Press Room

New initiative. NATO will launch a new mission to protect critical infrastructure around the Baltic Sea following the recent suspected sabotage of undersea cables in the area, NATO Secretary General Mark Rutte announced at a meeting of Baltic allies in Helsinki on Tuesday. The alliance will increase its presence in the Baltic Sea, including through the deployment of frigates, maritime patrol aircraft and new technologies like naval drones. Armenian backlash. Armenia’s Foreign Ministry summoned Russia’s ambassador to Yerevan, Sergey Kopyrkin, over claims made on a broadcast on Russian state TV. According to Armenia’s public radio, the ministry accused the program of making “artificially generated statements against the sovereignty and territorial integrity of the Republic of Armenia.” This comes as Armenia and the U.S. signed on Tuesday a “strategic partnership commission charter” during the Armenian foreign minister’s trip to Washington. Also on Tuesday, Russian Foreign Minister Sergei Lavrov said the Armenian foreign minister had been invited to visit Russia and that a meeting could take place in the near future. Getting closer. Hamas has begun preparations in anticipation of a prisoner swap deal, Saudi-owned broadcaster Al Hadath reported. According to the outlet, the group has begun separating the hostages it is holding in Gaza into groups and transferring those with U.S. citizenship to “safe places.” A source told the news site that Hamas had demanded international and U.S. guarantees that would force Israel to abide by the terms of a deal before agreeing to a prisoner exchange. U.S.-Israel talks. Relatedly, the commander of U.S. Central Command, Gen. Erik Kurilla, was in Israel this week to meet with the chief of staff of the Israel Defense Forces. They discussed the situation in the Middle East and bilateral cooperation. Russia's Africa connections. Central African Republic President Faustin-Archange Touadera arrived in Moscow on Wednesday for an official visit. He is expected to meet with President Vladimir Putin and discuss with Russian officials cooperation on economics, security and humanitarian issues. China's Africa connections. Niger’s Ministry of National Defense and WAPCO-Niger, a subsidiary of China National Petroleum Corporation, signed on Tuesday an agreement aimed at strengthening security of the country’s oil infrastructure. The deal comes amid increased attacks on a pipeline critical to the export of Nigerien oil. Relationship reset. British Prime Minister Keir Starmer and Iraqi Prime Minister Shia al-Sudani signed a partnership agreement and trade package, worth 12.3 billion British pounds ($15.1 billion), during the latter’s visit to London. They also discussed migration and agreed on principles for a program to return irregular migrants to Iraq.

Editor’s note: If it feels as though the world is changing, that’s because it is. Global economic reconfiguration, demographic decline and geopolitical realignment have fundamentally altered long-held conventional political wisdom, perhaps nowhere more markedly than in the United States. Like all countries, the U.S. is mutable. But unlike most others, changes there have global consequences. The situation in America signals a break in the natural process of a country. America has surprised the world many times, and it is doing so again. The following essay is the second in a series by George Friedman seeking to explain why that’s the case. Many look from afar at the current political, social and economic turmoil in the United States and see it as a sign of American decline. In my most recent book, "The Storm Before the Calm," my goal was to explain the patterns in the U.S. that look like evidence of weakness but in fact show the country's unique strength through remaking itself. I write: “American society and the American economy have a rhythm. Every fifty years or so, they go through a painful and wrenching crisis, and in those times it often feels as if the economy were collapsing, and American society with it. Policies that had worked for the previous fifty years stop working, causing significant harm instead. A political and cultural crisis arises, and what had been regarded as common sense is discarded. The political elite insists that there is nothing wrong that couldn’t be solved by more of the same. A large segment of the public, in great pain, disagrees. The old political elite and its outlook on the world is discarded. New values, new policies and new leaders emerge. The new political culture is treated with contempt by the old political elite, who expect to return to power shortly when the public comes to its senses. But only a radically new approach can solve the underlying economic problem. The problem is solved over time, and a new common sense is put into place, and America flourishes – until it is time for the next economic and social crisis and the next cycle.” It has been nearly 50 years since the last cyclical transition occurred. In 1981, Ronald Reagan replaced Jimmy Carter as president, changing the economic policy, the political elites and the common sense that had dominated the country for the 50 years since Franklin D. Roosevelt replaced Herbert Hoover. The 2020s have brought the convergence of two major crises: the institutional breakdown of a federal government desperate to preserve its position (while failing to function effectively) and the collapse of once-successful social and economic systems. Both systems, quite crucial in the past, are no longer serving their purpose, leaving instability and disorder in their wake. These crises often come to be personified by certain individuals. From the standpoint of the model in my book, Donald Trump exploited the crises in the elections of 2016 and 2024 to side with those who suffered the most economically and those who doubted the experts. Joe Biden and Kamala Harris sided with those who saw themselves as incurring less cost and social pain and those who trusted the federal government. Each side held the other in contempt. Those who resisted were portrayed as ignorant, and those suffering economically and socially were seen simply as paying the price necessary to protect themselves. Those who doubted this perspective were deemed at least irresponsible. On the other hand, those who accepted the technocratic solution of the medical establishment