particular attack to any given person, group, or location. Even when it is determined that the group is likely operating “outside of official entities” (wink wink), it is difficult to do anything. We have quite clear policies and responses for many attacks and yet we don’t seem to have one for cyber. With so many from Trump’s inner circle now coming from high-tech backgrounds, it will be interesting to see what develops.
• Built-in security. There have been various movements to make products more secure. The example often used is that we don’t buy a car and then go out and buy an alarm system. Will there be a push to mandate that computers are “secure” when they are purchased? Not sure how it would be done, but as you can see from some of the lawsuits around various large scale, high-profile attacks (and even mistakes) it can be difficult to assign blame. To the hardware maker? To one of several software makers? I’m not sure I see the need for this, but it has been something that comes up, and we will be following up to see if it gets any traction going forward.
• Cyber versus military defense. No one is expected to have their own ability to defend their territory. That is why we have the military. Collectively we pay for and support the military, but it isn’t our job, at an individual, or even corporate level, to figure out how to defend the United States from attack. Yet, on cyber, it more or less is. One thing preventing any sort of national cyber effort is that individuals and corporations value their privacy and it seems odd to risk that for protection. Yet the cost is expensive, and it is really difficult to win business on a “my cyber is better than your cyber” pitch when cyber isn’t the core business you provide. This ties into the first issue on this list.

I’m not sure anything will progress on these issues. We are not even sure of the new administration’s stance as they certainly were not campaign issues. But they are issues that national security is looking at (from a variety of angles and viewpoints) and we will be trying to identify potential policy paths.

Space

We all know about the success Musk (in particular) has had in space and his vision for Mars.

What will be interesting to see is if this administration takes space from a national security perspective more seriously.

The U.S. has generally treated space rather dovishly, generally assuming good intentions in space. Even the Space Force (which has had some success recruiting) is handcuffed by a variety of competing organizations and groups in its effort to develop a comprehensive strategy (and get the resources they need). General (ret.) Deptula can talk about this all day, and it is very interesting, and somewhat alarming.

The people Trump has been surrounded by on space seem more likely to fall into the “dovish” camp, but as space becomes a focus (and it seems likely to given Musk and others), look for the administration to focus on the risks to “our” satellites and our ability to use space.

Space will likely be a growth opportunity under the Trump administration.

Bottom Line

A lot to examine and I understand why Geopolitical Risk is top of mind, but Geopolitical Opportunities should not be ignored!

We could see escalations in the existing conflicts. We could see new conflicts arise. We didn’t spend time on Africa or rare earths and critical minerals in this report, as we discuss it regularly. It is complex, and so far, we don’t seem to be winning (we still aren’t getting traction with changing “Drill Baby Drill” to “Refine Baby Refine”).

We continue to be fixated on China and that is one area where I’m concerned that the market is currently too complacent about risks.

But, having said all of that, we will have plenty of time to discuss geopolitical risks this year (sadly), so let’s not ignore the opportunities!

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