during the COVID-19 pandemic were unaware of the hidden intentions of those who advocated the solution, or at least unaware of the limits of their knowledge. They were trapped in the systematic lies. The idea that reasonable people could disagree was completely absent. All disagreement was seen as either idiotic or monstrous. Not all of Trump’s supporters agreed with his views, nor did all of Biden’s and Harris’ supporters agree with theirs. But the dynamic was driven by passion, which itself was driven by the social, economic and institutional tensions tearing at the country’s fabric. The next phase of a cyclical shift is what might be called pseudo-normalization. As my book predicted, the next president after Trump’s first term was a Democrat. This was not because the shift depended on party politics. Following the election of a disruptive president, and stunned by the political disruption, the political system would seek to stabilize itself without fundamental economic or social shifts. In other words, it would seek to return to a stable norm. In the last 50-year cycle (1930 to 1980), the political chaos of the Nixon years – which really began with the presidency of Lyndon B. Johnson – was followed by the presidencies of Gerald Ford and Jimmy Carter. Each sought to normalize the system. As Ford put it after pardoning Nixon: “The long national nightmare is over.” Indeed, the political nightmare was over, in the sense that Ford and Carter were both operating within the behavioral norms that were personified by John F. Kennedy, Dwight D. Eisenhower, Harry S. Truman and Franklin D. Roosevelt. This was possible because they all shared core beliefs: assertive foreign policies, supporting social security, federal responsibility for economic performance and racial integration. In other words, they shared key principles that were forged during Roosevelt’s first term to replace the then-failed policies of the previous era. When Nixon became president, many of those policies were failing. The Vietnam War called into question an assertive foreign policy. The economic system was beginning to produce results that were unacceptable from the standpoint of a New Dealer. Despite the passage of the Civil Rights Act, Black Americans were still on unequal social and economic footing with their white counterparts. The Roosevelt era, which in a sense was drawing to a close with Johnson’s Great Society, ended when Nixon was forced to impose a national compulsory wage and price freeze to control the first surge in inflation. The underlying problem was economic and social. The Roosevelt-era model saw the fundamental problem as a lack of demand for goods that had to be solved by funneling money to the industrial working class, which had been the most victimized class in the Great Depression. The tax code and other tools were created to achieve higher consumption. Over time, higher consumption lowered available investment capital, and industry became less efficient, less innovative and less able to compete on the global market. Nixon said “we are all Keynesians” and intensified the movement of capital for consumption. The lack of investment capital created an under-invested economy with increased demand that led to rising costs alongside rising demand, which resulted in the massive inflation of the 1970s. This was compounded by the assertive foreign policy that triggered the Arab oil embargo. Inflation lowered consumption, weakened businesses and raised unemployment. The 1970s was a decade of failure. Ford and Carter sought to return things to normal. The latter sought to offset shortages of investment capital by cutting taxes for the middle and lower classes, which would use the difference to increase purchases and generate economic activity. Carter followed the playbook of the Roosevelt era, but the play didn’t work. Most important, Carter and Ford sought to resurrect the norm in politics, but they could not see that the problem was not at the political level. The industrial working class, poor and struggling with unionization, was no longer the victim or the challenger of the system. Socially, the center of gravity had shifted to the suburban professional class. At the end of a cycle, it is hard to see that everything has changed, so any political stabilization is, at best, temporary. The election of Ronald Reagan bore this out. The phase after the 2020 U.S. presidential election resembled the Ford-Carter political era. It represented the stabilization of a political period as the economic and social crises intensified. Its intensification was, as usual, made more extreme by the inability of the political system to mitigate or even recognize the tensions. If the economic tension of the Roosevelt era stemmed from insufficient investment capital, the economic tension of today is a surplus of investment capital and a lack of investment opportunities. As discussed in "The Storm Before the Calm," we are at the stage of maturation of the microchip culture, and this will show itself in two ways. The first is a growing lack of innovative and marketable opportunities. The second is the decline of major firms whose size either makes them unmanageable or exposes them to political pressure. The industrial working class was supplanted as the center of gravity of society by the suburban professional class, which took power at the beginning of the Reagan era in the 1980s. This shift culminated in the urban technological class (technologists or workers in associated professions), which had a different cultural aesthetic but a similar cultural reality. Like suburban professionals, the urban technologists lived by the production of ideas to solve problems for businesses and individuals. And like the suburban intellectuals, they saw their preeminence as permanently redefining America. All dominant classes redefine the U.S., but none are permanent. As microchip technology matures, it will of course remain an important part of the nation, but not its entire future. I do not consider artificial intelligence a new technology, but merely the advancement of the same microchip technology. And as competitive economic pressure and the inherent obsolescence of all industries take hold, this class will begin to decline from the pivot point into just another class of aging professionals. That will happen alongside the economic crisis that will crop up as the oldest millennials reach their 50s, recreating the malaise that we saw in the 1970s. The economic crisis caused by the success of the Reagan era in producing wealth from innovation reversed the changes of the Roosevelt period, in terms of the value of money, but created the same political stress and forced a systemic rotation in innovation and industries. Just as Carter tried to solve the problems caused by the Roosevelt era by the same means as the Roosevelt, so too will the presidents of this decade use Reagan-era solutions to deal with the failures at the end of the Reagan era, focusing on maximizing available capital in a period where the problem is excess money. In the 1970s, a Republican and a Democrat both acted the same way. Partisan politics are irrelevant to historical forces. If my model is correct, we are facing roughly another four years of this disjuncture between economic and social reality on the one hand and the political system on the other. We have to see if Trump in his second term will be aligned with the era or not. After Nixon came a period of political stability. Most likely a new American era will emerge in 2028, changing the way American society and institutions work. Biden may have brought a semblance of normalcy back to politics, but he was not able to come to grips with the deeper problems. It is not yet certain that Trump will be able to do so, but neither is it very important. It is the 2028 election that will matter, in the same way that 1980 and 1932 did. We must remember this is cyclical, not existential.

Editor’s note: If it feels as though the world is changing, that’s because it is. Global economic reconfiguration, demographic decline and geopolitical realignment have fundamentally altered long-held conventional political wisdom, perhaps nowhere more markedly than in the United States. Like all countries, the U.S. is mutable. But unlike most others, changes there have global consequences. The situation in America signals a break in the natural process of a country. America has surprised the world many times, and it is doing so again. The following essay is the first in a series by George Friedman seeking to explain why that’s the case. America needs a sense of perspective. In this time, all is not wonderful, nor is it all terrible. We need to find the order in the United States. We need to understand America’s soul. In business, we don’t succeed by rushing into a deal – we wait for a chance and make sure it’s the right chance, because if it’s the wrong one, we risk losing it all. Paradoxically, the United States lives off that fear. America needs to recognize this and make peace with itself. America is a sober country. It speaks quietly and honestly. When we look at the nature of the country, this makes sense. The United States has a vast central plain running from the north to the south. In that plain, there was always great hope, deep loneliness and uncertainty about the future. It is a place where humans lived heroically. As you move through the western plains, you are struck by how empty the country is and by how hopeful it is. This story is found not only on the plains but also in the darkness of the cities. Each city has a different meaning, a different promise and different threats. I grew up in a city, and I have lived in the plains. There is something fearsome in the cities and desolate in the plains. This is really a story about the American people. In “The Storm Before the Calm,” I wrote:

Most nations define nationality in terms of shared history, culture and values. The American people had none of these. They did not even share a language. Rather they came as aliens, having nothing in common. But an odd evolution took place. The immigrants came to have two cultures. One was a culture of their families, recalling their past. The other was the culture of their nation into which they merged without disappearing. The American culture was defined by this dichotomy, and hence the "American people" is a very real – but artificial – construct.

The encounter with reality amid the quietude of the plains is what introduces Americans to their country. They learn the extreme promise, the real pain – and from this the American homeland becomes powerful. There are those who would like to cleanse the homeland and take away the pain, but then what would be left? It is not a pleasant life, nor is it just. But where else in the world could such a diverse people come together and form one nation under God? The question we must answer is: What will all this become and what will America’s future be? And we will answer that, but first we must wallow in the reality of the country. We can speak of income, investment, etc., but in the end, people must confront their fellow countrymen. Out of this, we must consider the nature of America and what lies ahead. But as I said, unless we understand America now, we will be blind. One of the problems in discussing America is the simplicity of vision and the failure to understand how complex it is. America is dedicated to speaking the truth about itself, but frankly, its glory is found where we came together and stood the line. America needs to make peace with itself. We are at war with each other, but we need to recognize that we are bound together in making history. When the settlers went inland, they faced hardships that made them stand together. When immigrants settled in cities, it was the same story. To be successful, Americans stand guard, whether it’s over their property, their business or their country. They do so because they have nowhere else to go. These are the men who are the foundation of the republic. They went where they had to go and refused to apologize. To understand America in the future, we need to understand the people who are doing the building and the defending. Americans are proud, and with that pride, they invent starships and other things that are said to be impossible. They take big risks and fight every way they know to win. Thomas Edison, Henry Ford, Steve Jobs, Elon Musk and people like them denied the impossible and did what others said could not be done, just like the nation’s founders did. To see the American perspective, you need to understand the people who founded the country, who founded the businesses, and who stood guard over the land. How does this spirit move into the future?

By Chris Siepmann On Dec. 23, the United States launched an investigation under Section 301 of the Trade Act of 1974 scrutinizing China’s policies regarding its foundational semiconductor industry. Over the past decade, much of Washington’s focus in its economic competition with China has been on advanced logic semiconductors. These are the chips at the heart of the newest cell phones, laptops and advanced AI processors. Foundational semiconductors, meanwhile, were largely ignored, lost in the concerns over China winning the race for smaller node sizes and more advanced architectures. Foundational chips are used for applications where low cost is more important than bandwidth or processing power. To keep costs down, they are produced using mature process nodes – i.e., larger, less-advanced chips manufactured using previous-generation technologies. Whereas advanced node semiconductors are typically reserved for specialized applications, foundational semiconductors are used in a dizzying array of consumer, industrial and defense applications – everything from toys and smart appliances to laser guidance systems for missiles and night vision goggles. However, China’s manufacturing aspirations were never limited to advanced chips. Its “Made in China 2025” industrial policy, first announced in 2015, does not differentiate between advanced and legacy chips in its top-line goals. It calls for China to produce 70 percent of the semiconductors it consumes by 2025 and 80 percent by 2030 – which, according to a report issued by the U.S. International Trade Commission, would result in China capturing 57 percent of the global semiconductor market and displacing production in the United States, Europe and Japan. China will fail to meet its 2025 goal; it presently lags behind Taiwan, Japan, South Korea, Europe and the United States in advanced chip production. However, according to Taiwanese semiconductor market research firm TrendForce, China will more than double its chip manufacturing capacity within the next five years, the vast majority of which will be for legacy chips. Between current and planned fabrication projects, Beijing is on track to capture more than half of the global semiconductor market by 2029, potentially fulfilling the Chinese Communist Party’s long-term vision. To accomplish this, China’s main policy tool has been a sustained torrent of targeted government subsidies. According to U.S. Secretary of Commerce Gina Raimondo, “[w]e know there’s a massive subsidization of that industry on behalf of the Chinese government, which could lead to huge market distortion," resulting in China capturing 60 percent of the global foundational semiconductor market in the “next handful of years.” Just one of these subsidy programs, the IC Investment Fund, is valued at $150 billion. For comparison, America’s CHIPS Act allocated a mere $53 billion to new domestic semiconductor investments. The Section 301 initiation notice highlighted that China’s policies have led to “significant capacity expansion, artificially and unsustainably lower domestic and global prices, a protected domestic market, and emerging overconcentration of production capacity in the PRC.” Indeed, analysts have projected that China’s subsidized investments in foundational semiconductor production between 2022 and 2027 are likely to result in supplies more than doubling global demand. U.S. policymakers believe this would allow China to manipulate supply chains, undercut prices and suffocate the manufacturing base for these “boring” but critical chips in rival nations. In addition to systemic overcapacity, the Section 301 initiation notice offers a long list of additional grievances, arguing that “the PRC pursues its targeting of the semiconductor industry through an extensive range of anticompetitive and non-market means, including through Chinese Communist Party guidance, directives, and control within state and private enterprises; activities of state-owned or state-controlled enterprises; market access restrictions; opaque regulatory preferences and discrimination; wage-suppressing labor practices; massive and persistent state financial support of industry, including government guidance funds; and forced technology transfer, including state-directed cyber intrusions and cybertheft of intellectual property.” In other words, an increasing number of U.S. policymakers now realize that focusing mainly on advanced chips was myopic. They now see China’s potential dominance of legacy chip manufacturing as a national security threat on par with its potential dominance of advanced chip manufacturing. The “small yard and high fence” strategy of selectively restricting China’s access to leading-edge technologies was intended to minimize unintended economic harm to the U.S. and its allies, but was too clever for its own good due to its granular complexity. Chinese companies, with limitless time and motivation to find loopholes, were slowed but not prevented from accessing restricted chips and equipment, and U.S. companies designed advanced AI chips for the lucrative Chinese market falling just outside the government’s specifications. The tightening regulatory noose both failed to halt China’s development of its indigenous semiconductor supply chain and steeled party leaders’ resolve to accelerate it. And while advanced node semiconductors are critical to maintaining the lead in the AI race and other economic battlegrounds, they comprise a small percentage of total semiconductor production. By turning a blind eye to mature process node semiconductors, the U.S. appeared to be ceding most of the global semiconductor market to China. Any attempt to remedy this situation with tariffs must confront the reality that most foundational semiconductors entering the U.S. do so as part of another finished product, such as a toaster, a television or a car. International customs conventions (the so-called “rules of origin”) permit tariffs based only on the classification of finished goods, not the parts contained therein. However, to be effective, any remedy resulting from the Section 301 investigation must somehow either target previously incorporated semiconductors (using a demand-side barrier such as tariffs) or the means to produce them (using a supply-side barrier such as export controls). This may lead to “ends justify the means” countermeasures that ignore rules of origin to accomplish policy goals. In addition to further undermining international trade agreements and bodies such as the World Trade Organization, tariffs on incorporated components would also be extremely disruptive for manufacturers and importers, who would be forced to account for the provenance of every chip soldered into their products. Some influential think tanks and policy voices have already advocated for “see-through” tariffs on integrated components for which importers would bear the burden of accurately declaring the presence of Chinese chips. The new Section 301 investigation is just one of many policy changes that could result from legacy chips’ accession to policymakers’ lists of strategic industries. Use of export control tools, such as the foreign direct product rule, could be broadened beyond AI-related chips and high-bandwidth memory to restrict Chinese access to a broader range of semiconductor equipment, including equipment for manufacturing legacy semiconductors. Other policy proposals, such as Sen. Marco Rubio’s “Stopping Adversarial Tariff Evasion Act,” would apply Section 301 China tariffs to legacy chips produced by Chinese-owned manufacturers even when not produced in mainland China. President-elect Donald Trump’s first term in office inaugurated a new era of U.S. trade policy, with broad tariffs and new export control rules that were maintained and expanded by President Joe Biden. During Trump’s second term, expect a whole-of-government approach to further economic decoupling from China, starting with industries deemed critical to national security (a list that will continue to grow). This decoupling will employ tariffs, sanctions, export controls and other enforcement levers to block China’s access to the buyers, knowledge, equipment and tools needed for its strategy of subsidized, systematic industrial overcapacity, while leaning on allies to follow suit. At the same time, expect a resurgence of U.S. industrial policy aimed at resurrecting previously hollowed-out U.S. manufacturing capabilities and developing new initiatives in strategic sectors. In the words of Chinese President Xi Jinping, “[t]echnological revolution is intertwined with the wrestling of superpowers, with the high-tech sector becoming the main battlefield.” Trump has already proved that he’s not afraid of causing disruption if it helps him win. Chris Siepmann is the managing director at Weller James, an advisory firm helping organizations navigate geopolitical and policy changes, reduce risk exposure, forecast future outcomes and build organizational resiliency. Previously, he served as director for trade enforcement at the Office of the U.S. Trade Representative during the Trump and Biden administrations, where he advised on and helped administer tariffs and exclusions under the first China Section 301 action, along with a variety of other issues. You can contact him at inquiries@wellerjames.com.

(click to enlarge)

Panama and Costa Rica lay along one of the most important transit routes for American migrants, the majority of whom are fleeing the poor living conditions and violence in Venezuela. Those coming from outside the Western Hemisphere – mostly from China and African countries – come to South America before venturing north. Notably, certain measures have been taken to make it more difficult for them to enter South America; Ecuador, for example, has reinstated visa requirements for Chinese travelers. The United States has strong ties with both Costa Rica and Panama, and it has every intention to leverage those ties to stem the flow of migrants before they can reach the U.S. border. To that end, Washington in 2023 introduced safe migration offices in Costa Rica, Panama, Guatemala, Colombia and Ecuador that can process claims from migrants seeking asylum status in the U.S. The idea is for migrants wait for their case to be resolved legally closer to their country of origin. In addition, the US has arranged a program to support Panama’s attempts to deport irregular migrants by providing air transit back to Colombia and select countries of origin. For their part, Costa Rica and Panama have instituted a joint busing system to shuttle migrants into Nicaragua who enter via the Darien gap. This, too, is meant to ensure safety, reduce passage time and limit the amount of time migrants spend in country.